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Africa urged to transform dependence on commodities

Even as the world emerges from the worst of the global commodity price meltdown, African countries were urged on Tuesday to make the most of the next upward