tag:theconversation.com,2011:/africa/business/articlesBusiness + Economy – The Conversation2024-03-28T12:17:22Ztag:theconversation.com,2011:article/2247522024-03-28T12:17:22Z2024-03-28T12:17:22ZProtected products: what makes lamb from South Africa’s Karoo and France’s Mont Saint-Michel so special<p>A meal or food shopping experience can be more interesting and enjoyable when you know more about a particular product, like what region it came from and the culture that shaped it. Knowing what makes the food “unique” can improve the tasting experience.</p>
<p>Think about drinking an ice-cold glass of <a href="https://www.vindulge.com/what-is-champagne/">“real” Champagne</a> from France or the satisfaction of serving your dinner guests <a href="https://parmacrown.com/why-prosciutto-di-parma/">“Parma ham”</a> from Italy’s Parma region. </p>
<p>In 1994 the World Trade Organisation put in place an agreement on intellectual property (Trips) that had a <a href="https://www.wto.org/english/docs_e/legal_e/27-trips_04b_e.htm#3">section</a> on Geographical Indications. This increased the protection of certain products, and extended it to more countries. The rights are territorial – the name of a product can only be used if it is sourced from a designated country or region. All members of the WTO are required to make sure this protection happens in their territories. </p>
<p>As a result of the agreement most countries realised they had food products with unique “backstories”. Examples include: Basmati rice (India and Pakistan); Darjeeling tea (India) and Café de Colombia (Colombia).</p>
<p>African countries have also joined the global Geographical Indication family: there’s <a href="https://www.adams.africa/alissa-naran/poivre-de-penja-cameroons-first-eu-geographical-indication/">Poivre de Penja (Penja pepper) from Cameroon</a>, for example. And in 2021 South Africa registered <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021R0865">Rooibos</a>, a locally grown fragrant plant used to make tea. In 2023 it registered <a href="https://www.gov.za/sites/default/files/gcis_document/202310/49556gon3992.pdf">Karoo lamb</a>. This is meat from lambs born and raised in the Karoo, a semi-desert area of the country which gives it a distinctive flavour.</p>
<p>This means that Karoo lamb has its <a href="https://www.news24.com/fin24/economy/amazing-day-for-sa-karoo-lamb-is-now-protected-just-like-champagne-20231027">own Geographical Indication</a> protection with its own unique story.</p>
<p>There are similarities between the backstories of Karoo lamb and Mont Saint-Michel lamb, also known as <a href="http://www.aop-pressales-montsaintmichel.fr/">Agneau de Prés-salés du Mont-Saint-Michel</a> (salt meadow lamb).</p>
<h2>Lamb: two tales</h2>
<p>The story of France’s Agneau de Prés-salés du Mont-Saint-Michel starts in the vast salt marshes that surround the <a href="https://whc.unesco.org/en/list/80/">Mont Saint-Michel abbey, a Unesco World Heritage Site in Normandy, France</a>. The marshes are flooded twice daily by the tides of the English Channel. The sheep that roam these salt meadows feed on a variety of grasses and herbs that impart a distinctive flavour to their meat. </p>
<p>The high saline content of the vegetation, combined with the coastal climate, results in lamb that is tender, succulent, and imbued with the essence of the sea. For centuries the farmers have moved their livestock between different grazing areas seasonally, and during spring and summer the sheep are brought to the salt marshes to graze. In 2013, Mont Saint-Michel lamb was given <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52023XC0526(03)">official recognition</a> as a Protected Geographical Indication under European Union law.</p>
<p>This designation acknowledges the unique characteristics of the lamb produced in the bay area and provides legal protection against imitation or misuse of the name. The <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023XC0526%2803%29&qid=1709802332744">status</a> ensures that Mont Saint-Michel lamb can only be produced within the designated geographical area and according to specific production criteria outlined in the official regulations. </p>
<p>South Africa’s Karoo lamb story has echoes of this.</p>
<p>The Karoo covers <a href="https://www.researchgate.net/figure/The-Karoo-region-in-South-Africa-KMOO-2016a_fig1_320066652">almost 50%</a> of the total area of South Africa and is sparsely populated, far away from major urban and distribution centres. This lonely corner of the earth is home to one of South Africa’s living treasures: flocks of sheep, grazing freely among the scattered shrubs. Their meat is spiced on the hoof as the sheep feed on wild vegetation. </p>
<p>Karoo lamb Geographical Indication can now be traced to its own “salt marshes”, in this case the Karoo’s unique shrubs and grasses (“veld”). According to <a href="https://www.greengazette.co.za/notices/agricultural-product-standards-act-119-1990-registration-of-karoo-lamb-karoo-lam-as-a-south-african-geographical-indication-gi_20231027-GGN-49556-03992">the statement</a> giving it this special status: </p>
<blockquote>
<p>It is only Karoo Lamb when it is a lamb which was born and raised on Karoo veld in the defined Karoo region. It has never been in a feedlot, and never grazed on planted pastures. </p>
</blockquote>
<h2>Compliance</h2>
<p>Trading these authentic products outside the region of origin and beyond national borders brings into play a host of problems. These include traceability, labelling and consumers being misled. Protecting the reputation and authenticity of these products needs to be done with great care and precision. </p>
<p>Most high value products with intrinsic value lose their reputation through misappropriation, usurpation and simple fraudulent and counterfeit practices. This is why some form of assurance is critical to protect the value of the product.</p>
<p>Rigorous traceability systems are needed to ensure compliance and to provide the necessary consumer assurance. The regional collective organisation, the <a href="https://www.karoolamb.org/">Karoo Lamb Consortium</a>, tries to ensure the integrity and honesty of all role players – from the farmer to the retailer to the restaurateur.</p>
<p>There are nevertheless opportunities for opportunistic behaviour, dishonesty, shirking and plain food fraud. These include:</p>
<ul>
<li><p>farmers who market feedlot or pasture lamb as Karoo lamb </p></li>
<li><p>abattoirs that source from farms outside the region </p></li>
<li><p>butchers who don’t confirm the origin but sell it as Karoo lamb</p></li>
<li><p>restaurateurs who tell the naive tourist that the lamb on the plate is from the Karoo when it is actually sourced from a feedlot far away from the Karoo.</p></li>
</ul>
<p>Fortunately science can detect the origin of lamb through analysis of the meat and fat. In a 2017 <a href="https://www.sciencedirect.com/science/article/abs/pii/S0308814617307094">paper</a> researchers showed it was possible to authenticate the origin. Their results showed clearly that fat from Karoo lamb had a higher concentration of key terpenes, validating the direct link with the herbaceous plant samples. </p>
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Read more:
<a href="https://theconversation.com/its-true-what-a-sheep-eats-affects-the-taste-of-your-lamb-roast-51877">It's true: what a sheep eats affects the taste of your lamb roast</a>
</strong>
</em>
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<p>Overall, the analysis shows considerable differences between the Karoo and non-Karoo samples.</p>
<p>This research was followed by an extensive exercise to develop a database for more regions and sub-regions in the Karoo. Scientists can now easily analyse samples from retail shelves and confirm the authenticity of claims on labels. </p>
<p>These techniques have been <a href="https://oritain.com/">successfully applied</a> to protect the authenticity of Welsh lamb and New Zealand lamb.</p><img src="https://counter.theconversation.com/content/224752/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Johann Kirsten is affiliated with the "Karoo Lamb Consortium".. </span></em></p>Meat from sheep that graze in South Africa’s Karoo and France’s Mont Saint-Michel lamb is deemed special.Johann Kirsten, Director of the Bureau for Economic Research, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2260622024-03-27T12:00:09Z2024-03-27T12:00:09ZKenya has tightened its laws to stop money laundering: why banks are the focus<p><em>Kenya’s banking industry has in recent years been in the crosshairs of <a href="https://www.centralbank.go.ke/wp-content/uploads/2023/06/Money-Laundering-and-Terrorism-Financing-National-Risk-Assesstment-Report.pdf">national</a>, <a href="https://www.businessdailyafrica.com/bd/economy/how-sh72bn-hard-cash-inflow-put-kenya-on-dirty-money-watch--4321252">regional</a> and <a href="https://nation.africa/kenya/news/interpol-seeks-unravel-puzzle-of-laundered-sh25bn--3795554">international</a> watchdogs, given the country’s role as a financial hub in eastern Africa. In 2023 Kenya enacted <a href="https://kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/2023/TheAntiMoneyLaunderingandCombatingofTerrorismFinancingLawsAmendmentAct2023.pdf">laws</a> to curb money laundering and combat terrorism financing</em>.</p>
<p><em>While the laws have led to <a href="https://www.reuters.com/article/idUSL8N2AY62G/">tougher sanctions</a> on some banks, the risk of money laundering remains, and the country was recently <a href="https://www.businessdailyafrica.com/bd/opinion-analysis/columnists/what-kenya-stands-to-lose-in-financial-crimes-grey-list-4537478">greylisted</a> by the <a href="https://www.fatf-gafi.org/en/home.html">Financial Action Task Force</a>. A grey list contains countries that are actively working with the Financial Action Task Force to address loopholes in countering money laundering, terrorist financing, and proliferation financing.</em></p>
<p><em><a href="https://law.uonbi.ac.ke/latest-news/dr-constance-gikonyo-appointed-member-capital-markets-tribunal">Constance Gikonyo</a>, a corporate law academic who has researched the place of <a href="https://www.researchgate.net/publication/340113669_Banks_in_Kenya_and_anti-money_laundering_obligations_the_conflicts_of_interests_arising">banks</a> and <a href="https://wiredspace.wits.ac.za/items/4b63e591-221a-4f39-897a-dbf15325aa6c">piracy</a> in money laundering, answers questions about existing loopholes</em>. </p>
<h2>How is money laundered through banks?</h2>
<p>Money gained illegally can be laundered by placing it into the financial system, through banks. Those who launder money typically engage in <a href="https://insights.namescan.io/smurfing-vs-structuring/">“smurfing” and “structuring”</a>. This is the breaking down of large sums of money into smaller transactions so as to evade the reporting threshold and to avoid suspicion. In Kenya, the reporting threshold has been increased from US$10,000 to US$15,000. Banks have to report certain transactions to the Financial Reporting Centre.</p>
<p>Once in the financial system, the money is moved around in a process known as <a href="https://www.unodc.org/e4j/en/organized-crime/module-4/key-issues/money-laundering.html">layering</a>. Funds are moved through different banks using different transactions and bank accounts so as to disguise the illicit origin of the money. </p>
<p>Once the money is disguised, the banks will again be involved in the process of <a href="https://amluae.com/what-is-integration-in-money-laundering/">integration</a>. This is where the money is deposited into the bank account of the person or entity that finally uses it. That way, the criminal proceeds are integrated with legitimate funds. These funds make their way into the economy through investments such as purchasing a property.</p>
<h2>Why are banks the prime targets of money launderers?</h2>
<p>Banks offer a gateway into the financial system. Once the funds are in the financial system it is easier to disguise their illegal origin. Also, technological advancements and integration of the global financial system makes it easier and faster to move the money around and across borders.</p>
<p>Some banks have weak know-your-customer procedures – mandatory checks meant to identity and verify customers when opening an account and periodically over time. These can be exploited. Banks don’t always continue monitoring customers effectively. </p>
<p>There are also cases of complicit individuals within banks using the system to aid money laundering. </p>
<h2>What are the duties of banks?</h2>
<p>Kenya’s law, the <a href="https://www.treasury.go.ke/wp-content/uploads/2023/09/POCAMLA-REGULATIONS.pdf">Proceeds of Crime and Anti-Money Laundering Act</a>, imposes duties on banks in seeking to deal with money laundering. Banks must:</p>
<ul>
<li><p>Evaluate their customers thoroughly. The due diligence should be based on an assessment of the customer as a risk. The riskier a customer appears to be, the more comprehensive the evaluation should be. </p></li>
<li><p>Keep records of transactions and customer identification information for at least seven years after the end of engagement.</p></li>
<li><p>Report suspicious transactions and cash transactions of US$15,000 or more to the Financial Reporting Centre, an agency created under the same law for the purpose of fighting money laundering.</p></li>
<li><p>Hire money laundering compliance officers and ensure continuous staff training on anti-money laundering and combating financing to terrorism. All banks are required to develop internal policies, procedures and controls to combat these crimes.</p></li>
</ul>
<h2>What challenges do banks face in fighting money laundering?</h2>
<p>Technological advancements mean that money launderers can be a step ahead of the measures the banks have put in place. The criminals can find ways to avoid detection by the systems in banks. The rise of digital and cyber-enabled financial crimes increases the challenge for banks. Compliance requirements mean banks have to invest in personnel, technology and training. This increases their operation costs. Banks also invest in research to help identify weaknesses in their systems.</p>
<p>Banks have to balance regulatory requirements with customer service and customer privacy. Customer background checks can be intrusive but a bank faces sanctions and reputational risks if it does not do them.</p>
<p>Corrupt individuals working in banks can assist in money laundering. Banks should vet staff when they hire them, especially those in sensitive roles, and continuously monitor them. </p>
<p>The global nature of the financial system means banks must deal with financial institutions and different regulatory standards in different jurisdictions. Compliance with all these can be a challenge. Criminals will identify the loopholes and gaps created by these differences and seek to exploit them. </p>
<h2>What are the main markers of a well-governed financial system?</h2>
<p>A well-governed financial system has effective policies and practices for combating money laundering and financing of terrorism. The relevant authorities ensure the laws are enforced. There should also be international cooperation, and engagement between the private sector and relevant regulatory and enforcement agencies. </p>
<p>Effective supervision by the central bank is a feature of a well governed system. Central banks ensure the stability, soundness and integrity of the banking system. They should establish a proper regulatory framework for banks, tighten their licensing and approval processes, ensure continuous monitoring and examination of sector players, and provide early warning systems. Weak supervision would mean that consumers were not adequately protected. This leads to loss of public trust and international confidence. Financial instability could be the end result.</p>
<p>The public and private sectors should collaborate actively. In Kenya the Financial Reporting Centre and the Law Society of Kenya are working together towards implementing the anti-money laundering provision which requires lawyers to report entities that make suspicious transactions.</p>
<p>Regulatory bodies and law enforcement agencies need resources to do their work. Preventing, identifying and dealing with financial crimes requires funds to innovate, to develop staff capacity and for infrastructure. </p>
<p>Transparency and accountability in financial institutions encourages compliance with regulatory standards. Banks with a culture of innovation and investment in new technologies are best placed to achieve transparency and accountability.</p><img src="https://counter.theconversation.com/content/226062/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Constance Gikonyo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A well governed financial system is effectively supervised by the central bank.Constance Gikonyo, Corporate Law Lecturer, University of NairobiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2164762024-03-26T16:04:24Z2024-03-26T16:04:24ZExploring the roots of stupidity: first understand the psychology of what lies behind irrational opinions<p>Most people, at one time or another, act foolishly. However, truly ignorant individuals exhibit a lack of introspection and stubbornly cling to their opinions, regardless of how irrational they may be. These people demonstrate unwavering self-assurance and are often oblivious to their own inadequacies. They craft retrospective justifications to validate their beliefs and hold onto them.</p>
<p>Even when presented with opportunities for personal growth and change, they seem incapable of breaking free from their entrenched habits. Reasoning with stubborn individuals can be as perplexing as it is frustrating. Many have written it off as a hopeless task. </p>
<p>As American writer Mark Twain <a href="https://marktwainstudies.com/the-apocryphal-twain-never-argue-with-stupid-people-they-will-drag-you-down-to-their-level-and-beat-you-with-experience/">once cautioned</a>: </p>
<blockquote>
<p>Never argue with stupid people, they will drag you down to their level and then beat you with experience.</p>
</blockquote>
<p>To argue against stupidity only seems to reinforce it. These individuals thrive on power and control, defending their position and denying their foolishness, regardless of counterarguments.</p>
<p>Despite these challenges, it is still possible to sway such people towards more sensible behaviour. It all starts with understanding the roots of stupidity. From a psychological perspective, stupidity is often considered an outcome of cognitive biases or errors in judgment.</p>
<h2>Why biases persist</h2>
<p>Many prominent psychologists attribute irrational beliefs and foolish actions to our cognitive limitations. Research into human cognition and decision-making has shed light on why <a href="https://www2.psych.ubc.ca/%7Eschaller/Psyc590Readings/TverskyKahneman1974.pdf">these biases persist</a>. It reveals that humans are not purely rational beings. <a href="https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555">They switch between fast, intuitive thinking and slow, rational thinking</a>, depending on the situation. </p>
<p><a href="https://pubmed.ncbi.nlm.nih.gov/20920513/">Neuroscientists</a> have also weighed in, noting that the brain’s frontal lobes, responsible for rational thinking, can be overridden by the amygdala, a more primitive system for processing threats. In emergency situations requiring quick decisions, the slower, deliberate information processing is often set aside. </p>
<p>Numerous cognitive biases can help explain some of the nonsensical decisions people make. For instance, individuals can be susceptible to confirmation bias, where they favour information that aligns with their preexisting beliefs. They may also succumb to “anchoring”, becoming overly influenced by the first piece of information they receive (the anchor), even when this information turns out to be irrelevant or arbitrary. </p>
<p>The overconfidence effect is another potential factor at play, causing people to overrate their abilities and knowledge and the accuracy of their beliefs. There is also the phenomenon of <a href="https://www.psychologytoday.com/za/basics/groupthink">groupthink</a>, where groups prioritise consensus and conformity over critical evaluation. </p>
<p>Flawed decisions could also be the result of fundamental <a href="https://online.hbs.edu/blog/post/the-fundamental-attribution-error">attribution error</a>. This involves incorrectly attributing others’ behaviour to internal factors, such as personality, rather than to external factors, like situational influences. </p>
<p>Also, the <a href="https://thedecisionlab.com/biases/availability-heuristic">availability heuristic</a> explains the tendency to rely on information that comes to mind quickly and easily when making decisions. </p>
<p>While these cognitive biases don’t inherently imply stupidity, when left unaddressed, they can pose significant risks.</p>
<h2>Managing the misguided</h2>
<p>When individuals recognise their cognitive biases, they become more willing to participate in productive discussions and gain deeper insights into their own behaviour. Rather than trying to persuade them through rational discourse, one can encourage them to examine these biases. </p>
<p><strong>Promote reflective thinking:</strong> People can be taught how to properly decode the information they encounter. They can learn to discern whether their own observations and beliefs are grounded in accurate evidence. </p>
<p><strong>Advocate greater self-awareness:</strong> When people acquire self-awareness, they are able to reflect on their behaviour more objectively. </p>
<p><strong>Keep people grounded:</strong> Self-absorbed people often lack interest in the opinions of others. They need to attain a more grounded perspective on life and cultivate their capacity for self-evaluation. Empathy is another great remedy for foolishness. </p>
<p><strong>Satire as a tool:</strong> Satire has the potential to stimulate reflection and critical thinking. It gets people to question their assumptions without attacking individuals personally. </p>
<p><strong>Let them learn the hard way:</strong> Instead of instructing individuals to avoid specific foolish activities, one may encourage them to go ahead. It can be risky, but the hope is that when their actions lead to disastrous outcomes, they will learn from the experience. </p>
<p><strong>Lead by example:</strong> An effective leader, whether in government, business or any other sector, requires a combination of intelligence, knowledge, wisdom, empathy and compassion. Additional qualities are critical thinking, problem-solving skills, proficiency in handling complex issues, and the ability to collaborate with others and distinguish between the wise and the foolish. </p>
<p>A leader like this can set an example that contrasts with the conduct of foolish leaders. </p>
<h2>Stupidity in a ‘post-truth’ era</h2>
<p>In today’s “post-truth” era we find ourselves grappling with a daily barrage of public discourse that blurs the line between fact and fantasy. We are fooled by errors and lies, and social media appears to be amplifying such stupidity. The rise of social media has made human follies more visible than ever. We tend to underestimate the number of ignorant individuals in our midst, and the influence such people can exert over large groups.</p>
<p>The dangerous combination of power and stupidity can disrupt the lives of countless people. Unfortunately, as long as there are foolish supporters enabling such leaders, people will be trapped in their own collective foolishness. A significant counterforce against collective stupidity is the presence of institutional safeguards. </p>
<p>Citizens must cultivate a robust civic culture, fostering a society where they can exert influence on their government. There need to be laws that discourage misinformation and legal avenues to counter fake news, especially when it causes personal harm. </p>
<p>Education can lead people to discover and acknowledge their own ignorance, nurturing a more thoughtful and informed society that is better equipped to confront the pitfalls of stupidity.</p>
<p><em>This is an edited version of <a href="https://knowledge.insead.edu/leadership-organisations/how-handle-foolish-people"> an article published</a> by Insead Knowledge.</em></p><img src="https://counter.theconversation.com/content/216476/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Manfred Kets de Vries does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Truly ignorant individuals lack introspection and stubbornly cling to their irrational opinions.Manfred Kets de Vries, Distinguished Clinical Professor of Leadership Development and Organisational Change, INSEADLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2259342024-03-25T15:08:37Z2024-03-25T15:08:37ZKenya’s greylisting for weak action on money laundering and terrorism financing: what that means and what must happen next<p><em>Kenya and Namibia are the <a href="https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2024.html">latest</a> African countries to be placed on the Financial Action Task Force’s grey list over their weak measures against money laundering and terrorism financing.</em></p>
<p><em>Being on the grey list is <a href="https://www.pwc.com/ke/en/blog/fatf-grey-list.html">typically seen</a> as an indictment of a country’s ability to identify and effectively redress financial crimes. It warns investors to be cautious in dealings with the country.</em></p>
<p><em>Financial crimes researcher <a href="https://scholars.latrobe.edu.au/ldekoker">Louis de Koker</a>, who has recently studied the <a href="https://www.mdpi.com/2227-9091/11/5/81">economic consequences of greylisting</a>, answers questions on the move.</em></p>
<h2>Why is Kenya on the grey list?</h2>
<p>In February 2024 Kenya was <a href="https://www.cnbc.com/2024/02/23/fatf-financial-crime-watchdog-adds-kenya-and-namibia-to-its-grey-list.html">greylisted</a> by the <a href="https://www.fatf-gafi.org/en/home.html">Financial Action Task Force</a> (FATF), the world body that sets standards for combating money laundering and the financing of terrorism and weapons of mass destruction. At the same meeting, Namibia was also listed while Uganda was removed from the grey list.</p>
<p>The Financial Action Task Force, an intergovernmental group of economically powerful countries, maintains a set of standards to safeguard the integrity of the international financial system. Kenya, Namibia and Uganda are not members of the task force but they are members of the Eastern and Southern Africa Anti-Money Laundering Group, an associated regional body. </p>
<p>All countries that are members of the Financial Action Task Force or any of the regional bodies are regularly evaluated by their peers. Countries are rated on technical compliance with the standards, as well as the effectiveness with which those standards are implemented. </p>
<p>Kenya’s mutual evaluation reports revealed a host of strategic deficiencies. Kenya, for example, had not taken appropriate steps to investigate and prosecute money laundering and terrorist financing offences or to assess and mitigate crime risks associated with crypto assets.</p>
<p>When a country performs poorly in its mutual evaluation the Financial Action Task Force may place it in a one-year <a href="https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/More-on-high-risk-and-non-cooperative-jurisdictions.html#:%7E:text=The%20FATF%20continually%20identifies%20and,and%20was%20enhanced%20in%202009.">observation period</a>. During the observation period, the country works with the Financial Action Task Force or its regional body to address the identified weaknesses.</p>
<p>If at the end of the observation period the country has not been able to address the deficiencies appropriately but has an action plan to address them and has made the political commitment to do so, the task force may put that country on its list of “jurisdictions under increased monitoring”, also known as the “grey list”. This is what happened to Kenya and Namibia in February 2024.</p>
<h2>What are the consequences?</h2>
<p>At face value, the list sends a positive message. According to the Financial Action Task Force, countries on the list have committed themselves to resolve the identified deficiencies within agreed time frames. They are therefore working actively to improve their compliance with the Financial Action Task Force standards. Greylisting also triggers international technical and other assistance to help countries to improve their compliance levels.</p>
<p>The market, however, tends to respond negatively to countries that are greylisted. Some countries and regulators (including the <a href="https://finance.ec.europa.eu/financial-crime/high-risk-third-countries-and-international-context-content-anti-money-laundering-and-countering_en">EU</a> and the <a href="https://www.gov.uk/government/publications/money-laundering-advisory-notice-high-risk-third-countries--2">UK</a>) also compel their institutions to treat the businesses and persons linked to greylisted countries as higher risk customers and parties. The accompanying enhanced due diligence measures (such as collecting and verifying more information about the customer and the customer’s funds) slow down the pace of business, increase transaction costs and may even threaten deals and business relationships.</p>
<p>In the past two years, the Financial Action Task Force has <a href="https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2024.html">called on</a> foreign regulators and their markets to take a measured approach. It added explicitly to its greylisting statement that it does not call for enhanced due diligence measures against greylisted countries and cautioned against termination of business relationships. It is not clear that this has had the intended effect.</p>
<p>In a recent <a href="https://www.mdpi.com/2227-9091/11/5/81">study</a> my co-authors and I found that greylisting appears to continue to have a negative economic impact on listed countries. Correlations point to a negative impact on GDP growth rates and, worryingly, even development aid appears to be adversely affected. Some of the negative impacts may lag after delisting. Uganda may, for instance, take some time to see the positive benefits of being off the list.</p>
<p>Impact, however, differs from country to country, and smaller economies are often likely to face greater impact than large economies.</p>
<h2>What does Kenya need to do now?</h2>
<p>Since its 2022 mutual evaluation report, Kenya has been working to improve its compliance levels. Now it must implement the <a href="https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2024.html">agreed action plan</a> to address the remaining strategic deficiencies. Actions include completing a national terrorist financing risk assessment and sharing the results with the public and private sector stakeholders. Kenya is also committed to improving its risk-based supervision of regulated entities including licensing and supervision of virtual asset (crypto) service providers.</p>
<p>Other actions required include:</p>
<ul>
<li><p>enhancing risk-based compliance and the reporting of suspicious transaction reports to the <a href="https://www.frc.go.ke/">Financial Reporting Centre</a></p></li>
<li><p>increasing the number of money laundering and terrorist financing prosecutions to match the country’s risk levels</p></li>
<li><p>revising the framework for the regulation of non-profit organisations and their oversight to ensure that mitigating measures are risk-based and do not disrupt or discourage legitimate non-profit organisations’ activity.</p></li>
</ul>
<p>Uganda spent four years on the grey list. Given what Kenya will need to achieve, a time-frame of three to four years may be realistic.</p>
<h2>Why does greylisting matter to Africa?</h2>
<p>Greylisting poses a challenge for sub-Saharan Africa. Since February 2024, the region accounts for 12 of the 21 grey-listed countries. The listed countries include <a href="https://theconversation.com/south-africa-has-been-grey-listed-for-not-stopping-money-laundering-and-terrorism-funding-what-it-means-200696">Nigeria and South Africa</a>. The economic impact of this level of simultaneous greylisting on the development of the region as a whole gives cause for concern. </p>
<p>The reasons why countries from this region have not been able to meet the task force standards adequately should be probed. Is there really a sufficient level of political commitment to fight money laundering, corruption and terrorist financing? Given the negative impact of crime and the negative impact of a failure to implement the crime combating standards, can the region afford political complacency?</p>
<p>The task force is about to start another round of mutual evaluations. Countries that are delisted in this round may be listed again in the next round. The listed countries have the opportunity now to ensure that these serious crimes are combated appropriately. Doing so will serve the national interest and prevent a relisting in the future.</p><img src="https://counter.theconversation.com/content/225934/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louis de Koker received funding from the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GiZ) to research the economic impact of greylisting.</span></em></p>Kenya must complete a national terrorist financing risk assessment and share it publicly.Louis de Koker, Professor of Law, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2250002024-03-25T15:02:22Z2024-03-25T15:02:22ZGhana’s decades-old ambition to build an integrated aluminium industry faces a new hurdle: the clean energy transition<p>It has been more than 60 years since Ghana’s first post-independence leader Kwame Nkrumah first <a href="https://www.google.co.uk/books/edition/Living_in_the_Shadow_of_the_Large_Dams/4IVSEAAAQBAJ?hl=en&gbpv=1&dq=volta+river+project+in+ghana&pg=PR3&printsec=frontcover">mooted</a> the idea that Ghana should produce aluminium from the country’s ample supply of bauxite.</p>
<p>Under the <a href="https://www.jstor.org/stable/40567076">Volta River Project</a>, Nkrumah’s vision was to construct a dam on Ghana’s Volta River to provide dedicated electricity to a newly built smelter. The smelter was to be run by the <a href="https://thebftonline.com/2023/07/18/valco-needs-us600m-to-modernise-aging-smelter/">Volta Aluminium Company (Valco)</a> in the new industrial city of Tema. </p>
<p>The smelter would be linked to a refinery to process Ghana’s bauxite, currently estimated at <a href="https://www.mining.com/web/ghana-signs-1-2-billion-deal-to-develop-its-bauxite-resources/">900 million tonnes</a>. Ghana has the second largest reserves in Africa after <a href="https://www.usgs.gov/centers/national-minerals-information-center/bauxite-and-alumina-statistics-and-information">Guinea</a>.</p>
<p>Successive Ghanaian governments have pursued this strategy over the decades. The most recent push came in 2017 when the government embarked on its <a href="https://www.youtube.com/watch?v=wwDpGcigkac">latest drive</a> to develop an aluminium producing capacity. </p>
<p>Since then, the Ghana Integrated Aluminium Development Corporation (Giadec) has <a href="https://thebftonline.com/2022/08/25/giadec-seeks-us6bn-for-integrated-aluminium-industry/">invested</a> in <a href="https://giadec.com/giadec-selects-mytilineos-s-a-as-partner-for-project-3a-development-of-bauxite-mine-alumina-refinery/">new mines</a> and is looking to partner with foreign and domestic companies to actualise a harmonised aluminium industry, including an alumina refinery.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/lessons-about-housing-from-ghanas-volta-river-project-50-years-on-123920">Lessons about housing from Ghana's Volta River project 50 years on</a>
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<p>The logic has always been that <a href="https://www.jstor.org/stable/1808850">heavy industries</a> that turn natural resources into useful products are critical for structural transformation. That is, <a href="https://unhabitat.org/structural-transformation-in-developing-countries-cross-regional-analysis">moving an economy</a> “from low productivity and labour-intensive activities to higher productivity and skill-intensive ones”. </p>
<p>Such transformation is also <a href="https://elibrary.worldbank.org/doi/10.1596/978-1-4648-1448-8_ch1">associated</a> with rising wages and living standards. Heavy industries can also reduce reliance on imports. </p>
<p>Recent <a href="https://www.sciencedirect.com/science/article/pii/S2214629622001426">works</a> have identified gaps in geography-specific research on industrial decarbonisation in developing economies. Sub-Saharan Africa is particularly under-researched, with research only really examining the case of <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/62f92860408b4b366da8a572/1660495974819/IDTT+5+WP5_Climate+change+policies+and+trade_202208.pdf">South Africa</a>.</p>
<p>We <a href="https://doi.org/10.1016/j.erss.2023.103337">examined</a> Ghana’s long-standing challenges to the dream of a fully developed aluminium industry. We also assessed the most recent attempts to realise these plans against the backdrop of the energy transition and <a href="https://netzeroclimate.org/sectors/heavy_industry/">industrial decarbonisation</a>. </p>
<p>We found that new uncertainties and challenges stand in the way of Ghana’s latest efforts to develop an integrated aluminium industry. These are linked to the unfolding global energy transition agenda and shifts towards “green” manufacturing. </p>
<h2>Why aluminium</h2>
<p>Aluminium is both a constraint to and an enabler of a <a href="https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-net-zero">net zero</a> future. </p>
<p>On the one hand, it has numerous energy transition <a href="https://european-aluminium.eu/about-aluminium/aluminium-in-use">applications</a>, from solar panels and wind turbines to electricity cables and batteries. </p>
<p>But aluminium is also the <a href="https://doi.org/10.1016/j.jclepro.2019.118004">second most</a> carbon-intensive industry, after steel. It accounts for <a href="https://www.carbonchain.com/blog/understand-your-aluminum-emissions">about 4%</a> of global emissions. Emission-reduction technologies are costly and, in many cases, still being developed. </p>
<h2>Challenges – old and new</h2>
<p>The <a href="https://www.researchgate.net/profile/Theophilus-Acheampong/publication/333834250_Towards_an_Integrated_Aluminium_Industry_in_Ghana_Some_Policy_Considerations/links/5d0832ce299bf1f539cb8c66/Towards-an-Integrated-Aluminium-Industry-in-Ghana-Some-Policy-Considerations.pdf">obstacles</a> Ghana has faced in its aluminium industry over the decades have included a lack of investments in new mines, lack of refinery, limited <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-7660.1987.tb00278.x">electricity</a> for smelting, and a lack of investments to upgrade the existing Valco smelter.</p>
<p>More recently, other constraints have come into play that make it hard for peripheral economies like Ghana to develop and sustain competitive aluminium industries.</p>
<p>Firstly, they are not financially in a position to use the latest sustainable production technologies, such as <a href="https://www.iea.org/energy-system/carbon-capture-utilisation-and-storage">carbon capture, use and storage</a> and <a href="https://www.weforum.org/agenda/2024/01/aluminium-green-transition-technologies-decarbonization/">green hydrogen</a>. These are needed to improve energy intensity and reduce emissions.</p>
<p>Secondly, Ghana faces tough new conditions, known as <a href="https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en">“green taxonomies”</a>, being set by key export markets in the global north. Countries or trading blocs like the <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">European Union</a> are demanding that importers in targeted heavy industrial sectors monitor and declare emissions embedded in products. They are also required to buy <a href="https://taxation-customs.ec.europa.eu/system/files/2023-12/Questions%20and%20Answers_Carbon%20Border%20Adjustment%20Mechanism%20%28CBAM%29.pdf">Carbon Border Adjustment Mechanism certificates</a> to offset such emissions. The mechanism, which has already been introduced on a trial basis, will charge levies from January 2026.</p>
<p>There are strong critics of these mechanisms, with some <a href="https://www.energymonitor.ai/carbon-markets/how-cbam-threatens-africas-sustainable-development/">arguing</a> that they <a href="https://www.lse.ac.uk/News/Latest-news-from-LSE/2023/e-May-2023/Africa-could-lose-up-to-25-billion-per-annum-as-a-direct-result-of-the-EUs-CBAM">threaten</a> Africa’s sustainable development. These arguments are unlikely to see the EU dropping these measures. </p>
<p>The third obstacle that Ghana faces revolves around how to make its refineries and smelters produce competitively priced aluminium. The cost of power is a sticking point as it has been in prior years.</p>
<p>According to Ghana’s recently published <a href="https://www.energymin.gov.gh/sites/default/files/2023-09/FINAL%20GHANA%27S%20NATIONAL%20ENERGY%20TRANSITION%20FRAMEWORK_2023_compressed%20%281%29_compressed%20%282%29.pdf">National Energy Transition Framework</a>, natural gas will serve as Ghana’s primary transition fuel. The government argues that it can provide the base load electricity that Ghana requires for industrialisation. </p>
<p>But choosing gas as the energy solution for Ghana’s aluminium chain could jeopardise the export potential of the aluminium it produces. About <a href="https://oec.world/en/visualize/tree_map/hs02/export/gha/show/157601/2019">80%</a> of Ghana’s aluminium is exported to Europe and could be subjected to carbon taxes if production is powered by gas.</p>
<p>Hydro electricity would, in many respects, be the ideal solution. It is Ghana’s cheapest and greenest energy source. And it would allow the country to compete in markets regulated by carbon considerations. </p>
<p>But this isn’t as straightforward as it may seem. If Valco and a new smelter were to operate at envisaged levels of production it would remove almost all the hydropower output of Akosombo Dam from Ghana’s broader electricity mix. The hydropower also plays a key role in bringing down overall <a href="https://rgu-repository.worktribe.com/preview/1721654/ACHEAMPONG%202021%20Ghanas%20changing%20electricity%20%28VOR%29.pdf">electricity prices</a>. </p>
<p>Thus, while hydro electricity may be a technically good solution, it may not be politically acceptable in a country where electricity prices are a key <a href="https://www.bbc.co.uk/news/world-africa-68236869">electoral issue</a>. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/ghanas-electricity-crisis-is-holding-the-country-back-how-it-got-here-217606">Ghana's electricity crisis is holding the country back - how it got here</a>
</strong>
</em>
</p>
<hr>
<p>Finally, other concerns are emerging around plans to mine bauxite in some of Ghana’s last remaining green forests, including the <a href="https://www.clientearth.org/latest/news/protecting-ghana-s-atewa-range-forest-reserve-from-bauxite-mining">Atewa Forest Reserve</a>. </p>
<p>National and international civil society organisations and environmental activists are resisting the move. Many local businesses support it, however, because of the potential economic gains a mine and refinery would bring. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ghanas-pact-with-china-to-explore-bauxite-threatens-a-unique-forest-120815">Ghana's pact with China to explore bauxite threatens a unique forest</a>
</strong>
</em>
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<hr>
<p>These are some of the trade-offs that policymakers must consider.</p>
<h2>Moving forward</h2>
<p>Collectively, these issues may frustrate Ghana’s ambitions once more. </p>
<p>At an international level, peripheral economies like Ghana need clarity about how particular energy technologies will be classified. </p>
<p>Lastly, climate financing and green technology transfer pledges from developed to developing economies need to be honoured. </p>
<p>We suggest the Ghanaian government can overcome some of these issues through dialogue with stakeholders and being frank about the trade-offs involved. But a national discussion about benefits and costs is only possible if it’s clearer what choices around energy will be made.</p><img src="https://counter.theconversation.com/content/225000/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Theophilus Acheampong is affiliated with the IMANI Centre for Policy and Education in Accra, Ghana. He has consulted in a private capacity for the Government of Ghana on the aluminium industry.</span></em></p><p class="fine-print"><em><span>Matthew Tyce does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ghana has spent over 60 years trying to build an aluminium industry.Theophilus Acheampong, Associate Lecturer, University of AberdeenMatthew Tyce, Lecturer in International Political Economy, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2255822024-03-24T08:50:02Z2024-03-24T08:50:02ZWhy do identical informal businesses set up side by side? It’s a survival tactic – Kenya study<p>The population on the African continent will have <a href="https://www.un.org/en/global-issues/population">nearly doubled</a> by 2050, according to UN projections. About <a href="https://www.mckinsey.com/mgi/our-research/reimagining-economic-growth-in-africa-turning-diversity-into-opportunity">800 million</a> more young Africans will enter the job market by then. Combine this forecast with the <a href="https://ilostat.ilo.org/african-youth-face-pressing-challenges-in-the-transition-from-school-to-work/#:%7E:text=True%2C%20nearly%2013%20million%20young,for%20and%2For%20obtaining%20jobs.">high youth unemployment rate</a> in many African countries today, then the pressing question is: who will create stable jobs at mass scale?</p>
<p>Many policies to create new employment at scale focus on solution templates that have worked elsewhere, often outside Africa. These include enabling entrepreneurship to create high-growth start-up ventures, bringing in technological advances to potentially unlock new industries, or the establishment of outsourcing hubs for low-cost labour.</p>
<p>Few policies directly support homegrown solutions that already have a track record of creating large-scale stable employment.</p>
<p>Together with my coauthors, I looked for answers in a seemingly unlikely place. <a href="https://pubsonline.informs.org/doi/10.1287/orsc.2023.17644">We studied</a> how car repair businesses were organised. Specifically, we studied the neighbourhood of Dagoretti Corner in Nairobi, Kenya. </p>
<p>Here, 105 largely identical car repair businesses set up shop close to one another. Imagine corrugated iron sheets as fences to demarcate businesses which offer exactly the same service in the same location. </p>
<p>This phenomenon <a href="https://www.africanbookscollective.com/books/african-markets-and-the-2028utu-buntu-business-model">is common</a> in major African cities. Thousands of different traders – from fruit sellers to furniture makers – set up next door to each other and co-locate. This doesn’t make sense as a competitive strategy, so why do it?</p>
<p>We found that these businesses do this in part because it generates an informal welfare system. In our study, the car repair businesses mutually supported each other in a variety of ways to ensure they survived and thrived. </p>
<p>Our findings make a case that policymakers should focus on supporting these informal welfare systems. They abound in urban areas and create employment at scale. Yet, policies tend to support individuals, as opposed to groups, in informal economies. This could risk eroding these welfare systems, putting livelihoods at risk.</p>
<h2>Informal welfare system</h2>
<p>Over the past two decades, car repair businesses in Dagoretti Corner grew from 11 to 105 identical businesses. As the satellite images in the video below show (car repair businesses shaded in yellow), they have massively expanded and are now fully integrated into the urban infrastructure. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/qnUdWWWPv6E?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<p>The agglomeration of businesses in this way is often seen as a sign of failed economic and urban development policy by industry analysts, development practitioners and policy makers. They tend to believe that agglomerated businesses should reach higher levels of efficiency, competitiveness, specialisation and innovation. </p>
<p>Yet, many businesses continue to operate the same way they did a decade ago with little change or upgrading. What benefit are these businesses reaping?</p>
<p>Through our fieldwork in Dagoretti Corner, visiting car repair businesses and conducting interviews with 45 owners, we identified five ways in which business owners create their own welfare system: </p>
<p>First, they save and invest money together. This is often done in small scale, informal rotating savings and investment associations. In Kenya these are known as chamas and Savings and Credit Cooperative Organisations (Saccos) and are akin to credit unions and cooperatives. Saving money together enables owners to get a loan and enables business owners to make investments together. Rather than being competitors, businesses are interdependent and trust each other to grow together.</p>
<p>Second, businesses offer apprenticeship opportunities, enabling the youth from rural Kenya to get trained and equipping them with the knowledge and resources to start their own car repair businesses. Through apprenticeships, mechanics become familiar with the welfare system and continue its upkeep into the future.</p>
<p>Third, trust is fragile and business owners come up with ways to self-police against free riding and theft. They address competitive behaviour through self-organised committees. Poaching customers from a peer business is seen as theft and is policed. Repeated shoddy repair work and alcohol abuse among mechanics is also policed. Particularly exploitative customers are blacklisted. After all, the owners want to make sure that customers perceive Dagoretti Corner as a safe place for customers to entrust their valuable cars.</p>
<p>Fourth, businesses support each other in times of crisis when nearing bankruptcy to ensure survival. Chamas and Saccos make emergency money available to smooth over gaps. Businesses temporarily loan out their employees to other businesses to ease the financial burden of paying a wage. And businesses sub-contract repair work to distressed businesses, ensuring at least some cash flow until business picks up again.</p>
<p>Fifth, in times of personal crises when livelihoods are at stake, due to high medical bills or funeral costs, peer businesses step in and provide a type of insurance policy. Owners, employees and apprentices collectively contribute funds to support those in dire need and prevent them from slipping into destitution. This informal insurance scheme even extends to family members.</p>
<p>This informal social welfare system is critical because it provides stable employment, saving and investment opportunities and insurance at considerable scale. </p>
<p>Policies that support the growth of individual entrepreneurs in these areas – such as through training and cash infusions geared towards business differentiation – are likely to introduce competitive behaviours among identical businesses. This risks the collapse of welfare systems and thus also employment at scale.</p>
<h2>Policies must strengthen informal welfare systems</h2>
<p>We concluded from our research that policies need to further enable, strengthen and then leverage the existing welfare systems of co-locating businesses to engender firm and employment growth. These are strongholds of cooperative behaviour that need to be protected rather than transformed or displaced. </p>
<p>One way this can be done is through the creation of transparent cooperative structures and exit pathways for individual businesses to grow. This would strengthen the welfare system and needs to be the starting point of policy discussions. </p>
<p>For example, targeted governance interventions could make chamas and Saccos more robust to safeguard them against fraud and enhance their self-organising capacity. Digital technologies can play a role here to bring these saving and investment schemes into the modern age. Once made robust, cash infusions by the government to support firms in the informal economy can then happen through these rather than through separate, government-run entities. </p>
<p>We do not rule out the potential for policy interventions seeking to support individual firms. Yet, these need to be context-sensitive so that they can enable businesses to scale without eroding the social order. </p>
<p>This is just a starting point. In light of the pressing challenge to bring about labour-intensive growth in African societies, it is paramount to not only focus on importing solutions from elsewhere but to be intentional about enabling and supporting homegrown solutions that already work.</p><img src="https://counter.theconversation.com/content/225582/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Weiss does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Identical informal businesses set up next to each other because they’ve created an informal welfare system.Tim Weiss, Assistant Professor, Department of Management and Entrepreneurship, Imperial College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2261352024-03-21T14:40:20Z2024-03-21T14:40:20ZThis is how President Ramaphosa got to the 25% figure of progress in land reform in South Africa<p>Nearly three decades into democracy, land reform remains central to South Africa’s transformation policies and agricultural policy. </p>
<p>We have over the years pointed out that the <a href="https://academic.oup.com/edited-volume/37171/chapter/323739043?login=true">progress on land reform has been incorrectly reported</a>. It’s been consistently understated.</p>
<p>We have argued that, if the statistics are treated carefully, the progress has been much better than politicians and activists often claim.</p>
<p>We were encouraged earlier this year when South African president Cyril Ramaphosa <a href="https://www.youtube.com/watch?v=q5d28EqZ-t8">acknowledged</a> in his <a href="https://www.parliament.gov.za/state-nation-address-president-cyril-ramaphosa-8-february-2024">State of the Nation address</a> that there had been better progress in land reform. The commonly cited argument is that land reform has been a failure and that only 8%-10% of farmland has been returned to black South Africans since apartheid ended in 1994.</p>
<p>Ramaphosa stated that:</p>
<blockquote>
<p>Through redistribution, around 25% of farmland in our country is now owned by black South Africans, bringing us closer to achieving our target of 30% by 2030.</p>
</blockquote>
<p>This figure is based on an update of <a href="https://theconversation.com/land-reform-in-south-africa-5-myths-about-farming-debunked-195045">our work</a> at the Bureau of Economics Research and the Department of Agricultural Economics at Stellenbosch University.</p>
<p>Below we provide a detailed explanation of how we arrived at this figure. We also highlight policies the government can use to fast track the land reform programme to ensure that black farmers become central to a growing, and inclusive agricultural sector.</p>
<h2>Land reform data</h2>
<p>In reviewing the progress with land reform we should be mindful that the land reform programme consist of three elements (refer to <a href="https://www.justice.gov.za/legislation/constitution/saconstitution-web-eng.pdf">Section 25 of the constitution</a>: redistribution, restitution and tenure reform.</p>
<p>Substantive progress has only been made in the land redistribution space and through the process of land restitution managed by the <a href="https://nationalgovernment.co.za/units/view/62/commission-on-restitution-of-land-rights">Land Claims Commission</a>.</p>
<p>The progress of land reform can only be tracked where we have surveyed land, and land with title deeds registered. Even then it is tricky as the title deeds do not record the “race” of the registered owner.</p>
<p>To understand the progress with land reform it is important to start from the correct base. How much farm land is in question here? </p>
<p>In 1994, total farm land with title deeds (thus outside what the apartheid government set aside for black people) covered <a href="https://theconversation.com/how-a-land-reform-agency-could-break-south-africas-land-redistribution-deadlock-165450">77.58 million hectares of the total surface area of South Africa of 122 million hectares</a>. It is assumed, merely by the fact that black ownership of farm land in South Africa was not possible before 1991, that all <a href="https://academic.oup.com/edited-volume/37171/chapter/323739043">77.58 million hectares were owned by white farmers when land reform was initiated in 1994</a>.</p>
<p>Let us now unpack the progress with land reform based on the various data sources.</p>
<h2>Land restitution</h2>
<p>The land restitution process involves the restoration of land rights to black communities who lost their (registered and legally owned) farm land as a result of various forms of dispossession introduced by the apartheid-era governments after 1913.</p>
<p>Through the process of land claims, the Land Claims Commission has transferred 4 million hectares back to communities who previously were dispossessed (Source: various annual reports of the Land Claims Commission). </p>
<p>What’s missing from this calculation is the fact that communities have also been able to elect to receive financial compensation instead of obtaining the formal rights to the land.</p>
<p>Over the years a total of R22 billion (about US$1.1 billion) was paid out in financial compensation (Source: various annual reports of the Land Claims Commission). The commission never reported the number of hectares for which financial compensation was paid out for. It took some work by us to get the number of hectares of farmland involved in financial compensation from the commission, and it has now been confirmed that a total of 2.68 million hectares have been restored in this way.</p>
<p>That means that, in total, the restitution programme managed to restore the land rights of black communities equivalent to 6.68 million hectares.</p>
<h2>Land redistribution</h2>
<p>For the first 10 years of the land reform programme the government applied a market assisted programme of land redistribution based on the <a href="https://repository.up.ac.za/bitstream/handle/2263/2537/Kirsten_Approaches(1999).pdf?sequence=1">willing-buyer-willing-seller principle</a>. Government grants assisted the purchase of the land by groups or individual beneficiaries. </p>
<p>These initiatives resulted in the transfer of 7.55 million hectares of farm land to black South Africans (Source: Various annual reports by Department of Agriculture, Land Reform and Rural Development to parliament). This is probably where the stubbornness of the 10% figure came from. People have focused only on the one dimension of the land reform programme.</p>
<p>One element of redistributive land reform that is usually ignored is the private acquisition of farmland by Black South Africans outside the formal government assisted processes. Here individuals have used their own resources or financial arrangements with commercial banks or the <a href="https://landbank.co.za/Pages/Home.aspx">Land Bank</a> through which they fund the purchase farm land. </p>
<p>The only way you can find the exact number of these deals is to comb through every land transaction and, based on the surnames of the seller and buyer, confirm that the land was transferred from White to Black.</p>
<p>The Bureau of Economic Research at Stellenbosch University estimated that since 1994 a total of 1.9 million hectares of farm land were acquired by black South Africans without the assistance of the state. This might even be an undercount because some surnames such as Van Wyk, Van Rooyen, and even Schoeman do not necessary belong to white South Africans, and then there are many transactions to proprietary limited companies that are majority black owned but with typical names that would resemble an Afrikaans name such as Sandrift Boerdery. These are not picked-up in these searches.</p>
<h2>Government acquisition</h2>
<p>Our final source of the data is the farmland acquired by the state. The first is via the Proactive Land Acquisition Strategy (<a href="https://theconversation.com/south-africas-government-has-been-buying-land-and-leasing-it-to-black-farmers-why-its-gone-wrong-and-how-to-fix-it-211938#:%7E:text=By%20June%202023%2C%20the%20state,to%20the%20leasing%20of%20land.">PLAS</a>) that was introduced in 2006 after dissatisfaction with the earlier land reform efforts.</p>
<p>By August 2023, the state had acquired 2.54 million hectares of productive farmland through the programme and lease it out to beneficiaries. The <a href="https://www.gtac.gov.za/pepa/wp-content/uploads/2022/04/ALHA-Spending-Review-Report.pdf">State Land Holding Account Entity</a> is the custodian of this land.</p>
<p>Most of the roughly 2500 beneficiaries have a 30-year lease agreement with the state.</p>
<p>In addition, state owned enterprises and provincial governments have also acquired farmland which is now used for non-agricultural purposes. A total of 630 000 hectares have been acquired over the last 30 years.</p>
<h2>Getting to 25%</h2>
<p>If we now add all the numbers together:</p>
<ul>
<li><p>Restitution: 6.68 million ha</p></li>
<li><p>Government Land redistribution: 7.55 million ha</p></li>
<li><p>Private transactions: 1.9 million ha</p></li>
<li><p>Proactive Land Acquisition Strategy programme: 2.54 million ha</p></li>
<li><p>Government acquisition for non-agricultural use: 0.63 million ha</p></li>
</ul>
<p>This gives a total of 19.3 million ha or 24.9% of the total of all freehold farmland in South Africa. The correct way to word the statement on the progress of with land reform since 1994 is therefore as follows:</p>
<blockquote>
<p>Almost 25% of all farm land previously owned by white land owners have been restored, redistributed to black South Africans or moved away to state ownership.</p>
</blockquote>
<p>This does not say anything about the financial and commercial viability of the land that was transferred and doesn’t speak to the fast tracking of the land reform programme to bring about a just, equitable and inclusive commercial agricultural sector. Here we need more specific policy interventions.</p>
<h2>Policy considerations</h2>
<p>There are vast tracts of land within the government books that could be transferred to black South Africans for the benefit of agricultural progress and land reform success. The government should consider the following steps:</p>
<ul>
<li><p>Establishing a <a href="https://theconversation.com/how-a-land-reform-agency-could-break-south-africas-land-redistribution-deadlock-165450">Land Reform and Agricultural Development Agency</a>. It would primarily be responsible for land registration and transfer under the redistribution programme. It could operate under the <a href="https://landbank.co.za/About-Us/Key%20Policies/1.%20Land%20Bank%20Act.pdf">Land Bank Act</a>, effectively execute the government policy, and deal with beneficiary selection.</p></li>
<li><p>The government’s <a href="https://www.greenagri.org.za/blog/blended-finance-scheme/">Blended Finance programme</a>, in collaboration with the <a href="https://www.gcis.gov.za/sites/default/files/docs/resourcecentre/newsletters/issues.pdf">development finance institutions</a> and other financial institutions, should provide financial support to the selected beneficiaries.</p></li>
</ul><img src="https://counter.theconversation.com/content/226135/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and a member of the Presidential Economic Advisory Council (PEAC).</span></em></p><p class="fine-print"><em><span>Johann Kirsten does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Almost 25% of all farmland previously owned by white landowners has been restored, redistributed to black South Africans, or moved away to state ownership.Johann Kirsten, Director of the Bureau for Economic Research, Stellenbosch UniversityWandile Sihlobo, Senior Fellow, Department of Agricultural Economics, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2259922024-03-19T14:03:12Z2024-03-19T14:03:12ZCocoa beans are in short supply: what this means for farmers, businesses and chocolate lovers<p><em>A <a href="https://www.reuters.com/markets/commodities/african-cocoa-plants-run-out-beans-global-chocolate-crisis-deepens-2024-03-13/">shortage</a> of cocoa beans has led to a near shutdown of processing plants in Côte d'Ivoire and Ghana, the two countries responsible for <a href="https://theconversation.com/cocoa-prices-are-surging-west-african-countries-should-seize-the-moment-to-negotiate-a-better-deal-for-farmers-214305">60% of global production</a>. With chocolate makers around the world reliant on west Africa for cocoa, there is significant concern about the impact on the prices of chocolate and the livelihood of farmers. Cocoa researcher Michael Odijie explains the reasons for the shortage.</em></p>
<h2>Why has cocoa production declined sharply in west Africa?</h2>
<p>Three factors are at play: environmental, economic cycle related and human. </p>
<p>One environmental factor is the impact of the El Niño weather phenomenon, which has caused drier weather in west Africa. It has contributed to problems on farms, such as the swollen shoot virus disease. As a result, Ghana has lost harvests from nearly <a href="https://thecocoapost.com/ghana-loses-over-500000-hectares-of-cocoa-farms-to-swollen-shoot-disease/">500,000 hectares</a> of land in recent years.</p>
<p>The economic cycle of cocoa production refers to the inherent patterns of expansion and contraction in cocoa farming. For example, as cocoa trees age, they become susceptible to diseases, requiring high maintenance costs. Historically, farmers have tended to abandon old farms and start anew in fresh forests. Unfortunately, finding new forests is now increasingly difficult. Perhaps the most severe issue of all is the lack of fair compensation for sustainable cocoa production</p>
<p>The human factor includes challenges such as illegal mining, which has overtaken numerous farms in Ghana. Sometimes, farmers lease their land to illegal miners in exchange for payment. These mining activities degrade the quality of the land, making it unsuitable for cocoa cultivation. </p>
<p>The global market for chocolate and chocolate products is on the <a href="https://www.fortunebusinessinsights.com/industry-reports/cocoa-and-chocolate-market-100075">rise</a>. It is projected to grow faster than <a href="https://www.grandviewresearch.com/industry-analysis/chocolate-market#:%7E:text=The%20global%20chocolate%20market%20size,key%20driver%20of%20the%20market.">4% annually</a> over the next few years. This growing demand for cocoa underscores the urgency in addressing the intertwined issues that relate to the industry’s sustainability.</p>
<h2>Have west African governments intervened to help cocoa farmers?</h2>
<p>In February 2024, the Ghana Cocoa Board (Cocobod), regulator of the country’s cocoa sector, secured a <a href="https://www.reuters.com/world/africa/ghanas-cocobod-taps-200-mln-world-bank-loan-rebuild-disease-hit-cocoa-farms-2024-02-16/">World Bank loan</a> of US$200 million to rehabilitate plantations affected by the cocoa swollen shoot virus. The board will take over the disease-ridden farms, remove and replace the afflicted cocoa trees, and nurture the new plantings to the fruiting stage before returning them to the farmers.</p>
<p>This practice of Cocobod taking out loans to assist farmers is a longstanding one in Ghana. For instance, in 2018, Cocobod <a href="https://thecocoapost.com/cocobod-afdb-loan/">used part</a> of a $600 million loan from the African Development Bank to rehabilitate aging plantations and those hit by diseases. And at the start of the current harvest season in October, the <a href="https://www.cighci.org/ghana-announces-cocoa-producer-price-for-2023-24-crop-season/">producer price was raised</a>: farmers are paid more, a move made inevitable by the surge in global prices. Also, Ghana Cocobod has established a <a href="https://starrfm.com.gh/2024/03/cocobod-taskforce-arrests-illegal-mining-gang-leaders-in-atobrakrom/">task force</a> to shield cocoa farms from the harmful impacts of mining. It has cooperated with police to stem the smuggling of cocoa to neighbouring countries, particularly those that offer a stronger currency.</p>
<p>In Côte d'Ivoire, relatively little action has been taken. It appears the government is still assessing the situation. But there have been <a href="https://www.usnews.com/news/world/articles/2024-02-16/ivory-coast-seizes-100-tons-of-cocoa-at-the-border-with-guinea">measures</a> to curb smuggling of cocoa, prompted by the fact that the shortage is driving up prices in neighbouring countries. Côte d'Ivoire does benefit from numerous sustainability programmes initiated by multinational corporations. The current shortage has accelerated these initiatives. Regrettably, some of the programmes do not disclose their data, making it difficult for academics to access and analyse their information.</p>
<p>African governments have yet to address significant structural issues in their interventions.</p>
<h2>How have cocoa farmers and cocoa-producing countries’ economies been affected?</h2>
<p>At the farm level, although the rise in prices may initially appear beneficial to farmers, the reality is not straightforward. A decrease in output leads to fewer harvests on average, which means that, overall, farmers are not earning more. This issue is compounded by recent <a href="https://theconversation.com/ghanas-economic-crisis-expert-insights-into-how-things-got-so-bad-and-what-the-fixes-are-193153">economic challenges in west Africa</a>, such as high inflation and currency devaluation, particularly in Ghana. These factors have resulted in farmers becoming poorer.</p>
<p>Another impact of the output decline is a reduction in local processing. Major African processing facilities in Côte d'Ivoire and Ghana have either ceased operations or reduced their processing capacity because they cannot afford to purchase beans. This likely means that chocolate prices worldwide will surge. This, in turn, adversely affects the local production units that have been emerging in recent years. </p>
<p>However, the bargaining power of west African cocoa-producing countries seems to have increased. Now is an opportune moment for these nations to unite and negotiate more favourable terms for their cocoa farmers. </p>
<h2>Will chocolate makers eventually turn to cocoa alternatives?</h2>
<p>It’s inevitable because continuing to cultivate cocoa under current conditions is unsustainable. I don’t perceive this negatively; I hope it occurs sooner rather than later. In fact, it is already underway with the rise of cocoa butter equivalents, cocoa extenders and artificial flavours (synthetic or nature-identical flavours that mimic the taste of chocolate without the need for cocoa). </p>
<p>The German company Planet A Foods is a leader in this area. It produces cocoa-free chocolate, using technology to transform ingredients such as oats and sunflower seeds into substitutes for cocoa mass and butter. </p>
<p>Overall, this is beneficial for everyone. The demand for cocoa has <a href="https://theconversation.com/the-real-cost-of-your-chocolate-habit-new-research-reveals-the-bittersweet-truth-of-cocoa-farming-in-africas-forests-206082">resulted</a> in mass deforestation and significant carbon emissions, issues that are likely to worsen due to climate change. Moreover, the push for cultivation has led to various forms of labour abuses. Exploring cocoa alternatives is certainly part of the solution.</p><img src="https://counter.theconversation.com/content/225992/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael E Odijie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Major African cocoa plants in Côte d'Ivoire and Ghana have stopped or cut processing because they cannot afford to buy beans.Michael E Odijie, Research associate, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2222242024-03-19T10:45:17Z2024-03-19T10:45:17ZNigeria’s fuel subsidy removal was too sudden: why a gradual approach would have been better<p>Nigeria <a href="https://www.economist.com/middle-east-and-africa/2023/06/08/nigerias-new-president-scraps-the-fuel-subsidy">removed</a> fuel subsidies entirely in May 2023. This came as a surprise because of the political risks associated with subsidy removal. Previous administrations were <a href="https://www.theguardian.com/world/2012/jan/16/nigeria-restores-fuel-subsidy-protests">reluctant</a> to jettison the subsidies.</p>
<p>The subsidies had been in place since the <a href="https://www.ictd.ac/publication/fuel-subsidy-social-contract-microeconomic-analysis-nigeria-rib/#:%7E:text=Subsidies%20exist%20because%20the%20government,oil%20price%20shock%20in%201973">1970s</a>, when the government sold petrol to Nigerians at a price below cost – though most consumers weren’t aware of this. </p>
<p>The 1977 <a href="https://gazettes.africa/archive/ng/1977/ng-government-gazette-supplement-dated-1977-01-13-no-2-part-a.pdf">Price Control Act</a> made it illegal for some products (including petrol) to be sold above the regulated price. The <a href="https://www.britannica.com/biography/Olusegun-Obasanjo">Olusegun Obasanjo</a> regime introduced this law to cushion the effects of <a href="https://www.npr.org/2021/05/29/1001023637/think-inflation-is-bad-now-lets-take-a-step-back-to-the-1970s">inflation</a>, caused by a worldwide increase in energy prices.</p>
<p>Fuel subsidies have been controversial in Nigeria, and some analysts see them as inequitable. Very few Nigerians own vehicles. Nigeria is among the countries with the <a href="https://nigerianstat.gov.ng/elibrary/read/903/#:%7E:text=Estimated%20vehicle%20population%20in%20Nigeria,population%20ratio%20is%20put%200.06.">least number of vehicles</a> per capita, with <a href="https://nigerianstat.gov.ng/elibrary/read/903/#:%7E:text=Estimated%20vehicle%20population%20in%20Nigeria,population%20ratio%20is%20put%200.06.">0.06 vehicles</a> per person or 50 vehicles per 1,000 Nigerians.</p>
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Read more:
<a href="https://theconversation.com/nigerias-fuel-subsidy-is-gone-its-time-to-spend-the-money-in-ways-that-benefit-the-poor-204701">Nigeria’s fuel subsidy is gone. It's time to spend the money in ways that benefit the poor</a>
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<p>So critics have <a href="https://theconversation.com/nigerias-fuel-subsidy-is-gone-its-time-to-spend-the-money-in-ways-that-benefit-the-poor-204701">argued</a> that the subsidies benefited mainly the elites even though they could afford to buy fuel at market prices. </p>
<p>The subsidies were also considered to be a drain on public finances, costing the government <a href="https://www.reuters.com/business/energy/nigerias-nnpc-spent-10-billion-fuel-subsidy-2022-2023-01-20/">US$10 billion</a> in 2022. About <a href="https://www.dataphyte.com/latest-reports/nigerias-expenditure-on-fuel-subsidy-in-17-years-adequate-to-build-three-450000bpd-refineries-neiti/">40%</a> of Nigeria’s revenue in 2022 was spent on fuel subsidies.</p>
<p>Fuel subsidies in Nigeria were notorious for their opacity and graft. <a href="https://punchng.com/probe-missing-2-1bn-n3-1tn-subsidy-payments-or-face-lawsuit-serap-tells-tinubu/">Billions of dollars</a> were said to have been lost through corrupt practices in the payment of the subsidies. </p>
<p>These are some of the reasons they were removed. </p>
<p>But now questions are being asked about the way it was done. In a public opinion poll conducted last year, <a href="https://www.noi-polls.com/post/fuel-subsidy-removal-7-in10-nigerians-lament-over-the-negative-impact">73%</a> of Nigerians said they were dissatisfied with the manner in which the fuel subsidy was removed. </p>
<p>As <a href="https://theconversation.com/profiles/stephen-onyeiwu-170137">an economist</a> who has studied the Nigerian economy for over four decades, I can see why the fuel subsidy had to go. </p>
<p>As I argued in a <a href="https://theconversation.com/fuel-subsidies-in-nigeria-theyre-bad-for-the-economy-but-the-lifeblood-of-politicians-170966">previous article</a>, fuel subsidies were bad for the Nigerian economy. They worsened budget deficits and the country’s debt profile, encouraged corruption, and diverted resources away from critical sectors of the economy. They were also inequitable, transferring the national wealth to elites. </p>
<p>But, as has become clear from the <a href="https://theconversation.com/inflation-in-nigeria-is-still-climbing-while-it-has-slowed-globally-heres-why-222226">unprecedented inflation</a> in the country partly caused by the removal of fuel subsidies, the abrupt removal of the subsidy was not the best strategy to use. </p>
<p>I believe this action should have been staggered over several months. This would have provided a soft landing, and gradually exposed Nigerians to the full market price of fuel. Doing so in one fell swoop amounts to shock therapy that is very traumatic for an already beleaguered and impoverished citizenry.</p>
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Read more:
<a href="https://theconversation.com/fuel-subsidies-in-nigeria-theyre-bad-for-the-economy-but-the-lifeblood-of-politicians-170966">Fuel subsidies in Nigeria: they're bad for the economy, but the lifeblood of politicians</a>
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<h2>Why removing the subsidy should have been gradual</h2>
<p>The <a href="https://theconversation.com/bola-ahmed-tinubu-the-kingmaker-is-now-nigerias-president-200383">Bola Tinubu</a> administration could have chosen from various mechanisms to minimise the negative impact of subsidy removal. </p>
<p>As proposed by the <a href="https://documents1.worldbank.org/curated/en/099061623093529051/pdf/P1779950377213012089e701681a43e5558.pdf">World Bank</a>, a temporary price cap would have ensured that fuel price increases did not inflict too much pain on consumers. This approach would also have enabled the government to significantly reduce, but not eliminate, the fiscal burden of the subsidy. </p>
<p>Another approach is periodic price adjustments: setting the price based on a moving average of previous months’ import costs. These adjustments could have been made together with a price cap. The <a href="https://documents1.worldbank.org/curated/en/099061623093529051/pdf/P1779950377213012089e701681a43e5558.pdf">Philippines</a> is one country that successfully removed fuel subsidies in the 1990s, using the price adjustment mechanism.</p>
<p>Gradually phasing out subsidies would have been a better approach for a number of reasons. </p>
<p>Firstly, Nigerians had become suspicious of government’s intentions, given their economic experiences with the previous administration of <a href="https://www.britannica.com/biography/Muhammadu-Buhari">Muhammadu Buhari</a>. Those <a href="https://newtelegraphng.com/agony-over-buharis-bad-economic-legacy/">experiences</a> include high <a href="https://tradingeconomics.com/nigeria/inflation-cpi">inflation</a> and <a href="https://tradingeconomics.com/nigeria/unemployment-rate">unemployment rates</a>, rising poverty and insecurity. </p>
<p>Tinubu should have re-established government credibility and good intentions first. He could have offered economic succour such as cash transfers and food subsidies for poor Nigerians, wage increases for workers and retirees, scholarships or tuition waivers for indigent students in tertiary institutions, free lunches for primary and secondary students in public schools, and subsidised public transport. </p>
<p>After demonstrating he meant well, he should have gradually rolled out the subsidy removal. Nigerians would have been psychologically prepared for what was coming, including inflation. </p>
<p>The inflationary impact of subsidy removal would have been less severe. Nigerians would have been more tolerant of difficult economic policies. People will accept difficult economic policies if they know their government is humane and pro-people. </p>
<p>Secondly, an incremental approach would have enabled the government to come up with programmes targeted at those most likely to be hurt by subsidy removal. This would have ensured buy-in. The “<a href="https://guardian.ng/politics/tinubus-subsidy-removal-and-palliative-dilemma/">palliatives</a>” introduced by the Tinubu administration and state governments are temporary and have a <a href="https://punchng.com/palliatives-knocks-trail-distribution-beneficiaries-decry-inadequate-foodstuffs-delay/">limited reach</a>. </p>
<p>Gradual subsidy removal would have enabled the government to engage with groups that would be affected by the policy. Groups representing labour, manufacturers, students, women and others could have provided insights into what would be needed to help their members adjust. </p>
<p>This interactive approach would have promoted transparency and credibility in the conduct of government policies.</p>
<p>Many vulnerable Nigerians were already under severe economic pressure. Apart from <a href="https://tradingeconomics.com/nigeria/unemployment-rate">high unemployment</a> and <a href="https://nigerianstat.gov.ng/elibrary/read/1092#:%7E:text=In%20Nigeria%2040.1%20percent%20of,considered%20poor%20by%20national%20standards.">poverty rates</a>, <a href="https://tradingeconomics.com/nigeria/inflation-cpi">inflation</a> was biting very hard. </p>
<p>The abrupt removal of fuel subsidies, without first putting in place shock-absorbing measures, will make it more difficult for the government to achieve the policy’s long-term aims: fiscal sustainability; higher levels of investment in productive sectors of the economy; economic growth; and investment in renewable energy.</p>
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Read more:
<a href="https://theconversation.com/nigerias-transport-grant-isnt-the-best-way-to-allocate-fuel-subsidy-savings-heres-what-is-172982">Nigeria's transport grant isn't the best way to allocate fuel subsidy savings: here's what is</a>
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<h2>Minimising the negative impact of subsidy removal</h2>
<p>Tinubu should minimise the negative impact of subsidy removal and <a href="https://www.centralbanking.com/central-banks/reserves/foreign-exchange/7959058/nigeria-liberalises-exchange-rate">liberalisation</a> of the foreign exchange market. These two phenomena interact to cause the <a href="https://theconversation.com/inflation-in-nigeria-is-still-climbing-while-it-has-slowed-globally-heres-why-222226">inflation</a> that the country is facing. </p>
<p>First, savings from ending the subsidy should be used to develop productive capacities in agriculture, labour-intensive manufacturing and services. </p>
<p>Manufacturing activities like agro-processing, textiles, footwear, leather products, arts and crafts should be targeted for development. This would generate high-paying jobs that might help Nigerians to cushion the effects of inflation. </p>
<p>In an economy that’s functioning well, wages always adjust to reflect price increases. In Nigeria, however, too many people are either unemployed or in the <a href="https://www.researchgate.net/publication/352695633_EMPLOYMENT_IN_THE_INFORMAL_SECTOR_IN_NIGERIA_IMPLICATIONS_FOR_SUSTAINABLE_ECONOMIC_DEVELOPMENT">informal sector</a>, with limited opportunities to adjust their earnings to reflect inflation. </p>
<p>Funds saved from subsidy removal should be invested in public infrastructure (mass transportation, road construction, electricity generation, water supply). </p>
<p>Funds should also be used to develop people’s capabilities through massive investment in health and education. Part of the savings should be used to support and sustain the <a href="https://www.nuc.edu.ng/president-tinubu-signs-student-loan-bill/">student loan programme</a> announced by the Tinubu administration. </p>
<p>Successful radical economic reforms, such as the ones implemented in <a href="https://academic.oup.com/book/6796/chapter/150948559">Rwanda</a>, usually give people an incentive to be more productive, creative and innovative. But policies that are punitive, with marginal or no benefits, are unlikely to succeed.</p>
<p>It remains to be seen whether Tinubu’s economic policies will spur sustained and inclusive economic growth, as well as alleviate poverty.</p><img src="https://counter.theconversation.com/content/222224/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigeria’s sudden and total removal of fuel subsidies was not the best strategy to use.Stephen Onyeiwu, Professor of Economics & Business, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2253612024-03-18T13:41:37Z2024-03-18T13:41:37ZMalawi and maize: prices have spiked on the back of bad weather and trade bans<p>Maize is the <a href="https://cgspace.cgiar.org/server/api/core/bitstreams/3bd9d66e-1614-4bdd-9971-56f44ed73455/content">leading staple</a> food in Malawi and crucial for food security. Typically, local production from smallholder farmers meets and exceeds annual requirements of around <a href="https://blogs.worldbank.org/africacan/amid-maize-bumper-harvests-malawi-food-insecurity-reigns#:%7E:text=Malawi's%20annual%20maize%20requirement%20is,opposite%20has%20been%20the%20case.">3 million metric tonnes</a>.</p>
<p>The country, however, is currently facing a crisis with <a href="https://response.reliefweb.int/malawi/food-security/reports">4.4 million Malawians (22% of the population)</a> being food insecure. </p>
<p>This is due firstly to a poor harvest in 2023. The subsequent shortages led to a spike in prices which hit households hard. Such severe impacts on households could have been avoided, however, with <a href="https://africanclimatefoundation.org/wp-content/uploads/2022/11/800690-01-ACF-Position-Papers-COP27-Food-Prices-05.pdf">more integrated regional</a> markets to buffer against such shocks.</p>
<p>We analysed the dynamics behind these developments. We concluded that regional trade was not working well. Supply shocks driven by extreme weather were exacerbated by ad hoc trade bans and by apparent market speculation.</p>
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Read more:
<a href="https://theconversation.com/enforcing-competition-would-ease-food-price-hikes-in-east-and-southern-africa-182879">Enforcing competition would ease food price hikes in east and southern Africa</a>
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<p>These factors added hundreds of millions of dollars to the total costs of maize for ordinary Malawians from August 2023 to January 2024. Our calculations indicate that households incurred additional spending of around US$200 million due to the elevated maize prices. Prices were elevated by <a href="https://sway.cloud.microsoft/W8DD8rBEbGpa6pOG?ref=Link">50%</a>, in the period when most households in Malawi had to purchase maize as <a href="https://massp.ifpri.info/files/2024/02/Working-Paper-45-Welfare-impacts-of-seasonal-maize-price-fluctuations-in-Malawi.pdf">smallholders had exhausted their own production</a>. Sharp price hikes have been seen in earlier years, such as in <a href="https://www.competition.org.za/s/AMO_Price-tracker-18_Oct_14112022.pdf">Kenya in late 2022</a>, for similar reasons.</p>
<p>These numbers should be sounding a loud warning for expected supply volatility in future. Our view is that stakeholders, together with the national and regional competition authorities, should monitor markets and advocate for fair prices. They should intervene where appropriate if there are signs of anti-competitive conduct.</p>
<h2>The dynamics</h2>
<p>Trade from neighbours with good harvests could have mitigated the impact of supply shocks. </p>
<p>In 2023, facing high fertilizer prices, <a href="https://sway.cloud.microsoft/W8DD8rBEbGpa6pOG?ref=Link">Malawi imported</a> much smaller fertilizer volumes, including supplies for its <a href="https://www.nyasatimes.com/malawi-government-misses-deadline-on-aip-implementation/">Affordable Inputs Programme</a>. The <a href="https://www.mwapata.mw/_files/ugd/dd6c2f_decdb3b481b243388d835f560a28fc9d.pdf?index=true">programme</a> is a government initiative which seeks to promote food security and reduce poverty in Malawi by improving access to affordable farming inputs. The decision hurt crop yields. Maize harvests were also hit hard by <a href="https://e360.yale.edu/features/cyclone-freddy-malawi-aftermath#:%7E:text=%E2%80%9C%5BCyclone%20Freddy%5D%20caused%20soil,the%20productivity%20of%20agricultural%20land.">Cyclone Freddy</a> early in 2023. </p>
<p>The reduction in domestic maize supply would be expected to result in somewhat higher maize prices in Malawi. But Malawi’s neighbours in east Africa had abundant maize supply from the 2023 harvest. Prices in Malawi shouldn’t have increased above the costs of imports. </p>
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Read more:
<a href="https://theconversation.com/zambia-can-meet-growing-food-demand-how-to-fix-whats-standing-in-its-way-187373">Zambia can meet growing food demand: how to fix what's standing in its way</a>
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<p>Malawi prices shot up following <a href="https://ipad.fas.usda.gov/countrysummary/Default.aspx?id=MI">the 2023 May harvest period</a> (Figure 1). The prices of US$650 per metric tonne were far above those of neighbouring countries (such as $250 per tonne in south-west Tanzania). In addition, the prices hugely exceeded the import parity price based on adding transport and related costs for importing into Malawi.</p>
<p>From August to October, prices continued to be marked up substantially above the import parity price of around $370 per tonne. The import parity price represents a reasonable price and is calculated using the maize prices from Tanzania and Zambia, which averaged $300 per tonne over the period, and <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/627b83c72818b8346e9227a0/1652261854313/WP+Assessing+agriculture+food+markets+in+Eastern+and+Southern+Africa+an+agenda+for+regional+competition+enforcement.pdf">transport costs of US$50-80 per tonne</a>. </p>
<p>In 2024 there are widespread concerns again about production in some southern African countries, such as <a href="https://theconversation.com/dry-weather-hits-southern-africas-farmers-putting-key-maize-supplies-at-risk-how-to-blunt-the-impact-224974#:%7E:text=South%20Africa%2C%20Zambia%20and%20Zimbabwe,hit%20by%20heatwaves%20and%20dryness.">Zambia</a>, because of persisting dry weather conditions. At the same time, there is abundant production and good growing conditions in countries such as Tanzania, which remains a substantial maize net exporter, having <a href="https://dailynews.co.tz/maize-boom-in-season-of-surplus/">experienced good harvests</a>.</p>
<h2>Trade and prices</h2>
<p>The sharp reduction in prices in Malawi in November 2023 followed 40,000 tonnes of maize being <a href="https://sway.cloud.microsoft/W8DD8rBEbGpa6pOG?ref=Link">imported by the Agricultural Development and Marketing Corporation</a> from Mozambique to be distributed all over the country. Prices dropped to US$458 per tonne. However, the currency depreciation of almost 50% in the same month meant that prices in local currency did not fall. </p>
<p>The currency depreciation flowed through to huge local price increases in December as prices increased in US dollar terms to their highest levels: $670 per tonne. The December increases were due in large part to <a href="https://farmersreviewafrica.com/malawi-suspends-unmilled-maize-imports-from-kenya-and-tanzania-sights-necrosis-disease/">a ban initiated by Malawi</a> on maize imports from Tanzania at the same time as Zambia was restricting maize trade to Malawi. The holders of maize stocks were able to earn staggering excess margins over the import parity prices that would have applied if trade had been possible.</p>
<p>In January 2024, maize prices declined to $446 as the trade restrictions with Tanzania were relaxed again. Market participants <a href="https://sway.cloud.microsoft/W8DD8rBEbGpa6pOG?ref=Link">reported an influx of maize</a> into the market from imports and traders with storage facilities. Even though prices declined in January, they were still inconsistent with fair market outcomes. </p>
<h2>Harm to consumers</h2>
<p>The highest prices from August to December coincided with the period when in a normal year most households in rural areas have exhausted their own produce and would have to <a href="https://massp.ifpri.info/files/2024/02/Working-Paper-45-Welfare-impacts-of-seasonal-maize-price-fluctuations-in-Malawi.pdf">buy additional maize</a>. </p>
<p>On average each person in Malawi <a href="https://massp.ifpri.info/files/2024/02/Working-Paper-45-Welfare-impacts-of-seasonal-maize-price-fluctuations-in-Malawi.pdf">consumes about 9.5kg of maize per month</a>. With an average overcharge on maize in the order of $200 per tonne, which is calculated as the difference between the prevailing price in Malawi and the import parity price, this means that <a href="https://microdata.worldbank.org/index.php/catalog/3818/download/49047">an average household of 4.3 people</a> spent an additional $8 per month to maintain their consumption. This assumes that the increases are passed through by millers. The cost shock also affects animal feed, affecting prices of foods such as poultry and eggs, which has not been considered in this analysis.</p>
<p>In conclusion, the sustained excess margins in Malawi indicate that regional trade is not working well. Supply shocks, such as those due to extreme weather, are exacerbated by ad hoc trade bans as well as by apparent market speculation, as conveyed to us by market participants.</p><img src="https://counter.theconversation.com/content/225361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Roberts works for the Centre for Competition, Regulation and Economic Development (CCRED) at the University of Johannesburg and is an advisor to the Shamba Centre for Food and Climate which has provided funding for CCRED's research on African food markets. </span></em></p><p class="fine-print"><em><span>Namhla Landani works for the African Market Observatory (AMO), an initiative of the Centre for Competition, Regulation and Economic Development at the University of Johannesburg. The AMO receives funding from the Shamba Centre for Food and Climate for research on African Food Markets.</span></em></p><p class="fine-print"><em><span>Olwethu Shedi works for the African Market Observatory (AMO), an initiative of the Centre for Competition, Regulation and Economic Development housed at the University of Johannesburg. The AMO receives funding from the Shamba Centre for Food and Climate.</span></em></p>Approximately 22% of Malawians are food insecure, partly because of the poor maize harvest in 2023.Simon Roberts, Professor of Economics and Lead Researcher, Centre for Competition, Regulation and Economic Development, UJ, University of JohannesburgNamhla Landani, Economist at the Centre for Competition, Regulation and Economic Development, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2255172024-03-14T13:15:14Z2024-03-14T13:15:14ZBurkina Faso, Mali and Niger hint at a new west African currency: what it’ll take for it to succeed<p><em>On 11 February 2024, the head of Niger’s ruling military junta, General Abdourahmane Tiani, spoke of the <a href="https://www.france24.com/en/video/20240213-niger-hints-at-new-currency-in-step-out-of-colonialisation">possible creation of a common currency</a> with Burkina Faso and Mali. “The currency is a first step toward breaking free from the legacy of colonisation,” he said on national TV, referring to the CFA franc inherited from French colonisation.</em></p>
<p><em>Burkina Faso, Niger and Mali, three former French colonies, have experienced military coups in recent years. They’re now all ruled by military regimes. They also formed a new defence alliance, known as the <a href="https://theconversation.com/burkina-faso-mali-and-niger-have-a-new-defence-alliance-an-expert-view-of-its-chances-of-success-215863">Alliance of Sahel States</a> (AES).</em> </p>
<p><em>The Economic Community of West African States (Ecowas) <a href="https://www.france24.com/fr/afrique/20240226-la-lev%C3%A9e-des-sanctions-contre-le-niger-un-net-changement-de-braquet-pour-la-c%C3%A9d%C3%A9ao">has condemned</a> these coups and imposed sanctions on the countries involved. In response, these countries decided to withdraw from Ecowas. However, they remain members of the <a href="https://www.umoatitres.org/en/commission-de-luemoa/">West African Economic and Monetary Union</a> (Uemoa). Uemoa has a common currency, the CFA franc, which is issued by the Central Bank of West African States (BCEAO).</em></p>
<p><em>The BCEAO and the Banque de France are bound by <a href="https://www.banque-france.fr/fr/banque-de-france/partenariats-afrique-france">cooperation agreements</a> that include the deposit of a portion of foreign exchange reserves at the Banque de France and France guaranteeing the CFA franc.</em></p>
<p><em>Thierno Thioune, an expert on <a href="https://www.researchgate.net/publication/352717047_Interdependance_entre_Politique_monetaire_et_politique_budgetaire_au_niveau_de_l4UEMOA?_tp=eyJjb250ZXh0Ijp7ImZpcnN0UGFnZSI6InByb2ZpbGUiLCJwYWdlIjoicHJvZmlsZSJ9fQ">monetary policies and unions between west African states</a>, analyses the potential implications and feasibility of launching a new currency for the AES member countries.</em></p>
<h2>What conditions must be met for a multilateral currency to work?</h2>
<p>To successfully launch and maintain a multilateral currency, several key factors must be considered.</p>
<p>First, macroeconomic and budgetary policies must be closely coordinated. Rigorous harmonisation of economic and budgetary policies between participating countries is imperative to guarantee the stability of the currency’s value and prevent trade imbalances. This will help maintain the confidence of economic players and promote regional growth.</p>
<p>Second, robust monetary management institutions must be established. Strong institutions responsible for currency management, like a common central bank, are essential. This central bank must have adequate authority to implement an independent and stable monetary policy. This will ensure the preservation of the currency’s value and address cyclical fluctuations. </p>
<p>Third, creating an integrated common market is vital. The unrestricted flow of goods, services, capital and labour is key to driving economic growth and enhancing regional cooperation. The current framework provided by the West African Economic and Monetary Union offers a significant advantage in this regard.</p>
<p>Finally, mechanisms to monitor and resolve crises need to be established. For instance, common reserve funds and <a href="https://www.abc-forex.net/contenu/swap-de-change/swap-devises.php">currency swap arrangements</a> could help address external and internal shocks that may affect the new currency. Currency swaps – when two parties exchange amounts in two different currencies for a certain period at a fixed rate – can be used to manage exchange rate risks and facilitate cross-border financing. </p>
<h2>Are these conditions met in Burkina Faso, Niger and Mali?</h2>
<p>It’s difficult to say whether these conditions have been fully met in the three countries. It would mean having a firm understanding of whether these, among other, conditions have been met: </p>
<ul>
<li><p>harmonisation of government policies</p></li>
<li><p>macroeconomic stability through inflation control</p></li>
<li><p>limit on public debt</p></li>
<li><p>maintenance of a balanced current account.</p></li>
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<p>At this time, it’s hard to say whether these countries have done this. </p>
<h2>Does their monetary union membership make any difference?</h2>
<p>These three countries have been part of the West African Economic and Monetary Union since 1963. In theory, this should give them some experience in coordinating economic and monetary policies through the CFA franc. </p>
<p>They could have experience with infrastructure, like the Central Bank of West African States (which manages the single currency and monetary policy for member states), that would help them with the transition.</p>
<h2>What are the potential gains and risks of the initiative?</h2>
<p>Despite the risks involved, the initiative could bring several benefits. </p>
<p>Establishing a larger monetary zone can foster greater trade integration and improved resource allocation. </p>
<p>It could enhance the country’s “flexibility” in dealing with external partners. </p>
<p>By joining a new monetary union, these three countries could also benefit significantly from increased trade integration, independence from external partners, lower transaction costs and investor attractiveness. </p>
<p>Nevertheless, this initiative also entails risks, particularly with regard to their position within the West African Economic and Monetary Union and Ecowas. The latter could perceive the creation of a new currency as a threat to their regional influence. It could cause the fragmentation of existing economic blocs. In addition, the departure of the three countries could weaken the solidity of the West African Economic and Monetary Union and Ecowas in terms of economic and political influence. </p>
<p>There are also risks that the currency could quickly lose value. </p>
<p>The new currency could depreciate against the CFA franc. This could have substantial negative repercussions for exporters to other West African Economic and Monetary Union countries.</p>
<p>Second, without proper formal frameworks to control and manage the new currency, speculation and uncertainty regarding its value may emerge. This is why establishing robust institutions to support the management and supervision of the new currency is crucial.</p>
<h2>How will the new currency affect trade in the zone?</h2>
<p>The creation of a new currency by these three nations could, temporarily, have a negative impact on their trade with countries within the current bloc. It could even lead to some turbulence in trade with countries outside it.</p>
<p>The transition to a new currency typically introduces a level of uncertainty among economic actors and trading partners, as questions arise about the currency’s value, convertibility and stability. This adjustment phase can lead to a temporary slowdown in trade.</p>
<p>In addition, the introduction of a new currency often requires legislative and regulatory changes, especially regarding foreign exchange operations and customs duties. These can act as administrative and regulatory barriers and result in delays in commercial transactions.</p>
<p>During the transitional period, there may be fluctuations in exchange rates. This will lead to disparities between the old and new currencies. It can affect price competitiveness between exporters and importers and reduce the overall volume of trade.</p>
<p>The perceptions and attitudes of external partners matter when a new currency is announced. Some trading partners may exhibit reluctance or express doubts regarding its reliability and credibility. This could diminish their willingness to continue trading with member countries of the zone.</p>
<h2>Could the move isolate them?</h2>
<p>The creation of a new currency by these three countries may indeed raise questions about their potential isolation. However, such an initiative should not automatically lead to a diplomatic rupture or total marginalisation.</p>
<p>To avoid this, proactive communication, constructive cooperation and balanced, inclusive regional economic integration are key. This will help mitigate the risks of isolation for Burkina Faso, Mali and Niger in their monetary project.</p><img src="https://counter.theconversation.com/content/225517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thierno Thioune has received funding from the Agence Universitaire de la Francophonie (AUF) and the Romanian Government for the "Eugen Ionescu" doctoral programme at the University "Dunarea De Jos" in Galati, Romania. CODESRIA also awarded him a prize as part of its thesis grant programme.</span></em></p>Several conditions must be met to ensure the successful launch and operation of a multilateral currency.Thierno Thioune, enseignant-chercheur, directeur du CREA, Université Cheikh Anta Diop de DakarLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2222262024-03-14T10:35:45Z2024-03-14T10:35:45ZInflation in Nigeria is still climbing while it has slowed globally: here’s why<p>Just as Nigerians were gradually digging out from the devastating effects of the <a href="https://www.who.int/europe/emergencies/situations/covid-19">COVID-19 pandemic</a>, they were hit by high <a href="https://theconversation.com/nigerians-feel-the-pinch-as-food-prices-continue-to-spiral-there-arent-easy-solutions-188489">inflation</a>. </p>
<p>The Nigerian economy contracted by <a href="https://www.weforum.org/agenda/2020/08/africa-largest-economy-worst-contraction-in-a-decade/">6.1%</a> at the peak of COVID in the second quarter of 2020. Unemployment rate rose from 27% in the second quarter of 2020 to 33% in the fourth quarter of the same year. </p>
<p>The World Bank estimated that <a href="https://theconversation.com/nigerias-covid-19-economic-plan-has-delivered-disappointing-results-heres-why-169417">11 million Nigerians</a> were pushed into poverty during the pandemic, in addition to the 100 million (out of 200 million people in the country) who were already classified as poor. </p>
<p>Now, Nigerians have to grapple with unprecedented inflation too.</p>
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Read more:
<a href="https://theconversation.com/nigerias-food-inflation-losers-winners-and-a-possible-solution-172313">Nigeria's food inflation: losers, winners and a possible solution</a>
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<p>Nigeria’s <a href="https://www.cbn.gov.ng/rates/inflrates.asp">inflation rate</a> rose to 29.90% in January 2024, from 28.92% in December 2023. This is the highest it has been in two decades. </p>
<p>Global inflation has reached historic levels during the past three years. The International Monetary Fund expects <a href="https://www.imf.org/en/Blogs/Articles/2024/01/12/charts-spotlight-inflation-economic-growth-globalization-and-climate-change">global inflation</a> to fall, however, from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. </p>
<p>The <a href="https://www.bbc.com/news/business-68277677">US</a> and the <a href="https://www.ft.com/content/0c1f51ff-e42c-4bbc-938a-2cc97c73894a">EU</a> have seen inflation decline during the past few months, prompting central banks to pause interest rate hikes. </p>
<p>In fact, central banks in developed countries are <a href="https://www.weforum.org/agenda/2023/11/interest-rate-hikes-pause-and-other-economy-stories-to-read-3-november-2023/">expected</a> to begin reducing interest rates this year.</p>
<p>So why is inflation rising in Nigeria while it has been declining in other parts of the world?</p>
<p>As a <a href="https://sites.allegheny.edu/econ/faculty-staff/stephen-onyeiwu/">development economist</a> who has been studying the Nigerian economy for over four decades, I argue in this article that the factors that are pushing inflation downward in other parts of the world are moving in the opposite direction in Nigeria. </p>
<p>I also suggest that no single factor can adequately explain rising inflation and escalating food costs in Nigeria. Nigeria’s unprecedented inflation is a case of multiple factors interacting to trigger <a href="https://www.investopedia.com/articles/05/012005.asp">cost-push inflation</a>. </p>
<p>If not addressed urgently, Nigeria’s rising inflation could result in “<a href="https://www.britannica.com/money/what-is-stagflation">stagflation</a>”. This is when the lack of robust economic growth is combined with hyperinflation. </p>
<p>With high numbers of <a href="https://www.statista.com/statistics/1288721/number-of-people-unemployed-in-nigeria/#:%7E:text=Total%20unemployed%20population%20in%20Nigeria%202010%2D2021&text=As%20of%202021%2C%20the%20total,in%20any%20form%20of%20employment.">unemployed people</a> who must purchase basic necessities at very high prices, Nigeria risks widespread protests, social tensions and political instability.</p>
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Read more:
<a href="https://theconversation.com/nigerias-food-insecurity-declaring-a-state-of-emergency-isnt-a-real-solution-heres-what-is-209907">Nigeria's food insecurity: declaring a state of emergency isn't a real solution - here's what is</a>
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<h2>Fuel prices</h2>
<p>Declining <a href="https://www.cnn.com/2023/11/22/energy/oil-prices-fall-opec-meeting-delayed/index.html">oil prices</a>, caused by a slow post-pandemic economic recovery, are causing freight prices to fall, which in turn has lowered production costs and consumer prices in many countries. </p>
<p>But Nigerians are not benefiting from the global decline in oil and natural gas prices. Rather, they are paying substantially more at the pump because of the <a href="https://www.economist.com/middle-east-and-africa/2023/06/08/nigerias-new-president-scraps-the-fuel-subsidy">removal</a> of fuel subsidies. </p>
<p>Fuel prices <a href="https://www.reuters.com/world/africa/nigeria-petrol-prices-soar-record-high-after-subsidy-removal-2023-07-18/">soared</a>, from N557 (US$0.35) to N617 (US$0.39) per litre, after the removal of the subsidy in May 2023. </p>
<p>In other words, while <a href="https://www.barrons.com/articles/natural-gas-prices-51674768324">falling</a> oil and natural gas prices are reducing production costs in other countries, costs are <a href="https://www.thecable.ng/domino-effect-of-petrol-subsidy-removal-on-food-income-insecurity">rising</a> in Nigeria.</p>
<p>A World Bank <a href="https://documents1.worldbank.org/curated/en/099061623093529051/pdf/P1779950377213012089e701681a43e5558.pdf">study</a> found that complete removal of fuel subsidies, except kerosene subsidies, increases economy-wide prices by 3.4%. </p>
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Read more:
<a href="https://theconversation.com/nigerias-fuel-subsidy-is-gone-its-time-to-spend-the-money-in-ways-that-benefit-the-poor-204701">Nigeria’s fuel subsidy is gone. It's time to spend the money in ways that benefit the poor</a>
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<h2>Supply constraints and inflation</h2>
<p>Another factor that is causing global inflation to decline is the <a href="https://www.reuters.com/markets/goodbye-maybe-great-inflation-scare-world-bank-blog-2023-12-18/">easing</a> of pandemic-era supply chain bottlenecks, which has occurred faster than expected. </p>
<p>Nigeria, however, continues to endure supply constraints because of the <a href="https://apnews.com/article/nigeria-foreign-exchange-rate-naira-2d0d62bc89358b957edd602f506b7650">floating</a> of the local currency, the naira. Floating the naira means its value will from now on be determined by market forces of demand and supply, or what the Central Bank of Nigeria refers to as “the willing seller, willing buyer” <a href="https://www.cbn.gov.ng/Out/2024/TED/Circular%20on%20allowable%20limit%20of%20exchange%20rate%20quoted%20by%20IMTOs.pdf">exchange rate</a>. </p>
<p>The central bank previously adopted a “<a href="https://byjus.com/commerce/managed-floating/">managed floating</a>” policy, whereby it periodically adjusted the official exchange rate. But the adjustment criteria were considered to be too opaque and un-reflective of market fundamentals. </p>
<p>The naira depreciated by <a href="https://businessday.ng/news/article/naira-loses-69-of-its-value-against-dollar-since-fx-reforms/">69%</a> between June 2023 when the foreign exchange market was <a href="https://www.centralbanking.com/central-banks/reserves/foreign-exchange/7959058/nigeria-liberalises-exchange-rate">liberalised</a> and the middle of February 2024.</p>
<p>Currency depreciation has increased import costs. Nigeria is an import-dependent economy, and Nigerian importers are purchasing goods at prices that are already very high abroad. The costs of these goods have also gone up because of higher tariffs caused by the <a href="https://punchng.com/industrialists-parents-lament-as-troubled-naira-ends-2023-at-907/">depreciation</a> of the naira. </p>
<p>For instance, only 1% of the roughly <a href="https://www.ifpri.org/blog/russia-ukraine-crisis-presents-threats-nigerias-food-security-potential-opportunities">six million metric tonnes</a> of wheat that Nigeria consumes annually is produced domestically. The <a href="https://www.cfr.org/global-conflict-tracker/conflict/conflict-ukraine">war in Ukraine</a> has raised food prices in Nigeria, as the country imports wheat from Russia and Ukraine, in addition to fertilizers from Russia.</p>
<p>Thus, much of Nigeria’s inflation is caused by a combination of oil subsidy removal and devaluation of the naira. Making it worse are longstanding supply constraints like instability in <a href="https://www.vanguardngr.com/2024/02/what-tinubu-must-do-to-avert-food-riots-in-nigeria/">food-producing areas</a> of the country, deteriorating rural infrastructure, climate change and the exodus of rural dwellers to urban centres in search of opportunities.</p>
<p>Food inflation in Nigeria also reflects low productivity in the agricultural sector. Output has failed to keep up with population growth. Nigeria’s population has been growing by about <a href="https://theconversation.com/nigerias-growing-population-can-be-an-advantage-with-better-data-and-a-policy-focus-on-young-people-209530">2.4%</a> a year, while the growth of agricultural value added is a paltry <a href="https://tradingeconomics.com/nigeria/agriculture-value-added-annual-percent-growth-wb-data.html">1.8%</a>. </p>
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<p>
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Read more:
<a href="https://theconversation.com/nigerias-new-foreign-exchange-policy-is-good-news-but-it-cant-work-wonders-for-the-economy-on-its-own-207767">Nigeria's new foreign exchange policy is good news - but it can't work wonders for the economy on its own</a>
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<h2>Uncertain inflationary outlook</h2>
<p>Inflation is cooling globally partly because of the restrictive monetary and fiscal policies of many countries across the world. Central banks hiked interest rates aggressively and many governments cut spending. </p>
<p>Nigeria’s Central Bank governor <a href="https://www.cbn.gov.ng/AboutCBN/TheBoard.asp?Name=Mr%2E+Olayemi+Cardoso&Biodata=cardoso">Olayemi Cardoso</a> expects Nigeria’s inflation rate to decline to <a href="https://www.cbn.gov.ng/Out/2024/CCD/MPC%20Communique%20No%20150%20of%20the%20CBN%20Feb%202024.pdf">21.4%</a> in 2024, following interest rate increases and <a href="https://www.cbn.gov.ng/Out/2024/CCD/NESG%20CBN%20Governor's%20Keynote%20Speech.pdf">rising</a> agricultural productivity. </p>
<p>But I don’t expect a steep fall in Nigerian’s inflation this year. </p>
<p>First, inflation-targeting policies have lagged effects, and usually take time to make a difference to consumer prices. </p>
<p>Second, many prices are typically “sticky” downward. Once they go up they don’t come down – or only very gradually. </p>
<p>Lastly, Nigeria’s inflation targeting policy can only be effective if it is coupled with fiscal discipline by the executive and legislative branches of government. There is <a href="https://leadership.ng/tinubu-continues-with-borrowing-policy-of-previous-government/">no evidence</a> this has been the case so far under the Bola Tinubu administration.</p><img src="https://counter.theconversation.com/content/222226/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Factors pushing inflation rates downwards in other parts of the world are achieving the exact opposite result in Nigeria.Stephen Onyeiwu, Professor of Economics & Business, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2253022024-03-13T14:22:57Z2024-03-13T14:22:57ZFinancial abuse from an intimate partner? Three ways you can protect yourself<p><a href="https://www.divorcelaws.co.za/what-is-financial-abuse.html">Financial abuse</a> occurs when one person takes control over another person’s ability to acquire, use and maintain financial resources. An example is being denied access to your own funds or being forced to deposit your salary into a joint bank account but not having access to the account. It could also take place when large withdrawals are made from joint bank accounts without any explanation. </p>
<p>According to the <a href="https://www.isdj.org.za/">Institute for Social Development and Justice</a>, a South African non-profit company, financial abuse can vary and change shape or form but happens when access to economic opportunities is controlled or limited by an intimate partner. </p>
<p>This can happen when your partner withholds financial information or hides money from you. Another example is when your partner refuses to allow you to work, thereby controlling your ability to earn an income. Or being coerced into paying for most of the household expenses when you earn less than your partner. Alternatively, it can happen when the abuser racks up debt on a credit card, knowing the card is not in their name. </p>
<p>South Africa’s <a href="https://www.justice.gov.za/legislation/acts/2021-014.pdf">Domestic Violence Act</a> identifies financial abuse as a criminal act. Several other African countries, such as Ghana, Kenya, Uganda, Zambia and Zimbabwe also recognise it to be a criminal offence. But it remains largely unprosecuted.</p>
<p>Unfortunately, financial abuse is not a new problem. Over the years, my <a href="https://researchprofiles.canberra.edu.au/en/persons/bomikazi-zeka">research</a> has found that the proper use of financial services can help those in disadvantaged situations to turn income into wealth. But when money is entangled with relationships, it can become a tricky situation to navigate. </p>
<p>Financial abuse can happen to anyone, irrespective of age, gender, marital status, employment status or income levels. When financial abuse occurs, it is women who are more likely to see their financial security threatened should the dynamics in a relationship take a turn for the worse. Women are more likely to experience financial abuse since it can happen in tandem with <a href="https://link.springer.com/article/10.1007/s10896-023-00639-y">other forms of abuse</a>. </p>
<p>When you know the signs, you can put the following three measures in place to increase your financial safety: prevent, prepare and protect. </p>
<h2>Prevent</h2>
<p>Knowing your partner’s financial history is an important starting point in preventing financial abuse. Ask about how they have managed their debt in the past (and how they got into it in the first place) or whether they are actively saving money. </p>
<p>Broaching the money-talk conversation is difficult but this information should give you insight into their past financial behaviours which could influence and explain future financial behaviours. </p>
<p>Another strategy in prevention is asking about their attitudes towards money in relationships. For instance, do they believe that gender roles influence who manages money? Engaging in this topic early can also help you set boundaries about how money is managed within the relationship. </p>
<h2>Prepare</h2>
<p>Learning the signs of financial abuse can help you be prepared. If you suspect that financial abuse is beginning to emerge then keep close tabs on it by documenting all the evidence. This is important because an abuser may gaslight you into thinking you’re exaggerating, especially when the signs are subtle. Document as much evidence as you can and ensure you have copies of all important legal documents as this will help you, should you require legal assistance. </p>
<p>If you don’t already have one, speak to a financial advisor about how you can protect your finances and assets. </p>
<h2>Protect</h2>
<p>As far as possible, keep an independent source of income as this reduces any likelihood of dependency on a partner. Financial dependency can lead to feelings of isolation and hopelessness, which makes it more difficult to leave an abuser because they control the finances. </p>
<p>Another way you can protect your financial position is by making sure you don’t sign any documents you don’t understand. Often abusers will acquire financial assets in their partner’s name and leave them with the financial burden of the repayments, thereby entrapping them through debt. </p>
<h2>Getting help</h2>
<p>While the measures outlined here are not exhaustive, they are a good starting point to think about when your finances are merged with someone else’s. </p>
<p>If you are concerned about your financial safety, there are ways to get help. FIDA-Kenya, a women’s rights organisation in Kenya, offers <a href="https://www.fida-kenya.org/">free legal aid</a>. In Nigeria, the Women at Risk International Foundation operates a 24-hour confidential toll-free <a href="https://warifng.org/contact-us/">helpline</a>. </p>
<p>You can access free counselling from a social worker via the South African Department of Social Development’s <a href="https://gbv.org.za/about-us/">website</a>, which provides a call centre facility 24 hours a day, seven days a week. The call centre operates an emergency line number on 0800 428 428. You can visit the <a href="https://thewarriorproject.org.za/helplines/">website</a> of the Warrior Project, a non-profit organisation, for more information on helplines and resources.</p><img src="https://counter.theconversation.com/content/225302/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bomikazi Zeka does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When money is entangled with relationships, it can often become a tricky situation.Bomikazi Zeka, Assistant Professor in Finance and Financial Planning, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2249742024-03-05T13:13:04Z2024-03-05T13:13:04ZDry weather hits southern Africa’s farmers, putting key maize supplies at risk: how to blunt the impact<p><a href="https://www.news24.com/news24/africa/news/south-africa-and-the-region-face-grain-strain-despite-record-harvests-20231128">South Africa</a>, <a href="https://apnews.com/article/drought-national-disaster-emergency-electricity-4cc6a2105f4641efe17e10a5b75f78a5">Zambia</a> and <a href="https://english.news.cn/20240229/c7454e0f49e74fd6b891519993f943b9/c.html">Zimbabwe</a> have recently published reports indicating a potential decline in grain harvest because of intense El Niño-induced dryness. These developments could put the entire Southern Africa maize supply chain at risk, with Zambia and South Africa hard hit by heatwaves and dryness. The neighbouring small producers such as Zimbabwe, Botswana, Lesotho and Namibia are also struggling with dryness.</p>
<p>Given that South Africa, Zambia and Zimbabwe <a href="https://apps.fas.usda.gov/psdonline/circulars/production.pdf#page=29">are among the largest maize producers </a> within the Southern Africa region, a potential decline in the harvest in these countries suggests there could be an increase in the risk of food insecurity. This would necessitate imports to meet the shortfall in the region’s maize supplies.</p>
<p>The dryness in an El Niño event is not unexpected in the <a href="https://reliefweb.int/report/madagascar/southern-africa-el-nino-positive-indian-ocean-dipole-forecast-and-humanitarian-impact-october-2023#:%7E:text=El%20Ni%C3%B1o%2Drelated%20climate%20variability,during%20the%20November%20%2D%20April%20season.">Southern Africa region as this weather phenomenon is typically accompanied by dryness</a>. The year started favourably, with excellent rains. But the dryness intensified from the end of January. Major damage has been <a href="https://www.aljazeera.com/news/2024/2/29/zambia-declares-national-disaster-after-drought-devastates-agriculture">caused</a> to crops since then. The unusual pattern may be part of the broader climate change challenges.</p>
<p>Based on research into <a href="https://agbiz.co.za/content/open/sa-2023-24-summer-crop-production-forecasts-lowered-notably-72">grains markets</a> in the region, and recent observations from our field work across the summer crop growing regions of South Africa, it is clear that the region faces a difficult time ahead.</p>
<p>While the extent of the impact of the heatwave and dryness on crops changes daily, the pattern thus far is clear that the whole Southern Africa region has taken strain and will see a significant reduction in the volume of the crop produced.</p>
<p>Although the domestic hunger challenges may rise in some countries, as we already see in the forecasts in <a href="https://fews.net/sites/default/files/2024-01/FAOB-January%202024_1.pdf">Zimbabwe </a> and <a href="https://reliefweb.int/report/zambia/statement-unicef-zambia-situation-children-following-recent-emergency-declaration">Zambia</a>, the governments in the region must be careful about the response policies and programmes. For example, they should avoid export restrictions and maize price caps. And they should make sure that any government support should be at the household level.</p>
<h2>South Africa</h2>
<p>In South Africa, <a href="https://www.grainsa.co.za/news-headlines/press-releases/climate-conditions-problematic-for-grain-producers">a recent farmers’ survey</a> by <a href="https://www.grainsa.co.za/pages/about-grain-sa/overview">Grain South Africa</a>, a lobby group for the sector, found that extreme heat and dry conditions had caused the grain and oil-seeds harvest to deteriorate much faster than initially expected. </p>
<p>These challenges have probably worsened since the survey was completed towards the end of February.</p>
<p>The Crop Estimates Committee in South Africa – a grouping of scientists, economists and statisticians from the government, private sector, academia and independent research organisations – also fears the possible decline in the summer grains and oilseed harvest. <a href="https://agbiz.co.za/content/open/south-africas-summer-crop-production-prospects-remain-bleak-363">In its latest production estimate</a> for the 2023/24 season, the Committee placed the summer grains and oilseed harvest at 15.8 million tonnes, down 21% on 2023.</p>
<p>This is primarily a function of lower expected yields rather than a reduction in the acreage planted, thus reflecting a negative impact of the drier weather conditions and heatwave. This is an overall production figure, and the decline varies crop by crop. Still, a positive aspect of South Africa is that the expected harvest will still be enough to meet the country’s domestic consumption, leaving some volume for exports, albeit significantly down from the previous seasons.</p>
<p>There has not been a lot of talk about other value chains outside summer grains and oilseed, primarily because of higher dam levels from the past few years and earlier rains in the season. With all of South Africa’s commercial fruit and vegetable production under irrigation, the improved water levels in the dams assist farmers in coping with the current heatwave. The livestock industry is still in a relatively better place as the grazing veld has generally improved, and there were large maize and soybean supplies from the 2022/23 season. </p>
<p>The field crops are <a href="https://sa-tied-archive.wider.unu.edu/article/climate-uncertainty-and-agricultural-vulnerability-south-africa-0">primarily rainfed</a>, leaving a large percentage at the mercy of the natural rains, which have been scarce since the start of February.</p>
<h2>Zambia under drought stress</h2>
<p>In late February Zambia’s President, Mr Hakainde Hichilema, <a href="https://www.aljazeera.com/news/2024/2/29/zambia-declares-national-disaster-after-drought-devastates-agriculture">declared Zambia’s severe drought a national disaster and emergency</a>. There is crop damage in the majority of the summer crop-producing regions of the country because of the El Niño-induced drought. </p>
<p>Worryingly, the government reported that the drought <a href="https://apnews.com/article/drought-national-disaster-emergency-electricity-4cc6a2105f4641efe17e10a5b75f78a5">has destroyed nearly 1 million hectares of maize</a>. Given that the overall commercial maize area planting in the country is about 1.9 million hectares, this would mean half of the production has been destroyed. <a href="https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Zambia%20Maintains%20its%20Status%20as%20a%20Net%20Exporter%20of%20Corn%20_Pretoria_Zambia_ZA2023-0001.pdf">It could have significant negative consequences on food production</a>.</p>
<p>Zambia is one of southern Africa’s main producers and exporters of maize. This means if the maize harvest is down notably in the country, there will be no volume for exports to neighbouring countries that also need supplies. This happens at a time when South Africa, although potentially with sufficient supplies for domestic consumption, would have a massive decline in the volume of maize available for exports. </p>
<h2>Zimbabwe’s grain production also strained</h2>
<p>At the start of this year, there were reports of roughly <a href="https://apnews.com/article/zimbabwe-hunger-food-aid-el-nino-climate-aa25b4d2ee6405a792d75a0d4d12d505">2.7 million Zimbabweans potentially at risk of hunger</a> because of the drought impact in their summer grain fields. Moreover, Reuters <a href="https://www.nasdaq.com/articles/zimbabwe-targets-1.1-mln-tons-of-maize-imports-state-media-reports">reported</a> that “Zimbabwe plans to import 1.1 million metric tons of maize over the next year”.</p>
<p>It is unclear how much of this volume has thus far already been imported into the country. The volume speaks to the pressures of maize supplies in Southern Africa. Typically, when Zimbabwe needs such large maize imports, South Africa and Zambia are the primary suppliers. With Zambia potentially out of the export market this year, the pressure is now on South Africa to supply Zimbabwe.</p>
<p>Still, suppose all the required maize is of the white varietal, South Africa may not be in a position to provide Zimbabwe with the total required volume, particularly if we consider that the likes of Namibia, Botswana, Lesotho, Mozambique, Madagascar, and even Zambia will also require maize imports to supplement their domestic annual needs.</p>
<h2>Policy considerations</h2>
<p>There are several key points that policy makers should consider. These include:</p>
<ul>
<li><p>Avoiding export restrictions and maize price caps. While restricting exports seems a good approach for cushioning households in the near term, such an intervention disincentivises production for the next year as the farm-level prices would be artificially depressed. This is particularly important as farmers are not protected from higher input costs and pay world prices for all the imported inputs such as fertilisers, agrochemicals and some seeds.</p></li>
<li><p>Ensure interventions are at the household level through various support packages with fiscal space used to implement such programmes.</p></li>
<li><p>The regional governments should also engage with the World Food Programme to prepare to assist the least well-off countries with maize imports from the world market.</p></li>
<li><p>The governments should also engage, collectively with the private sector, the likes of Mexico that produce white maize, to assess if they would have space to export to the Southern Africa region if the need arises.</p></li>
</ul><img src="https://counter.theconversation.com/content/224974/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and a member of the Presidential Economic Advisory Council (PEAC).</span></em></p>The whole southern Africa region has taken strain and will see a significant reduction in the volume of the crop produced.Wandile Sihlobo, Senior Fellow, Department of Agricultural Economics, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2243802024-03-04T13:28:02Z2024-03-04T13:28:02ZCost-of-living crisis: experts share 3 survival tips<p>The price increases for essential goods such as food, petrol and household utilities are a global concern, but the region most hurt by the <a href="https://www.imf.org/external/pubs/ft/ar/2023/in-focus/cost-of-living-crisis/#:%7E:text=The%20IMF%20heightened%20its%20efforts,the%202008%20global%20financial%20crisis.">surge in food prices</a> is sub-Saharan Africa. The knock-on effect from the supply chain disruption caused by the COVID-19 pandemic, climate disasters that resulted in food insecurity and energy shortages have driven prices through the roof.</p>
<p>A report by <a href="https://www.numbeo.com/cost-of-living/rankings_by_country.jsp?title=2024&region=002">Numbeo</a>, which contains the world’s largest database on costs of living, found that South Africa is the ninth most expensive African country to live in and the most expensive in cost of living (in terms of groceries, transport, utilities and restaurants) in southern Africa. The index shows Côte d'Ivoire is the African country with the highest cost of living, followed by Senegal, Ethiopia, Mozambique and Mauritius. </p>
<p>Consumers have had to cope with food prices by meal planning or buying in bulk to save money. Unilever’s food group <a href="https://www.news24.com/news24/bi-archive/south-african-consumer-go-on-tight-budgets-to-keep-meat-on-their-plate-2022-5">Knorr</a> found that the average South African was also skipping breakfast and eating two meals on weekdays, and only having breakfast during the weekend. </p>
<p>After years of researching <a href="https://researchprofiles.canberra.edu.au/en/persons/bomikazi-zeka/publications/">personal finance</a> and <a href="https://scholar.google.com.au/citations?user=f2301MMAAAAJ&hl=en&oi=ao">development finance</a>, we have taken a keen interest in understanding how consumers manage their resources to overcome economic challenges, such as the cost-of-living crisis. Now is a good time to be financially prudent and plan for how you can keep afloat during these tough times. </p>
<p>It’s important to know how to manage the cost-of-living crisis, whether it’s by getting out of debt, being strategic about how you save or tracking the expenses that consume a big chunk of your income. Keeping an eye out for where you can boost your savings or reduce expenses can make a significant difference to your financial wellbeing. </p>
<p>Since everyone’s financial situation is different, none of this should be taken as financial advice. It’s always best to speak to an authorised financial service provider. Some of these suggestions may only be helpful to individuals with access to banking services and those earning a regular income. With these provisos in mind, we unpack three areas to consider when managing the cost-of-living crisis.</p>
<h2>1. Consolidate your expenses</h2>
<p>Review where you’re paying for the same expense twice. A good example is bank fees. If you’re banking with more than one bank, then chances are you’re paying bank fees for similar transactions across different banks. By housing your finances with one bank, you can reduce bank fees. </p>
<p>Another example is subscriptions for streaming services. Consider how many accounts like Netflix, YouTube Premium, AppleTV and Showmax you have, and ask yourself: how many of them do you really spend time watching? All the fees add up. As Benjamin Franklin, the former US statesman, once put it: “Beware of little expenses. A small leak will sink a great ship.”</p>
<h2>2. Clear debt</h2>
<p>Since the cost-of-living crisis plunged more South African households into indebtedness, Nedbank’s Financial Health <a href="https://moneyedge.co.za/content/dam/moneyedge-2-0/money-conversations/NEDFIN-Health-Monitor-Report.pdf">Report</a> found that almost 50% of South Africans believe it is okay to take on debt to cover household expenses such as groceries, clothing, furniture, appliances, electricity and water. In <a href="https://www.ft.com/content/2dbc240e-328a-452b-9347-5091d74f4003">Nigeria</a>, too, consumers are turning to loans to cover daily expenses as inflation rates rise. </p>
<p>Taking on more debt when living expenses are on the rise can easily sink you deeper into the debt hole. Instead, coming up with a plan to pay off debts will eventually free up your cash flows. </p>
<p>There are two strategies to try: the debt snowball approach or the debt avalanche method. </p>
<p>The debt snowball approach prioritises paying off your smallest debts first, before moving on to larger loans. Seeing your debt clearing up motivates you.</p>
<p>The debt avalanche approach tackles the debts with the highest interest rate first and will thus save you the most money as your high interest repayments are eliminated. </p>
<p>Whichever approach you decide to use, seek the opinion of a professional financial advisor. </p>
<h2>3. Compartmentalise your savings</h2>
<p>Saving provides financial security and a buffer for unplanned financial expenses. And it helps you reach your financial goals. While households with intermittent income are more likely to struggle with building up savings, opportunities to save may come in the form of reducing shopping costs, like switching to supermarket brands (which tend to be cheaper) or buying refills for household cleaning products. </p>
<p>In general, most people who actively save keep their savings for holidays, emergency funds, future purchases and long-term goals all in the same account. The problem with this approach is that when you need to withdraw from the savings account, you don’t know which part of your savings you’re withdrawing from. </p>
<p>One way to organise your savings is by separating them into the categories you are saving for. This could be done in a spreadsheet that shows how much you have saved for each category. You can clearly see how your savings for each goal are growing, which encourages you to keep the savings momentum going. </p>
<p>If you’re interested in taking this a step further, budgeting apps such as <a href="https://www.22seven.com/">22seven</a> create personalised budgets based on your actual spending patterns. This free app allows you to set limits for what you want to spend and tracks how much you’ve already spent.</p>
<p>For example, you can decide what you plan to spend for lifestyle expenses (such as dining out or shopping) and receive a notification when you are close to reaching your spending limit. But it’s important to practise some self-discipline and not overspend once those funds are depleted. And while this may seem like yet another app that needs to be installed, think of how easy it is to tap your debit card when going about your day and spending more than you had planned. </p>
<p>Sometimes we need to put measures in place to save ourselves from ourselves, and this is one of them.</p><img src="https://counter.theconversation.com/content/224380/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Keeping an eye out for where you can boost your savings or reduce expenses when times are tough can improve your financial wellbeing.Bomikazi Zeka, Assistant Professor in Finance and Financial Planning, University of CanberraAbdul Latif Alhassan, Professor of Development Finance & Insurance, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2241022024-02-28T14:42:15Z2024-02-28T14:42:15ZWhy developing countries must unite to protect the WTO’s dispute settlement system<p>The World Trade Organisation’s <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">dispute settlement mechanism</a> has, for decades, provided stability and predictability to the resolution of disputes between member countries. As escalating global crises increasingly <a href="https://www.wto.org/english/res_e/reser_e/ersd202209_e.htm">affect world trade</a>, however, the WTO needs to reform or risk becoming irrelevant.</p>
<p>Many are questioning whether <a href="https://www.wto.org/english/thewto_e/minist_e/mc13_e/mc13_e.htm">the 2024 Ministerial Conference</a> – the WTO’s highest decision making body – is the <a href="https://ielp.worldtradelaw.net/2024/02/guest-post-mc13-is-it-the-last-chance-to-save-the-wto-.html">last chance to save the WTO</a>. At the top of the agenda of the conference being held in Abu Dhabi is the blocking by the US of new Appellate Body member appointments. The Appellate Body of seven persons <a href="https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm">deals with appeals</a> against panel findings in disputes brought by WTO members.</p>
<p>The WTO’s dispute settlement system isn’t perfect. It is overly technocratic and expensive; and the Appellate Body was often <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2016/06/06/the-u-s-is-trying-to-block-the-reappointment-of-a-wto-judge-here-are-3-things-to-know/">accused of overreaching its authority</a>. </p>
<p>The dispute settlement mechanism was designed to provide a safeguard against unfair trade practices by treating all countries equally and regardless of their economic power. Once seen as the “jewel in the crown” of the WTO, the two-tier dispute settlement system has <a href="https://www.chathamhouse.org/2020/09/reforming-world-trade-organization/04-dispute-settlement-crisis">not been fully functional since December 2019</a>. <a href="https://www.csis.org/programs/scholl-chair-international-business/world-trade-organization-appellate-body-crisis#:%7E:text=On%20December%2010%2C%20the%20terms,in%20enforcing%20multilateral%20trade%20rules">The Appellate Body collapsed</a> when the terms of two of its three remaining members expired. Due to the requirement for three members to hear an appeal, there was no longer a standing body that could decide on appealed panel findings. This put cases on hold, threatening to undermine the WTO’s legitimacy.</p>
<p>In the hope of solving the current crisis, WTO members have put forward alternative models for resolving disputes. One is a multi-party interim arrangement. It provides a temporary alternative for appealing trade disputes. Originally set up by 16 WTO members, the arrangement quickly expanded to include 54 of the 164 WTO members. This reflected broad support for a final-stage arbitral process and the binding nature of the arbitral award issued by the panel.</p>
<p>However, its use <a href="https://www.akingump.com/en/insights/alerts/wto-dispute-settlementwhat-to-expect-in-2024">appears to have stalled</a> as more countries have opted to either settle their disputes bilaterally or even suspend them.</p>
<p>Developing countries, such as <a href="https://www.wto.org/english/news_e/news23_e/dsb_18dec23_e.htm">India</a>, have been critical of the interim arrangement. They have argued that it sidesteps their right to appeal under WTO rules. They want the standing Appellate Body to be reinstated. </p>
<p>Among the most controversial proposals for reform is an idea tabled by the US. It proposes a dispute settlement system with an <a href="https://www.iisd.org/articles/policy-analysis/wto-dispute-settlement-without-appellate-body">“opt-out” clause</a> for countries that only wish to accept the jurisdiction of the Appellate Body on a case-by-case basis. This is similar to the <a href="https://www.icj-cij.org/history">International Court of Justice</a>: countries choose to “opt in” and be subject to the jurisdiction of the court. </p>
<h2>What’s at stake</h2>
<p>A fully functioning dispute settlement mechanism with an appellate tribunal is indispensable for creating a just and equitable global economy. The US proposals for an opt-out system of dispute resolution would allow countries to disregard unfavourable decisions of the appellate tribunal.</p>
<p>This is problematic for several reasons.</p>
<p>First, it would weaken the WTO’s credibility and effectiveness by making the current crisis permanent. It contributes to a move towards bilateral dispute settlement, exemplified by the US-India deal to end six of their ongoing WTO disputes. This signals a worrying departure from <a href="https://www.wto.org/english/news_e/spno_e/spno32_e.htm">multilateralism</a>, a recent trend which risks sidelining the most vulnerable developing countries even more.</p>
<p>Second, being allowed to sidestep rulings would further marginalise developing countries, undermining the WTO’s mission to foster equal competitive conditions. It risks leaving less economically developed countries unable to challenge trade rule violations and seek remedies against unfair trade practices. </p>
<p>Two cases illustrate the dangers of a system where powerful countries ignore rulings without fear of repercussions.</p>
<ul>
<li><p>The first example is the <a href="https://www.asil.org/insights/volume/6/issue/4/us-eu-banana-dispute">long-running bananas dispute</a> between the European Community and some developing countries in Latin America. They successfully challenged the European Community’s banana import rules, claiming they were discriminatory and violated the most favoured nation principle. The principle states that countries <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm">cannot generally discriminate between their trading partners</a>. The European Community vetoed two panel reports, leading to a lengthy legal battle. The process was complicated by the General Agreement on Tariffs and Trade’s requirement for decisions based on consensus, which drained the limited resources of the developing countries involved. </p></li>
<li><p>The second example is the notorious <a href="https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm">US-Gambling dispute</a>, where the US was found to have violated WTO rules. Antigua and Barbuda were granted permission to retaliate, but the Appellate Body’s recommendations have still not been upheld. For small island nations like Antigua and Barbuda, the cost of this litigation has been far-reaching, harming their economies. Meanwhile, the US, insisting that its laws comply, has not faced any significant or negative economic consequences from either the dispute or its outright non-compliance with the outcome.</p></li>
</ul>
<p>Third, an “opt out” approach could allow economically stronger members to sidestep rulings, exacerbating power imbalances. Such a trend jeopardises the economic development prospect of poorer countries by affecting long-term investment and trade decisions. </p>
<p>Most African countries have rarely used the WTO’s dispute process. But addressing the reasons for this may enable them to engage with the system in future.</p>
<h2>To-do list for developing countries</h2>
<p>A functioning dispute settlement system would resonate with the WTO’s broader vision of fairness, equality and sovereignty in global trade. </p>
<p>To achieve this, developing countries must:</p>
<ul>
<li><p>reject the opt-out model </p></li>
<li><p>call for greater support, including technical assistance and capacity-building, to ensure effective participation in the dispute settlement process </p></li>
<li><p>collaborate with each other and with developed countries to strengthen their collective voice in reform discussions. </p></li>
</ul>
<p>Adopting a unified stance and getting commitment among all members to compulsory jurisdiction is the only way the WTO can remain a cornerstone of the international trade system.</p><img src="https://counter.theconversation.com/content/224102/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The approach proposed by the US to deal with trade disputes will marginalise developing countries.Franziska Sucker, Associate Professor, University of the WitwatersrandClair Gammage, Professor of International Commercial Law, University of ExeterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2238692024-02-28T14:41:38Z2024-02-28T14:41:38ZGhana: Street vending helps migrants to survive in Accra, but it’s illegal – a solution for all is needed<p>Moving to the city is a common strategy for the rural poor in the global south. Economic hardship pushes individuals out of their rural communities in search of opportunities. These tend to be found in urban centres, where facilities and services are concentrated. </p>
<p>The <a href="https://worldmigrationreport.iom.int/wmr-2020-interactive/">World Migration Report</a> indicated that 740 million people were migrants in their own country in 2009. </p>
<p>Even in the city, there’s no guarantee of finding a job. Many people therefore resort to informal ways of making a living, like street vending. In Ghana, about <a href="https://library.fes.de/pdf-files/bueros/ghana/10496.pdf">80% of the workforce</a> are employed in the informal sector.</p>
<p>We were among a group of urban planning researchers who recently <a href="https://link.springer.com/article/10.1007/s43545-023-00698-4">studied</a> the role of street vending in the lives of migrants in Ghana’s capital, Accra. In most <a href="https://www.wiego.org/sites/default/files/publications/files/IEMS-Sector-Report-Street-Vendors-Exec-Summary.pdf">African cities</a>, between 2% and 24% of informal workers are street vendors. </p>
<p>Our study showed that street sales were a source of jobs, income and survival for the urban poor in Ghana. This is even though street vending is illegal in the country.</p>
<p>We also assessed the effects of street vending from the lens of city authorities. Over the years, city authorities have failed to manage the activities of street vendors. Understanding all the relevant perspectives may help to find ways to meet people’s various needs in Ghanaian cities.</p>
<h2>Street vendors in Accra</h2>
<p>The study focused on street vending activities in the <a href="https://www.researchgate.net/figure/Map-of-Accra-Central-Business-Area-Showing-the-Study-Area-Source-Survey-Dept_fig2_330913282">central business district</a> of Accra Metropolis. The area was selected due to the concentration of street vending activities such as the sale of hardware goods, electrical appliances, cosmetics, clothing, food and beverages, and the activities of financial institutions. </p>
<p>We interviewed 80 migrant street vendors and some city authorities. In assessing the socio-economic effects of street vending on the livelihoods of migrants, we monitored key livelihood indicators:</p>
<ul>
<li><p>income</p></li>
<li><p>access to social services (education and healthcare)</p></li>
<li><p>asset acquisition (property such as land)</p></li>
<li><p>social ties </p></li>
<li><p>educational assistance (helping relatives in their education) </p></li>
<li><p>family relationships. </p></li>
</ul>
<p>We found that a majority (60%) of the participants used to earn a monthly income of less than GH₵50.00 (US$4) before they took up street vending. After moving to Accra and entering into street vending, 72% of the respondents indicated that they earned over GH₵200 (US$16). </p>
<p>Over a third (68%) of the respondents indicated that their access to social services such as education, healthcare and recreational facilities had improved since migrating from their place of origin and starting street vending. This could be a result of the increased income coupled with the presence of social facilities and services in urban centres. </p>
<p>Half (50%) of the respondents had not acquired any assets for their family members since they started street vending. However, the other 50% had been able to acquire assets for their family members in their home of origin. These assets included land for residential and agricultural purposes. </p>
<p>Also, 58% of the respondents indicated that street vending enabled them to support family members’ education back home. </p>
<p>Most of the vendors said they were selling on the streets because they had limited skills. And the cost of living was high in the city. </p>
<p>The challenges they faced included: </p>
<ul>
<li><p>limited access to shelter</p></li>
<li><p>risk of arrest by city authorities (street vending is illegal in the capital)</p></li>
<li><p>limited access to food and related consumer items </p></li>
<li><p>inability to access social services by some street vendors</p></li>
<li><p>cultural shock and cultural difference.</p></li>
</ul>
<h2>The city’s view</h2>
<p>City officials who took part in the research highlighted the challenges street vendors posed. These included: </p>
<ul>
<li><p>getting in the way of pedestrians and vehicles </p></li>
<li><p>forcing pedestrians to walk on the streets, increasing their chances of accidents </p></li>
<li><p>littering, which has environmental consequences and increases the cost of waste management.</p></li>
</ul>
<p>The city authorities indicated that the most sustainable approach to managing the activities of street vendors was to allot portions of the pavements to them. One strategy suggested was to block specific roads on specified days to allow street vendors to sell their wares. </p>
<p>The Metropolitan Assembly <a href="https://ama.gov.gh/doc/bye-laws.pdf">bye-law</a> states that there should be no hawking by street vendors. The assembly monitors their activities and sometimes evicts them.</p>
<p>These management strategies are expensive and ineffective. Authorities lack political will to enforce them. Most mayors allow street vendors to operate without restrictions during election years. </p>
<h2>Next steps</h2>
<p>Street vendors believe their activities are legitimate and present social and economic opportunities. For example, they believe they can make a living and support their families by vending. They say relocating to Accra has strengthened their livelihoods and improved their access to healthcare services and other social facilities. </p>
<p>On the contrary, city authorities see street vending as an illegal activity that poses environmental threats to the city. They associate it with problems such as obstruction to pedestrians and vehicles, littering and petty crime. </p>
<p>Our study concludes that halting street vending without alternative livelihoods will mean denying thousands of people their livelihood. </p>
<p>Over the years, government skills training and growth <a href="https://thebftonline.com/2023/08/15/yea-exceeds-2023-youth-employment-target-by-16/">interventions</a> have excluded informal sector actors such as street vendors. The only way to get the vendors off the streets is to offer alternative sources of livelihood that will provide competitive income. </p>
<p>We propose that policymakers design skills training programmes for street vendors that will offer them sustainable and improved livelihoods. These programmes should be designed and carried out in a politically neutral way.</p>
<p>Also, institutions such as the Ministry of Roads and Highways, Transport Ministry, <a href="https://mofep.gov.gh/sites/default/files/pbb-estimates/2022/2022-PBB-NDPC.pdf">National Development Planning Commission</a> and local authorities should incorporate the activities of street vendors in the design of layouts, roads, plans and policies.</p><img src="https://counter.theconversation.com/content/223869/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Street sales are a source of jobs, income and survival for the urban poor in Ghana.Stephen Appiah Takyi, Senior Lecturer, Department of Planning, Kwame Nkrumah University of Science and Technology (KNUST)Owusu Amponsah, Senior Lecturer, Department of Planning, Kwame Nkrumah University of Science and Technology (KNUST)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2239262024-02-27T14:07:54Z2024-02-27T14:07:54ZJohannesburg’s water crisis is getting worse – expert explains why the taps keep running dry in South Africa’s biggest city<p><em>Since <a href="https://mg.co.za/the-green-guardian/2023-11-06-joburg-water-outages-nobody-should-be-living-like-this/">the latter part of 2023</a> hardly a week has gone by without some residents of Johannesburg, South Africa’s commercial capital, losing their water supply. Notices of <a href="https://twitter.com/JHBWater/status/1759553128679002329?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet">planned</a> outages from the local water authority are a common occurrence. Unplanned water shutdowns also happen regularly.</em></p>
<p><em>The entire city has been affected – shanty towns, <a href="https://crisis24.garda.com/alerts/2024/01/south-africa-water-disruptions-planned-in-parts-of-gauteng-province-due-to-maintenance-works-on-jan-21">less affluent</a> and <a href="https://www.johannesburgwater.co.za/joint-media-statement-between-rw-and-johannesburg-water-re-scheduled-maintenance-of-the-sandton-meter-on-19-january-2024/">more affluent parts of the city</a>. The Conversation Africa asked geography professor Craig Sheridan, director of the Centre in Water Research and Development at the University of the Witwatersrand, what’s gone wrong.</em></p>
<h2>Why don’t Johannesburg citizens have enough water?</h2>
<p>The water allocation for each province is based on the amount available in the dams (which must also supply our future needs) and the number of people in that province. Currently the Vaal Dam is <a href="http://www.dwa.gov.za/hydrology/Weekly/ProvinceWeek.aspx?region=FS">70% full</a>.</p>
<p>Rand Water – the area’s bulk water supplier – buys the water from the Department of Water and Sanitation, which will only sell a certain amount to it. Rand Water takes water mainly from the Vaal Dam – the region’s biggest – and treats it to potable quality. It then sells the water to Johannesburg and Pretoria (and other cities and towns) which are in Gauteng, the smallest of South Africa’s nine provinces and its industrial heartland. </p>
<p>The cities sell the water to their residents through their distribution systems.</p>
<p>Rand Water is not allowed to supply more than the amount set by the Department of Water and Sanitation. But there is a mismatch between what’s allocated by the national government and what’s needed on the ground. This is because the national government takes into consideration future needs. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/johannesburg-has-been-hit-by-severe-water-shortages-new-plan-to-manage-the-crisis-isnt-the-answer-214975">Johannesburg has been hit by severe water shortages: new plan to manage the crisis isn't the answer</a>
</strong>
</em>
</p>
<hr>
<h2>Why can’t new dams be built to supply more water?</h2>
<p>This is the plan. But the next phase (Phase 2) of the Lesotho Highlands Scheme is <a href="https://www.greenbuildingafrica.co.za/lesotho-highlands-water-project-lhwp-ii-now-eight-years-delayed/">eight years behind schedule.</a> The <a href="https://www.lhda.org.ls/lhdaweb/projectphases/phaseii">Lesotho Highlands Water Project</a> is a multinational project to provide water to the Gauteng region of South Africa and to generate hydro-electricity for Lesotho. Work on the dam design started in 2017 and tender design was completed during 2020. Construction is expected to be completed with commissioning expected in 2028.</p>
<p>This eight-year delay roughly coincided with a period during which the population of Gauteng grew from 12 million to <a href="https://census.statssa.gov.za/#/">15.1 million people</a>. In 2023 the province had the same amount of water storage for a population that had grown by over 3 million people (or 25%), because the dam was not built. </p>
<p>There is now substantially less water for everyone in the province, including residents of Johannesburg.</p>
<h2>Why are Joburg residents struggling to get water?</h2>
<p>The City of Johannesburg is running <a href="https://dailymaverick.co.za/article/2023-06-13-sas-largest-city-may-not-be-able-to-pay-its-debt-warns-johannesburg-finance-boss/">its finances poorly</a>. The maintenance bill for water infrastructure is R2 billion (US$105 million) per year, but only R1 billion (US$52 million) is allocated. Maintenance needs are spiralling out of control. The city bills residents for rates, water, electricity, sewage and other services. However, the funds received are not ring-fenced. Other projects are competing for the same pot of money. </p>
<p>Because the infrastructure is ageing (for example in the suburb of Parkwood the infrastructure is older than <a href="https://joburg.org.za/media_/Documents/2024-Media-Statements/City-to-urgently-attend-to-Parkwood-water-outages.pdf">70 years</a>), the pipes rust and break. When they break, they leak, sometimes releasing very large quantities of water, before they are repaired. When the city responds to requests by residents for repairs, the response, if it comes, is often too little and the job is poorly done. There is little oversight or accountability by the city to ensure the contractors have done the job correctly and the repairs often do not last long. </p>
<p>Also, 15 million people are relying on a system designed for far fewer people. When everyone starts to use water, there just isn’t enough to go around. </p>
<p>There is also an additional factor in this discussion: non-revenue water. This is the term used for water that’s unbilled by the city – in other words, free water, unauthorised consumption or water lost due to leakages. This is water that is supplied by Rand Water, but is essentially “financially lost”.</p>
<p>In South Africa, the government gives a <a href="https://www.gov.za/faq/government-services/how-do-i-access-free-basic-municipal-services">free basic allowance</a> of 6,000 litres per month to every household. </p>
<p>Gauteng has non-revenue water of <a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">49.2%</a> (pages 25 to 27) – in other words, almost half the water that’s supplied to the cities in the province cannot be charged for (by the cities) because it forms part of the basic allowance, is lost through leaks or is stolen. By comparison, Denmark has non-revenue water of about <a href="https://sydafrika.um.dk/en/sector-cooperation/water-sector-program">7%</a>. Chile, also a country with variable climate, has urban non-revenue water of about <a href="https://www.thesourcemagazine.org/chiles-urban-2030-water-and-sanitation-agenda/">32%</a>.</p>
<p>Of the non-revenue water, the leakage portion for Gauteng is <a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">half</a>. In other words, for every four litres provided to Gauteng by Rand Water, one litre is wasted through leakage (the city’s fault) and one litre is either given away for free (public good), stolen (the public’s fault), or not accounted for (much harder to allocate blame). This means only half of what is provided can be charged for. </p>
<p>Now to water usage. The average consumption in Gauteng is <a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">279 litres</a> per person per day. This is:</p>
<ul>
<li><p>more than <a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">60%</a> greater than the global average </p></li>
<li><p>the <a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">highest</a> of any province </p></li>
<li><p><a href="https://www.dws.gov.za/documents/Overall%20findings%20of%20the%202023%20Drop%20reports%20Summit%20Jan%2024%203.pptx">27%</a> more than the country average. </p></li>
</ul>
<p>Gauteng citizens use too much, the cities waste way too much and there is too much theft of drinking water. The social pact is breaking down as a consequence. This is indicated by the number of civic action groups forming, for example <a href="https://watercan.org.za">WaterCAN</a>. </p>
<p>To restore this pact, the city needs to focus on non-revenue water, by allocating the correct and appropriate maintenance spend to fix and even renew the water network. At the same time citizens need to seriously consider their own water usage and how to reduce it. The citizens of Cape Town were forced to face the possibility <a href="https://www.westerncape.gov.za/general-publication/cape-town-water-rationing">of the taps running dry permanently</a> in 2018 during a five-year drought. Water consumption was <a href="https://theconversation.com/day-zero-is-meant-to-cut-cape-towns-water-use-what-is-it-and-is-it-working-92055">drastically limited</a>, forcing people to become very water conscious. </p>
<p>This has to become the new normal if there is to be uninterrupted water supply.</p><img src="https://counter.theconversation.com/content/223926/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Craig Sheridan has received research funding from the following organisations. The Claude Leon Foundation, the Danish International Development Agency (DANIDA), The Water JPI, The BMBF, FORMAS and the Water Research Commission. None of these organisations funded this work.
Craig Sheridan is a member of the South African Institution of Chemical Engineers (SAIChE), the Institute of Chemical Engineers (IChemE), and the International Water Association (IWA).</span></em></p>Citizens in South Africa’s industrial heartland use too much water, the city wastes way too much and there is too much theft of drinking water.Craig Sheridan, Chair professor, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2239822024-02-22T07:45:37Z2024-02-22T07:45:37ZAfrica’s debt crisis needs a bold new approach: expert outlines a way forward<p>It hasn’t been easy for African states to finance their developmental and environmental policy objectives over the past few years.</p>
<p>Recent events suggest that the situation may be improving. For the first time in two years, three African states have been able <a href="https://www.economist.com/middle-east-and-africa/2024/02/15/african-governments-return-to-international-bond-markets">to access international financial markets, albeit at high interest rates.</a> Kenya, for example, is <a href="https://www.bloomberg.com/news/articles/2024-02-12/kenya-said-to-tap-eurobond-market-at-exorbitant-rate-for-buyback?sref=UnSQjRxb">now paying over 10%</a> compared to about 7% in 2014. </p>
<p>Many African countries continue to face challenging sovereign debt situations.</p>
<p>Total external debts as a share of Africa’s export earnings increased from <a href="https://unctad.org/publication/world-of-debt/regional-stories">74.5% in 2010 to 140% in 2022</a>. In 2022, African governments had to <a href="https://data.one.org/topics/african-debt/">allocate about 12% of their revenues to servicing their debt</a>. Between 2019 and 2022, <a href="https://unctad.org/publication/world-of-debt/regional-stories">25 African governments</a> allocated more resources to servicing their total debts than to the health of their citizens. And in late 2023 the <a href="https://www.imf.org/en/News/Articles/2023/09/26/cf-how-to-avoid-a-debt-crisis-in-sub-saharan-africa">International Monetary Fund estimated</a> that over half the low income African countries were either potentially or actually experiencing difficulties paying their debts. </p>
<p>This suggests that it will be very difficult for Africa to raise the US$1.6 trillion that <a href="https://www.oecd-ilibrary.org/sites/3269532b-en/index.html?itemId=/content/publication/3269532b-en#:%7E:text=Africa's%20sustainable%20financing%20gap%20until,Sustainable%20Development%20Goals%20by%202030">the Organisation for Economic Cooperation and Development estimates</a> it needs to reach the sustainable development goals by 2030.</p>
<p>One of the lessons of the COVID pandemic and the climate negotiations is that Africa can’t count on the global community to provide it with sufficient new funds or with debt relief to deal with either its development needs or the consequences of crises such as pandemics or extreme weather events. </p>
<p>Its official bilateral creditors appear more focused on their own needs and on other parts of the world than on Africa. Commercial creditors are happy to provide financing when conditions are favourable and African debt can help them satisfy their investment mandates. But they are less forthcoming when the going gets tough and the risks associated with the transaction – and for which they have been compensated – actually materialise.</p>
<p>This suggests that Africa needs to advocate more aggressively for its own interests. </p>
<p>This year offers some good opportunities to promote a more effective approach to African debt. </p>
<h2>Careful planning needed</h2>
<p>There are two <a href="https://www.un.org/sustainabledevelopment/financing-for-development/">international</a> <a href="https://www.un.org/en/summit-of-the-future#:%7E:text=22%2D23%20September%202024,Solutions%20for%20a%20Better%20Tomorrow">conferences</a> where global economic governance will be on the agenda. This is also the first year that the African Union participates as a full member in the G20. In addition, South Africa, the G20 chair in 2025, currently serves on the troika that manages the G20 process. </p>
<p>Debt and development finance will be an important topic in all these forums. African representatives can use their participation to advocate for a new approach to sovereign debt that is more responsive to African needs and concerns. They can also lobby other participating states and non-state actors for their support.</p>
<p>But African states will need to plan carefully. Their starting point should be the well recognised fact that the current sovereign debt restructuring process is not working for anyone. The G20 agreed a <a href="https://clubdeparis.org/sites/default/files/annex_common_framework_for_debt_treatments_beyond_the_dssi.pdf">Common Framework</a> that was supposed to help resolve the sovereign debt crises in low income countries. <a href="https://saiia.org.za/research/africas-debt-priorities-a-sustainability-perspective-required-support-from-the-g20/#:%7E:text=The%20Common%20Framework%20was%20established,applied%20include%20Ethiopia%20and%20Ghana.">Four African countries</a> applied to have their debts restructured through the framework. Despite years of negotiations, it has failed to fully resolve the debt crisis in three of them. </p>
<p>Countries outside the Common Framework, such as <a href="https://www.reuters.com/markets/asia/sri-lanka-bondholders-raise-concerns-over-debt-deal-transparency-2023-12-01/">Sri Lanka</a>, have not managed to fully resolve their debt crises either. This is costly for both debtors and creditors. It is therefore in everyone’s interest to look for a new approach.</p>
<p>This requires all parties to be willing to entertain new ideas and to experiment with new approaches to old problems. African states should offer their own innovative proposals. They should also state that they are willing to take on new responsibilities if their creditors are willing to do the same.</p>
<p>They can remind their creditors that these experiments would not be taking place in a vacuum. They can be guided by the many existing, but underutilised, international norms and standards applicable to responsible sovereign debt transactions, for example the Unctad principles on <a href="https://unctad.org/publication/principles-promoting-responsible-sovereign-lending-and-borrowing#:%7E:text=Sovereign%20lending%20and%20borrowing%20conducted,neighbors%20and%20its%20trading%20partners.">responsible sovereign debt transactions</a>. Some of these relate to the conduct of sovereign borrowers. Others focus on responsible lending behaviour and are often cited by creditors in their own policies dealing with environmental and social issues, social responsibility or human rights. </p>
<p>By basing any new approach on these international norms and standards, both debtors and creditors will merely be agreeing to implement principles that they have already accepted. </p>
<p>Working from this starting point, African states should make three specific proposals. </p>
<h2>Concrete proposals</h2>
<p>First, they should commit to making both the process for incurring debts and the terms of all their public debt transactions transparent. </p>
<p>This will ensure that their own citizens understand what obligations their governments are assuming on their behalf. It will encourage governments to adopt responsible borrowing and debt management practices. They should also agree that they can be held accountable for their failure to comply with these transparent and responsible sovereign debt practices and procedures.</p>
<p>Second, African states should point out that there is a fundamental problem with a sovereign debt restructuring process that only focuses on the contractual obligations that the debtor state owes its creditors. This focus means, in effect, that servicing its debt obligations will trump the debtor state’s efforts to deal with the country’s vulnerability to climate change and the loss of biodiversity, and with its poverty, inequality and unemployment challenges. This follows from the fact that their creditors can use the restructuring process to force sovereign borrowers in difficulty, unlike corporations in bankruptcy, to pay those who lend them money without regard, for example, to the impact on their obligations to pensioners, public sector employees or the welfare of their citizens. </p>
<p>This exclusive focus on debt contracts is inconsistent with the international community’s interest in addressing global challenges like climate and inequality. </p>
<p>This problem can be resolved if both creditors and debtors agree that they will adopt an approach to debt negotiations that incorporates the financial, economic, social, environmental, human rights and governance dimensions of sovereign debt crises.</p>
<p>Third, African states should propose that their creditors publicly commit to base the new approach to sovereign debt on an agreed list of international norms and standards relevant to responsible international financial practices. These will include those dealing with transparency, climate and environmental issues, and social matters, including human rights.</p><img src="https://counter.theconversation.com/content/223982/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Bradlow previously had a grant from ther Open Society Initiative for Southern Africa to work on issues relating to sovereign debt. </span></em></p>Africa needs to advocate more aggressively for its own interests when it comes to negotiating debt terms.Danny Bradlow, Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2217792024-02-18T07:06:55Z2024-02-18T07:06:55ZCorruption and clean energy in South Africa: economic model shows trust in government is linked to takeup of renewables<p>South Africa <a href="https://www.trade.gov/country-commercial-guides/south-africa-energy#:%7E:text=Current%20Status%3A,from%20renewables%20will%20grow%20rapidly.">relies heavily</a> on energy from coal-fired power stations, which emit large quantities of carbon. But making the transition to greater use of renewable energies, such as solar, is being hampered by a number of factors. Chief among them is corruption, which is affecting the quality of institutions.</p>
<p>In <a href="https://www.tandfonline.com/doi/abs/10.1080/15567249.2023.2291433">a recent paper</a> I set out how perceptions of corruption in the country’s institutions have had a huge impact on the country’s transition to clean energy. This is particularly true of institutions involved in energy, such as the state power utility Eskom.</p>
<p>My findings were based on an econometric model we developed, based on economic theory. It highlighted how perceptions of corruption and the effectiveness of government institutions influenced attitudes towards the country’s energy transition efforts. </p>
<p>Econometrics combines statistics, mathematical models and economic theories to understand and model economic problems. It uncovers the relationships and effects of various economic elements. </p>
<p>The model showed that greater trust in institutions would make people, policymakers and businesses more inclined to adopt renewable energy practices. </p>
<p>The study also found that the quality of the regulatory framework and government’s effectiveness shaped people’s views. This in turn affected decisions around adding renewable energy to the supply mix.</p>
<p>These findings matter because South Africa’s energy transition faces <a href="https://theconversation.com/cop28-south-africa-pioneered-plans-to-transition-to-renewable-energy-what-went-wrong-218851">a host of challenges</a>. These range from technical and financial challenges to broader political, socioeconomic and institutional hurdles. The key to a successful energy transition is policy that’s aligned with what the environment and the society need. It’s essential to improve institutional quality, put anti-corruption procedures in place and have clear rules. </p>
<h2>Energy mix and vision</h2>
<p>The energy situation in South Africa has changed significantly <a href="https://ourworldindata.org/grapher/share-energy-source-sub?time=earliest..2022&country=%7EZAF">since the mid-1990s</a>. Then, coal made up 73%-76% of the primary energy mix. Oil made up 21%-22%.</p>
<p>By 2022, coal’s share had fallen to almost 69%. The share of renewable energy sources had increased to roughly 2.3%. </p>
<p>Our study supports <a href="https://www.sciencedirect.com/science/article/pii/S0301421520306145?casa_token=DpHWzhI7uCUAAAAA:leZ-aq2qmkX6h2AJbtSY5QN-0p9nlTC59L7gMJJgNRHUoJb1qEqY3bvKWt_83rXQhJ_PPe-BwQ">others</a> which show that 2008 was a turning point for the South African economy, particularly the energy sector. The factors involved included:</p>
<ul>
<li><p>the global financial crisis</p></li>
<li><p>changes in government policies, such as <a href="https://www.imf.org/en/News/Articles/2015/09/28/04/53/socar092509a">monetary policies</a> </p></li>
<li><p>leadership changes in the country and at Eskom</p></li>
<li><p>power cuts and rising electricity prices </p></li>
<li><p>a downturn in the economy. </p></li>
</ul>
<h2>Institutions and economic implications</h2>
<p>This research was designed to understand the impact of national policies, governmental efficiency and past dependency on fossil fuel. I based the models on historical data about the energy mix and governance scores.</p>
<p>The analysis focused on the share of renewable energy in South Africa’s total final energy consumption. I used this as a proxy for the nation’s shift to cleaner energy. </p>
<p>Institutional quality is a complex concept. In our modelling exercise we therefore used three of the <a href="https://www.worldbank.org/en/publication/worldwide-governance-indicators">World Governance Indicators</a> to stand for institutional quality: </p>
<ul>
<li><p>corruption perception index </p></li>
<li><p>regulatory quality – perceptions of government’s ability to make regulations that support private sector development </p></li>
<li><p>government effectiveness – perceptions of the quality and trustworthiness of public services. </p></li>
</ul>
<p>The first model confirmed a positive relationship between perceptions of corruption-free institutions and the rollout of renewable energy. More renewable energy has been produced when governance scores have been highest.</p>
<p>The second model showed that transparent and effective regulation potentially hindered the adoption of cleaner alternatives. This can be explained by the fact that regulatory decisions have mostly supported the country’s energy dependence on fossil fuels. The energy markets, especially those for electricity, are doing better because of more sensible, open, and high-quality rules. As a result, this reduced the desire to switch to more environmentally friendly, renewable options.</p>
<p>Finally, the third model indicated a negative relationship between higher government effectiveness and the share of renewable energy. Close ties between stable governments and the conventional energy sector are common. This can influence policy choices. If these well-established businesses oppose reforms that jeopardise their interests – much like the fossil fuel sector does – the promotion of renewable energy sources may suffer. </p>
<p>I also saw that there had been a slow rate of change in renewable energy share. That can be attributed to slow procurement processes, coupled with potential lobbying and corruptive practices. </p>
<h2>Next steps</h2>
<p>South Africa has a new <a href="https://www.dmr.gov.za/Portals/0/Resources/Documents%20for%20Public%20Comments/IRP%202023%20%5BINTEGRATED%20RESOURCE%20PLAN%5D/Publication%20for%20comments%20Integrated%20Resource%20Plan%202023.pdf?ver=2024-01-05-134833-383">Integrated Resource Plan 2023</a> which proposes a near-term (2023-2030) plan that combines gas, solar, wind and battery storage. </p>
<p>But to boost the adoption of cleaner energy, South Africa needs to take urgent action to fight corruption and improve confidence in the country’s institutions. </p>
<p>Policymakers should focus first on making regulatory changes. Efficient procurement procedures and honest practices would speed up the shift to renewables. What’s needed are streamlined procurement, greater transparency and more competition.</p><img src="https://counter.theconversation.com/content/221779/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roula Inglesi-Lotz receives funding from the National Research Foundation (NRF).</span></em></p>The key to a successful energy transition away from coal is good institutional quality supported by anti-corruption procedures and clear rules.Roula Inglesi-Lotz, Professor of Economics, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2228252024-02-15T13:43:31Z2024-02-15T13:43:31ZSouth Africa has spent billions in 4 years to create jobs for young people: how their wages affect the broader economy<p>In October 2020 the South African government launched a collection of public employment programmes, initially intended as a response to the COVID-19 pandemic. The initiative, called the <a href="https://www.stateofthenation.gov.za/employment-stimulus-dashboard">Presidential Employment Stimulus</a>, has been extended since then. The total budget allocation to March 2024 was R42 billion (US$2.1 billion). </p>
<p>By December 2023 it had directly created <a href="https://pres-employment.openup.org.za/img/February_2024_Update.pdf">1.8 million jobs and livelihood opportunities</a>. These have been mostly temporary jobs in public employment programmes such as school education assistants. It has also included financial support to various sectors. </p>
<p>An important question is how much the programme’s spending stimulates economic activity in local communities and nationally. That is, to what extent it supports job creation or higher incomes outside the programme.</p>
<p>South Africa has an exceptionally high unemployment rate (<a href="https://www.statssa.gov.za/publications/P0211/P02113rdQuarter2023.pdf">32% or 41%, depending on the definition</a>), particularly concentrated among the youth. <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2022&locations=ZA&start=1990">Economic growth has been stagnant</a> for the last 15 years, and increasing pressure has been placed on the national budget. While the core objective of a public employment programme is to provide direct employment and <a href="https://fundawande.org/img/cms/news/Limpopo%20Second%20Midline%20Report%202023%20V03.pdf">improve service provision</a>, in this context it is also important to understand how it might stimulate economic activity.</p>
<p>At the <a href="https://www.saldru.uct.ac.za/">Southern Africa Labour and Development Research Unit</a> at the University of Cape Town, we were commissioned by the Presidency to draw on our knowledge of programme evaluation and South Africa’s social assistance policy to try to answer this question. <a href="https://www.afd.fr/en/ressources/stimulus-effects-large-public-employment-programme">We evaluated</a> spending associated with the largest component of the programme – the <a href="https://www.education.gov.za/Programmes/BEEI.aspx">Basic Education Employment Initiative</a>. </p>
<p>We found that the programme likely does support broader economic activity, and these effects partly persist after the end of the programme. Participants buy goods which are produced to some extent in local value chains, and which employ local labour, rather than being imported. The programme spending does not just “disappear”, but recirculates in the South African economy.</p>
<h2>The study</h2>
<p>The Basic Education Employment Initiative has employed about 245,000 young people per phase to assist schools across the country. The duration of employment has varied with each phase. More recently it has been eight months. Participants are employed in full-time positions and are paid the monthly national minimum wage, which is approximately R4,000 (US$209).</p>
<p>The programme completed its fourth phase in 2023. Since it was launched in December 2020 it has employed over 850,000 young people, becoming the <a href="https://www.stateofthenation.gov.za/employment-stimulus-dashboard">largest</a> youth employment programme in South Africa’s history. </p>
<p>In our study, we focused on phases 2 and 3 of the programme, from November 2021 to August 2022. </p>
<p>First, we looked at how the programme affected participant spending patterns. We then estimated what kind of economic activity this spending supported.</p>
<p>Our initial evidence came from a WhatsApp survey of 31,250 participants we ran with <a href="https://www.harambee.co.za/">Harambee Youth Employment Accelerator</a>, a non-profit which supported the programme in partnership with the Department of Basic Education. Harambee holds contact details of most participants for phases 2 and 3, with permission that the records may be used for programme evaluation. </p>
<p>The survey response rate was unfortunately low. But it showed participants spent their cash mostly on groceries (about 50%), transport and rent. </p>
<p>Most of their income went to necessities, much of it from local stores. </p>
<p>However, our main evidence comes from information provided by a leading grocery retailer. The retailer gave us limited access to fully anonymised sales records from its loyalty rewards programme. </p>
<p>In partnership with <a href="https://omnisient.com/">Omnisient</a>, a privacy-preserving data collaboration platform, we were able to see who in the data was a participant in the programme and who wasn’t, while retaining individual anonymity. We explain in the paper how this was done without revealing or sharing any personally-identifying information. The data collaboration partnership went through a rigorous legal process and received University of Cape Town Research Ethics clearance.</p>
<p>Using this data, we found that average participant spending at the retailer increased from R327 (US$17) per month before the start of the programme to R437 (US$23.50) during the programme. </p>
<p>When compared to a control sample of other customers who shopped at the same locations and kinds of stores as the participants, using a statistical analysis method called <a href="https://mixtape.scunning.com/09-difference_in_differences">difference-in-differences</a>, we found that participant spending sharply increased by 15% during the programme. </p>
<p>Even after the programme ended, participants’ spending remained 4% higher than the baseline. </p>
<p>This might be due to participant savings during the programme, or participants being better placed to find work after the programme ends. </p>
<p>But this aggregate spending increase hides quite a lot of variety, per Table 1. In the largest spending categories, participant spending increased by 16% (groceries; refrigerated and frozen perishables) and 20% (toiletries), but in some smaller categories the percentage increase was much higher (off a low base).</p>
<p>For example, spending on home and small appliances increased by 51%, and kitchenware by 40%. In general, percentage spending increases were lower for food items. This was unsurprising as these necessities already took up a large part of participants’ budget before the programme.</p>
<p>This means the spending increase of 15% at the retailer is likely an underestimate of how much the programme increased participant spending overall, because food items make up over 80% of expenditure at the retailer and are therefore over-represented. </p>
<p>Another reason the 15% increase is probably an underestimate is because we can only see each individual’s shopping, and not the rest of their household. But some participants were probably shopping on behalf of their family before the programme, and during the programme someone else took over shopping responsibilities, using income from the Basic Education Employment Initiative.</p>
<h2>Income effects</h2>
<p>What can we then say about who receives income from this increased expenditure? This part of the paper is exploratory and speculative, because we cannot directly see how spending from the programme flows through the economy, and how firms respond to this increased revenue.</p>
<p>Instead, we have to use back-of-the-envelope calculations to scale up the expenditure, use <a href="https://www.oecd.org/sti/ind/input-outputtables.htm">input-output data</a> from Stats SA to guide assumptions about which industries produce which kinds of goods, and use other firm data to see how firms’ wage bills and profits usually respond to sales increases. In our paper we explain the methods, assumptions and limitations in detail.</p>
<p>With these caveats in mind, the implied direct effect of the programme on the retailer’s sales is about R8 million (US$417,500) per month. Directly, this likely increased the wage bill for workers at the retailer by about R1 million (US$52,188) per month. </p>
<p>Indirectly, the increase in the retailer’s sales would have increased demand from their suppliers, and in turn their suppliers’ suppliers, which we estimate increased employment and wages outside the retailer by another R1.7 million (US$88,734) per month. </p>
<p>What about participant spending outside the retail firm? By scaling up the retailer-specific results, we estimate that overall the programme generates about R38 million (US$2 million) per month in additional value added in the national economy, which translates to R19 million (US$991,473) in additional employment and wages per month, R13 million (US$678,376) of which went towards local community employment.</p>
<h2>What next</h2>
<p>The main beneficiaries of the Basic Education Employment Initiative programmes are the young people who are directly employed by it, and the students in the schools. But the money does not get “thrown away” – one person’s spending is another person’s income. </p>
<p>And the participants do buy goods which are produced locally, using local workers. When evaluating the costs and benefits of the programme, and similar programmes such as social grants, these “extra” economic benefits need to be part of the calculation.</p><img src="https://counter.theconversation.com/content/222825/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joshua Budlender received funding for this research from Agence française de développement (AFD) with the support of the European Union. This independent academic research was commissioned by the South African Presidency. He has previously done academic research and policy advisory work for the South African Presidency and National Treasury.</span></em></p><p class="fine-print"><em><span>Ihsaan Bassier received funding for this research from Agence francaise de developpement (AFD) with the support of the European Union. This independent academic research was commissioned by the South African Presidency. He has previously done academic research and policy advisory work for the South African Presidency and National Treasury. </span></em></p>When evaluating the costs and benefits of the employment programme, and similar ones such as social grants, ‘extra’ economic benefits need to be part of the calculation.Joshua Budlender, PhD candidate in Economics, UMass AmherstIhsaan Bassier, Researcher in Economics, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2230982024-02-14T14:25:52Z2024-02-14T14:25:52ZWest Africa trade will take a hit as Mali, Niger and Burkina Faso leave Ecowas<p>The membership of the Economic Community of West African States (Ecowas) has been whittled down from 15 to 12 following the unilateral withdrawal of Niger, Mali and Burkina Faso in <a href="https://apnews.com/article/mali-niger-burkina-faso-ecowas-west-africa-5a5dc2180e39223c91b1820067db4011">February</a>.</p>
<p><a href="https://www.ecowas.int/about-ecowas/">Founded</a> in 1975, Ecowas is one of eight regional economic communities recognised by the African Union to foster regional integration on the continent. Its main objective is to <a href="https://www.ecowas.int/about-ecowas/">create</a> a single, large trading bloc through economic cooperation.</p>
<p>Since 1975, Ecowas and its sister organisation the West African Economic and Monetary Union (known by its French acronym, Uemoa) have implemented numerous policies aimed at improving how west African countries trade with each other and how they are connected to the world.</p>
<p>Yet, progress towards regional integration has been <a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9781315712482-21/regional-integration-1-olivier-walther">slow</a>. Intra-regional trade remains well below the levels of other regions and the west African economies still rely a lot on informal activities. The limited results achieved in regional integration mean that there is a mismatch between <a href="https://www.routledge.com/Regionalism-in-Africa-Genealogies-institutions-and-trans-state-networks/Bach/p/book/9781138091054">regionalism</a> as it should be on paper and as it is experienced on a daily basis. Despite the many agreements signed between west African countries to foster integration, west Africa is one of the world’s most expensive <a href="https://www.sciencedirect.com/science/article/pii/S0966692319302182">regions in which to do business</a>.</p>
<p>Political elites bear a great part of the blame for this. In a political system that relies on interpersonal relations, regional integration goes against the <a href="https://www.cambridge.org/core/books/boundaries-communities-and-statemaking-in-west-africa/0A31250856228556B68B91639E3120A9">informal arrangements</a> that politicians have established with wealthy traders. These networks have encouraged the development of informal trade between west African countries and prevented the <a href="https://read.oecd-ilibrary.org/development/incentives-and-constraints-of-informal-trade-between-nigeria-and-its-neighbours_7aa64379-en#page21">implementation of trade facilitation initiatives</a>. Much of the trade between Benin, Niger and Nigeria, for example, relies on <a href="https://www.tandfonline.com/doi/full/10.1080/00220388.2015.1010152">informal networks</a> that connect traders in border regions to state elites in the capital cities.</p>
<p>Why three landlocked countries, among the poorest in the world, would leave an organisation established to foster free movement of people, goods and capital across the region is a puzzling question, considering the potential consequences.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/ecowas-why-withdrawal-of-mali-niger-and-burkina-faso-signals-fresh-trouble-for-the-sahel-222720">Ecowas: why withdrawal of Mali, Niger and Burkina Faso signals fresh trouble for the Sahel</a>
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<p>While the decision appears to have been made for political reasons, the economic consequences will be far-reaching. In the past, border closures between Sahelian and coastal countries have had devastating consequences on the <a href="https://www.brookings.edu/articles/the-effects-of-nigerias-closed-borders-on-informal-trade-with-benin/">regional economy</a>. They have also affected the livelihoods of millions of farmers, herders and city dwellers who depend on regional trade perhaps more than anywhere in the world. </p>
<p>It was precisely to foster these complementary relationships between the Sahel and the Gulf of Guinea that Ecowas was established in Abuja nearly 50 years ago.</p>
<h2>The integration conundrum</h2>
<p>The Sahel is a large semi-arid region that stretches from Senegal in the west to Chad in the east. Subject to constant climatic uncertainties, it includes some of the poorest and <a href="https://hdr.undp.org/data-center/human-development-index#/indicies/HDI">least developed countries</a> in the world.</p>
<p>Sahelian countries such as Burkina Faso, Mali and Niger depend more on regional trade than coastal countries, such as Côte d’Ivoire, Ghana or Nigeria. This is because they are far less urbanised and industrialised than their neighbours. They tend to produce identical agricultural commodities, which they typically trade with other countries located on the Gulf of Guinea.</p>
<p>Livestock trade between the Sahel and the Gulf of Guinea is also highly dependent on free movement between west African countries. Close to two thirds of the <a href="https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0232681">livestock movements</a> recorded in west Africa cross an international border. This is usually from the Sahel to big southern markets such as Abidjan in Côte d’Ivoire. </p>
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<p>A purely Sahelian bloc, like the recently <a href="https://www.aljazeera.com/news/2023/9/16/mali-niger-and-burkina-faso-establish-sahel-security-alliance">created</a> Alliance des États du Sahel (AES), would never be able to replace Ecowas. This is simply because of the regional nature of human and economic flows in west Africa. The new bloc was established in 2023 by the military juntas that took power in Burkina Faso, Mali and Niger, in reaction to the <a href="https://www.aljazeera.com/features/2024/2/8/economic-hardship-insecurity-spirals-in-mali-as-ecowas-exit-looms">sanctions</a> imposed by Ecowas.</p>
<p>Because Sahelian countries have hardly any industries, they <a href="https://www.tandfonline.com/doi/full/10.1080/00220388.2015.1010152">import</a> much of what they consume from the west African and global market, particularly from China. Much of the cement, petroleum products, cars, textiles, wheat, rice and plastics sold on the markets of Niamey, Ouagadougou and Bamako were produced elsewhere. They depend on the ports of the Gulf of Guinea to import them. </p>
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<strong>
Read more:
<a href="https://theconversation.com/mali-burkina-faso-and-niger-want-to-leave-ecowas-a-political-scientist-explains-the-fallout-222388">Mali, Burkina Faso and Niger want to leave Ecowas. A political scientist explains the fallout</a>
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<p>Coastal countries are far from being self-sufficient too. They import large quantities of <a href="https://www.aljazeera.com/economy/2023/9/8/a-coup-happened-in-niger-onion-prices-doubled-in-ghana-and-its-neighbours">onions</a> from the Sahel, for example. They also benefit enormously from import-export trade with the landlocked countries of the Sahel. </p>
<p>Some of them have transformed into “entrepot economies”. These are trading ports where goods from the world markets can be imported and stored before being re-exported with no customs duties imposed. Benin, for example, is specialised in importing goods that will eventually be <a href="https://www.karthala.com/economie-et-developpement/53-letat-entrepot-au-benin-commerce-informel-ou-solution-a-la-crise--9782865373604.html">re-exported illegally</a> to neighbouring countries where they are banned or subject to heavy taxes, such as Nigeria and Niger. </p>
<h2>The consequences</h2>
<p>Withdrawing from Ecowas is likely to have major consequences on the regional economy as a whole. Because of their landlocked situation, however, Sahelian countries will be more affected than the rest of the region by the reintroduction of tariff barriers. Without free access to the ports of Cotonou, Lomé, Abidjan or Tema, Sahelian imports will be far more expensive. </p>
<p>Informal trade is already the dominant form of economic exchange in the region. This will probably experience an unprecedented boom, particularly along the borders between <a href="https://anl.geog.ufl.edu/hausaland/">Niger and Nigeria</a>.</p>
<p>In addition, leaving Ecowas and its free movement protocol could have catastrophic consequences for millions of Sahelians who live in – or wish to migrate to – coastal cities. Migration is mostly intra-regional in west Africa. <a href="https://www.oecd-ilibrary.org/development/identifying-the-factors-driving-west-african-migration_eb3b2806-en">Sahelians mostly tend to migrate</a> to the Gulf of Guinea. Migrants from coastal countries go to Europe through the Sahara and, increasingly, to the US.</p>
<p>Sahelian traders have also developed <a href="https://www.tandfonline.com/doi/full/10.1080/00220388.2015.1010152">extensive trade networks</a> across west Africa. They take advantage of the liberalisation of trade that has characterised the region since the 1980s. </p>
<p>From Abidjan to Lagos, trade networks that rely on well-established diasporas would be particularly affected by trade restrictions and immigration policies.</p>
<h2>Political motivations</h2>
<p>The decision to leave Ecowas has little to do with economic considerations. It is primarily motivated by the fact that the bloc’s approach to region-building is not confined to economic integration. Ecowas is also well-known for its <a href="https://amaniafrica-et.org/wp-content/uploads/2021/04/Protocol-Relating-to-the-Mechanism-for-Conflict-Prevention-Management-Resolution-Peace-Keeping-and-Security-1999.pdf">robust involvement</a> in peacekeeping and security operations to end conflict in the region.</p>
<p>The bloc’s <a href="https://www2.ohchr.org/english/law/compilation_democracy/ecowasprot.htm">protocol</a> on democracy and good governance, adopted in 2001, prescribes a zero tolerance policy “for power obtained or maintained by unconstitutional means”. Furthermore, its 1999 protocol <a href="https://amaniafrica-et.org/wp-content/uploads/2021/04/Protocol-Relating-to-the-Mechanism-for-Conflict-Prevention-Management-Resolution-Peace-Keeping-and-Security-1999.pdf#page=11">authorises</a> external interventions without state consent under certain conditions, including “the overthrow or attempted overthrow of a democratically elected government”. </p>
<p>This, rather than trade liberalisation, is the main reason why the putschists in Burkina Faso, Mali and Niger have decided to leave Ecowas.</p>
<p><em>An <a href="https://anl.geog.ufl.edu/ecowas/?">earlier version</a> of this article was first published on the University of Florida blog.</em></p><img src="https://counter.theconversation.com/content/223098/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Olivier Walther receives funding from the Organisation for Economic Co-operation and Development. </span></em></p>Border closures between Sahelian and coastal countries have had devastating consequences for the regional economy.Olivier Walther, Associate Professor in Geography, University of FloridaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2219982024-02-02T10:59:15Z2024-02-02T10:59:15ZSouth Africa needs to manage migrants better. That requires cleaning up the Department of Home Affairs<p>Legal grievances against the South African Department of Home Affairs, including contempt of court cases, are depressingly common. Too frequently the minister has to apologise to a court, or to ask for more time, on behalf of the department. Most of the court cases involve the operations of the department regarding visas and permits for foreign visitors, immigrants and prospective refugees.</p>
<p>Just a few months ago home affairs minister Aaron Motsoaledi said, <a href="https://www.dailymaverick.co.za/article/2023-06-15-minister-motsoaledi-apologises-to-south-africa-for-the-mess-created-by-his-department/">in legal papers</a>:</p>
<blockquote>
<p>I would like to take this opportunity to extend my sincere apology to the Chief Justice, all judges of the high court and Constitutional Court, the President of South Africa, Minister of Finance, Lawyers for Human Rights and its legal representatives and the people of South Africa for the mess created by officials of the Department of Home Affairs.</p>
</blockquote>
<p>This particular mess was triggered by the minister’s failure to amend an unconstitutional law which allowed for the detention of irregular migrants for 120 days. </p>
<p>The rotten state of the department is widely known. Two reports released in the last three years, commissioned by the minister and the presidency and led by senior and seasoned individuals, set out the problems in detail. One, released <a href="https://static.pmg.org.za/Review-Issuance_of_visas_permits.pdf">in 2022</a>, chronicled a backlog of visa, permit and status applications, evidence of fraudulent applications being first rejected, then accepted, and the system being used illegally. The other found multiple failures in the provision of visas to senior business managers and experts.</p>
<p>The issue of migration policy and its implementation has never been more pressing for South Africa. Immigration has grown relatively rapidly in the past 20 years. The proportion of migrants to local people more than doubled from a relatively low level of 2.1% in 2000 to a moderate level of 4.8% in 2020, according to a <a href="https://nsi.org.za/publications/analysis-trends-patterns-migration-africa/">study</a> drawing on UN data.</p>
<p>The global average immigrant population is around 3.5% but countries like the US (nearly 16% in 2019), Australia and New Zealand are much higher. Côte d'Ivoire is the only country on the continent with a considerably higher percentage of immigrants than South Africa.</p>
<p>Migration policy is likely to be a key issue in South Africa’s forthcoming elections. A <a href="https://www.businesslive.co.za/fm/features/2023-11-16-is-south-africa-heading-for-an-immigration-election/">leading journalist</a> has argued that 2024 will be an “immigration election”. Populist parties are expected to mobilise around people’s fears, while the government will continue to use immigration as an excuse for poor service delivery and joblessness.</p>
<p>The reality is that the impact of migrants on the circumstances of poor South Africans is marginal, and far less important than the very poor performance of the economy and many governmental institutions. </p>
<p>In a paper <a href="https://nsi.org.za/publications/south-africa-migration-study-nsi-report/">just published</a> I examine the recent history of immigration policy in South Africa. I argue that the challenges would best be addressed by improvement in the operations of the Department of Home Affairs. This should be accompanied by some modernisation of migration law to encourage the use of regular migration channels and discourage irregularity. </p>
<h2>The problems</h2>
<p>The <a href="https://static.pmg.org.za/Review-Issuance_of_visas_permits.pdf">first</a> of the two investigations initiated by the minister was headed by Cassius Lubisi, former secretary of the cabinet. The <a href="http://www.dha.gov.za/images/PDFs/Report-of-the-Work-Visa-Review-2023.pdf">second</a> was headed by anti-apartheid struggle stalwart Mavuso Msimang. </p>
<p>Their main findings were as follows.</p>
<p>Fraudulent documentation was used in 36,647 applications for visas, permits or status over a 16-year period. Of these, 880 were approved and 288 were pending. 4,160 of the fraudulent applications were first rejected, and then accepted after reconsideration.</p>
<p>Systems that had been replaced were still being used illegally from time to time. The outcomes of such activities were suspicious. In some cases applications were processed in zero days. The investigation found visa expiry dates issued beyond the legal limit.</p>
<p>The department’s databases for naturalisation and population registration didn’t correlate with each other.</p>
<p>The list identifying undesirable immigrants was “fatally flawed due to incomplete and missing crucial data”. </p>
<p>In some cases, files had been inserted illegally into the information system. This process would require “a highly skilled IT user with administrator rights to execute”. </p>
<p>There were multiple cases of “forum-shopping” by applicants. This is when an applicant applies for a range of unrelated permits in the hope that one of them will get through.</p>
<p>The department did not have systems that could identify multiple applications by the same person.</p>
<h2>Possible fixes</h2>
<p>The Department of Home Affairs <a href="https://www.gov.za/sites/default/files/gcis_document/202311/49690gon4061.pdf">recently issued</a> a draft white paper which it said was aimed at addressing the problems that had been identified.</p>
<p>It proposed severely curtailing the rights of prospective refugees, restricting paths to citizenship, and strengthening the Border Management Authority and supportive institutions. </p>
<p>But, based on my findings, it is clear that these changes won’t solve the problems. Experts <a href="https://www.guilford.com/books/The-Age-of-Migration/Haas-Castles-Miller/9781462542895">show</a> that tighter restrictions lead to greater illegality, not less migration.</p>
<p>The most disappointing element of the draft white paper is that it makes no reference to recommendations made in the two reports on the problems at the department. </p>
<p>Recommendations of the reports included:</p>
<ul>
<li><p>major investment in and reorganisation of information systems </p></li>
<li><p>the integration of the various population databases </p></li>
<li><p>further forensic investigations to root out corruption </p></li>
<li><p>hiring and training staff with skills and integrity.</p></li>
</ul>
<p>The draft white paper also does not mention the need to modernise the colonial-style bilateral labour agreements which South Africa maintains with five regional neighbours – Mozambique, Lesotho, Eswatini, Malawi and Botswana. These countries, and Zimbabwe, are the greatest source of regular and irregular migration.</p>
<p>These agreements are no longer fit for purpose. Firstly, they impose tight restrictions on the rights of contracted migrants from other countries. Secondly, they are based on patterns of migrant labour developed during the colonial period to support farming and mining. Thirdly, they’re written up on the basis of an unequal relationship between countries of the southern African region.</p>
<p>Modern bilateral labour agreements have been developed. An example <a href="https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---migrant/documents/publication/wcms_837529.pdf">is the Canadian system</a>. It provides for long term arrangements with full labour and social rights for the duration of the multiyear contract, but no right to permanent residence for the workers or their families. </p>
<p>Modern Canadian-style migrant labour agreements would encourage more migrants to choose regular migration routes and fewer would try to evade or abuse the law.</p>
<p>The draft white paper gives the impression that the challenge of migration policy can be solved with tighter laws on refugees and citizenship. In fact the fundamental problem is the corruption and inefficiency in the permits and visa section of the department, which the white paper hardly mentions.</p>
<p>The unfortunate conclusion that can be drawn from a reading of the draft white paper is that it was designed primarily to give the ruling party a narrative for the upcoming election, rather than to reform the migration governance regime.</p><img src="https://counter.theconversation.com/content/221998/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Hirsch is employed as a research fellow at the New South Institute under whose auspices he researched and wrote this article.</span></em></p>Problems identified include a backlog of visa, permit and status applications, fraudulent applications being first rejected, then accepted, and the system being used illegally.Alan Hirsch, Research Fellow New South Institute, Emeritus Professor at The Nelson Mandela School of Public Governance, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2216142024-01-31T15:25:32Z2024-01-31T15:25:32ZAfrican countries are struggling with high debt, demands to spend more and collapsing currencies: the policy fixes that could help<p>Highly indebted African countries are facing stark trade-offs between servicing expensive debt, supporting high and growing development needs, and stabilising domestic currencies.</p>
<p>Government debt has risen in at least <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">40 African countries</a> over the past decade. As a result, some are experiencing a bad combination of high debt, elevated development spending needs amid budget shortfalls, and unfavourable exchange rate pressures. </p>
<p>These issues have become more pressing since 2022, when persistently high inflation prompted major central banks around the world to embark on the most aggressive <a href="https://www.worldbank.org/en/publication/global-economic-prospects">monetary tightening campaign</a> in decades. Monetary policy tightens when central banks raise interest rates. </p>
<p>Since then, global interest rates have climbed even <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">higher</a>, triggering a jump in repayments on external loans and adding to debt burdens accumulated over the last decade. In addition, some countries with worsening debt situations have endured large exchange rate depreciations and struggled to stabilise the value of their domestic currencies. </p>
<p>My perspective, shaped by years of researching Africa’s development challenges, is that this presents many countries with a triple set of dilemmas that’s not easy to navigate. Tackling any of one of these issues imperils the others.</p>
<p>Here are some examples:</p>
<ul>
<li><p>stemming the rise in public debt and containing exchange rate decreases would make it more difficult to meet bigger public spending needs </p></li>
<li><p>pushing for lower public debt while supporting extra spending risks putting more strain on domestic currencies </p></li>
<li><p>prioritising higher spending needs and easing currency strains runs the risk of inviting extra government debt. </p></li>
</ul>
<p>Steps can be taken to expand the policy space to tackle these challenges while easing difficult trade-offs. These steps include prioritising public spending measures that raise growth, fixing the revenue collection problem facing all African countries, and restructuring unsustainable government debt.</p>
<h2>Rising government debt and policy dilemmas</h2>
<p>The triple dilemma unfolded as government debts rose substantially over the last decade. As shown in Figure 1, median government debt has more than doubled since 2012 and amounted to <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">61% of GDP</a> as of 2023. </p>
<p>At first, <a href="https://www.economist.com/briefing/2023/11/02/markets-think-interest-rates-could-stay-high-for-a-decade-or-more">historically low global interest rates</a> in the decade after the global financial crisis in 2008 contributed powerfully to burgeoning debt by making it easy to borrow large amounts of cheap money. </p>
<p>The debt trends of countries have worsened sharply since then. Factors have included the COVID-19 pandemic, which triggered a cost-of-living crisis, and Russia’s invasion of Ukraine, which contributed to a rapid rise in global interest rates. </p>
<p>In Africa, the pain from higher borrowing costs is particularly acute for governments, given that public debt represented <a href="https://databank.worldbank.org/source/world-development-indicators">nearly 60%</a> of the region’s total external debt in 2022 (Figure 1). <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">Nineteen countries</a>, including Ghana and Zambia, are already in debt distress (meaning they are unable to meet financial obligations) or at high risk of debt distress.</p>
<p>Ghana’s public debt has more than doubled since 2012 and amounts to <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">85%</a> of GDP. Zambia’s went up much higher and stood at <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">98%</a> as of 2022. </p>
<p>Both <a href="https://www.bloomberg.com/news/articles/2023-12-11/ethiopia-is-about-to-become-africa-s-next-debt-defaulter">Ghana</a> and <a href="https://www.bloomberg.com/news/articles/2023-12-11/ethiopia-is-about-to-become-africa-s-next-debt-defaulter">Zambia</a>, along with <a href="https://www.bloomberg.com/news/articles/2023-12-11/ethiopia-is-about-to-become-africa-s-next-debt-defaulter">Ethiopia</a>, have defaulted on their foreign debt, sparking fears about a broader sovereign debt crisis on the continent if more countries fall into debt distress. </p>
<p>Others face high risk of debt distress. Kenya is on the edge of financial distress after its debt increased steadily to <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">70%</a> of GDP. South Africa also faces elevated public debt, which has almost doubled over the last decade and currently stands at <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">74%</a> of GDP. </p>
<p>And yet trimming high debts won’t be easy. Development needs are high after coffers were drained by higher spending tied to the pandemic and fallout from Ukraine. </p>
<p>The International Monetary Fund estimates that the median sub-Saharan African country needs to increase spending by at <a href="https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2023/09/15/Navigating-Fiscal-Challenges-in-Sub-Saharan-Africa-Resilient-Strategies-and-Credible-529230">least 20% of GDP</a> to meet sustainable development goals on health, education and infrastructure by 2030. Climate change adaptation is expected to add <a href="https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2023/09/15/Navigating-Fiscal-Challenges-in-Sub-Saharan-Africa-Resilient-Strategies-and-Credible-529230">billions of dollars</a> each year for the continent.</p>
<p>Coffers are also being depleted by more money being spent repaying expensive loans. This has the additional effect of depleting foreign exchange reserves, which means countries overburdened by debt also have to contend with weakening currencies. </p>
<p>Kenya’s debt interest payment as a share of revenue rose from <a href="https://databank.worldbank.org/source/world-development-indicators">11% in 2014</a> to more than <a href="https://databank.worldbank.org/source/world-development-indicators">20%</a> after 2020. This depleted its reserves as a share of external debt from 47% to less than 20% over the same period. This has pressured the Kenyan shilling, which lost more than <a href="https://www.bloomberg.com/news/articles/2023-11-28/-paramilitary-tax-agents-deployed-in-kenya-budget-revenue-drive">19%</a> against the US dollar last year.</p>
<p>In the cases of Ghana and Zambia, debt interest payments climbed even higher. For Ghana they were around <a href="https://databank.worldbank.org/source/world-development-indicators">45%</a> of revenue. For Zambia, around <a href="https://databank.worldbank.org/source/world-development-indicators">39%</a>. By 2022 reserves had dwindled to <a href="https://databank.worldbank.org/source/world-development-indicators">22%</a> in Ghana and to <a href="https://databank.worldbank.org/source/world-development-indicators">10%</a> in Zambia. </p>
<p>This precipitated large depreciations of Ghana’s cedi and Zambia’s kwacha. </p>
<p>South Africa’s debt interest payments increased at a relatively slower pace to about <a href="https://databank.worldbank.org/source/world-development-indicators">15%</a> of revenue after 2021 and it kept a higher reserve share of about <a href="https://databank.worldbank.org/source/world-development-indicators">35%</a>. This was why the decline in the rand was not as steep as in the other three countries. </p>
<p>Weakening currencies also make foreign debt servicing costlier. Consequently, reasonable debt can quickly turn into unmanageable debt.</p>
<p>Lower government revenue collection has also intensified debt risks.</p>
<p>In 2023, revenue collected was <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">16%</a> of GDP in Ghana, <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">17%</a> in Kenya and <a href="https://www.imf.org/en/Publications/WEO/weo-database/2023/October">21%</a> in Zambia. This is significantly below the <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/10/16/regional-economic-outlook-for-sub-saharan-africa-october-2023">27%</a> median level seen in other developing economies. Although this median level is matched by South Africa, rising costs of social transfers including welfare grants and subsidies to state-owned enterprises such as the power utility Eskom and transport utility Transnet have added upward pressure on <a href="https://www.worldbank.org/en/publication/global-economic-prospects">public debt amid slowing growth</a>. </p>
<h2>What can be done</h2>
<p>A number of steps can be taken to alleviate the trade-offs countries are having to make.</p>
<p>Firstly, governments should prioritise public spending measures that raise growth. </p>
<p>These include critical spending on education, health, infrastructure and other high-quality growth enhancing investments. As economic growth picks up, it is likely to generate more government revenue to pay down the debt.</p>
<p>It also means allocating more spending on first generation reforms. These are structural reforms that alleviate major growth constraints. For example, long-standing reforms in governance remain critical in African countries which generally lag behind countries in other regions on various measures of governance quality such as rule of law, control of corruption and government accountability. </p>
<p>Secondly, countries need to fix their revenue collection problems. While growth leads to a larger economy that generates additional revenue, low levels of domestic revenue collection constrain the ability of governments to pay down debt and fund vital social and growth sectors.</p>
<p>Across Africa, several countries, including South Africa, Nigeria, Ghana, Zambia, Kenya and Ethiopia, have mobilised efforts to spur gains in revenue collection. These include new levies, higher taxes, registering more shops on the tax roll, broadening tax bases, strengthening tax administration and other revenue enhancing measures.</p>
<p>Lastly, governments need to restructure their debt portfolios. When a debt crisis cannot be avoided, restructuring debt can reduce the amount owed to creditors by revising the amount and timing of future principal and interest payments. Chad reached an agreement to restructure its external debt under the <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/10/16/regional-economic-outlook-for-sub-saharan-africa-october-2023">G20 Common Framework for Debt Treatment in 2022</a>. This is an initiative designed to support low income developing countries with unsustainable debt. Since then, Ghana and Zambia have also launched debt restructuring negotiations under the <a href="https://clubdeparis.org/sites/default/files/annex_common_framework_for_debt_treatments_beyond_the_dssi.pdf">G20 Common Framework</a>. </p>
<p>Other highly indebted countries struggling to service their liabilities may have to do the same amid rising concerns about slow progress of the Common Framework.</p><img src="https://counter.theconversation.com/content/221614/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Munemo is affiliated with the Council on Foreign Relations. He was appointed as an International Affairs Fellow for Tenured International Relations Scholars for the 2023-24 academic year.</span></em></p>Many African countries face a triple set of dilemmas that are not easy to navigate.Jonathan Munemo, Professor of Economics, Salisbury UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2173912024-01-29T13:07:34Z2024-01-29T13:07:34ZSouth Africa is failing people who aren’t poor, but aren’t middle class either<p>Many South African households are trapped. They are neither poor nor middle class. As a demographic they hover above the indigence threshold financially. But they are not yet securely in the middle class. </p>
<p>This aspirant middle class – individuals whose income is above the indigent thresholds but too low to afford the middle-class lifestyle – <a href="https://econpapers.repec.org/article/eeewdevel/v_3a60_3ay_3a2014_3ai_3ac_3ap_3a132-146.htm">is growing</a> in metropolitan areas globally. This class is financially vulnerable, with a higher risk of falling back into poverty compared to the established middle class. </p>
<p>We set out to understand the challenges faced by this aspirant middle class in South Africa and the key determinants of their progression. We <a href="https://doi.org/10.1002/pa.2865">investigated</a> the salient factors that trap them in their progression towards a stable middle class. We used Johannesburg as our case study.</p>
<p>Our research found that several key factors affected this demographic. These include education, racial inequality, access to economic opportunities, entrepreneurship and proximity to amenities.</p>
<p>The findings have important implications for public policy in South Africa. They point to the need for hybrid policy frameworks that not only alleviate poverty but also sustain and expand the middle class. These policies should aim at ensuring social equity, reflecting the needs of the aspirant middle class and integrating them into broader economic and development strategies. </p>
<h2>The aspirant middle class and why it matters</h2>
<p>The middle class aspirants comprise <a href="https://www.datafirst.uct.ac.za/dataportal/index.php/collections/GCRO">about 30%</a> of the population based on the authors’ analysis of the 2018 Quality of Life Survey data released by the Gauteng City Region Observatory.</p>
<p><a href="https://econpapers.repec.org/article/eeewdevel/v_3a60_3ay_3a2014_3ai_3ac_3ap_3a132-146.htm">Studies</a> have <a href="https://documents.worldbank.org/pt/publication/documents-reports/documentdetail/530481521735906534/overcoming-poverty-and-inequality-in-south-africa-an-assessment-of-drivers-constraints-and-opportunities">suggested</a> US$10 per capita per day as the absolute minimum income in the developing world for a person to attain middle-class status.</p>
<p>In South Africa the upper-bound poverty line for individuals to benefit from the indigent policy is US$4.5 per capita per day. This leaves individuals with incomes between US$4.5 and US$10 per capita per day as neither poor nor middle class. </p>
<p>Middle class aspirants are important for several reasons.</p>
<p>Firstly, they often represent a significant consumer base, driving demand for goods and services. Secondly, they are likely to invest in education and healthcare, contributing to human capital development. Thirdly, their aspirations for upward mobility can foster a culture of entrepreneurship and innovation. And lastly they play a key role in political and social stability. They often advocate for improvements in governance as well as social justice.</p>
<p>These households are not poor. But they aren’t secure financially. Their risk of falling into poverty is three times that of the established middle class, <a href="https://www.undp.org/sites/g/files/zskgke326/files/migration/za/UNDP---Socioeconomic-Impact-Assessment-Socioeconomic-Impact-Assessment-2020_FINAL_01-October-2020.pdf">according to a United Nations Development Programme report drawn up in 2020</a>. In terms of the South African municipal indigent policies, the aspirants are economically self-sufficient and could be classified as middle class.</p>
<p>However, the aspirants don’t earn enough to cover their bills and care for their households. Their desired economic, social and political life is the same as that of their middle class counterparts. </p>
<h2>Middle class factors</h2>
<p>Historically, education empowered individuals with skills and knowledge, enhancing their employability and earning potential. In South Africa, the quality of public education <a href="https://www.businesslive.co.za/fm/features/2023-05-25-south-africa-sinks-to-the-bottom-of-the-class/">has become questionable</a>. Our analysis confirmed that completion of secondary education was no longer enough to sustain progression to middle class status. </p>
<p>Racial inequality can affect access to opportunities, thus affecting social mobility. In South Africa, racial disparities continue to play a significant role. Black Africans have the lowest probability of ascending into the middle class. This is indicative of persistent income and educational inequalities rooted in the country’s history.</p>
<p>Historically, race was a key determinant of ownership of assets in South Africa. And assets such as owning a house provide a buffer against economic uncertainties, an essential element for sustaining middle-class status. </p>
<p>Access to economic opportunities, such as quality jobs and entrepreneurship, is crucial for upward mobility and a stable middle class. Our research found that entrepreneurship could help the aspirant middle class to diversify income sources, enhancing their financial resilience.</p>
<p>Finally, proximity to amenities like healthcare, education and transport is vital for a quality of life consistent with middle-class standards. The absence or deficiency of these amenities can hinder the progression of middle class aspirants and their creation of a secure status.</p>
<p>Proximity is valued because of the overall comfort and time-saving aspects for all household members and its economic benefits, such as reduced transport costs.</p>
<h2>What next</h2>
<p>The solutions to the problem of growing the middle class aren’t the same as those for poverty alleviation. That’s because each socioeconomic segment – middle class aspirants and the poor – faces idiosyncratic challenges.</p>
<p>We therefore propose hybrid policy frameworks that integrate pro-poor policies and those designed to sustain the middle class.</p>
<p>The government must also design policies aimed specifically at easing the progression of middle class aspirants into a stable middle class. This will enable the aspirants to drive demand for goods and services, invest further in education and healthcare, and foster a culture of entrepreneurship and innovation. They can also play a key role in political and social suitability by advocating for governance improvements and social justice.</p>
<p>Emphasising the role of local governments, the article calls for policies that maximise human potential, redress past imbalances, and ensure broad representation. This will facilitate the upward mobility of the aspirant middle class into a more stable and secure economic position.</p><img src="https://counter.theconversation.com/content/217391/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mary Mangai receives funding from National Research Foundation, German Research Foundation, US Federal Government, UP Research Development Programme FUND and VC Congress Travel Grant.</span></em></p><p class="fine-print"><em><span>Adrino Mazenda, Margaret Chitiga-Mabugu, and Tinashe Mushayanyama do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa needs policies that look after households that aren’t poor, but are also not financially secure.Tinashe Mushayanyama, Online Assistant Lecturer, University of South AfricaAdrino Mazenda, Senior Researcher, Associate Professor, University of PretoriaMargaret Chitiga-Mabugu, Dean of the Faculty of Economic and Management Sciences, University of PretoriaMary Mangai, Senior Lecturer, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.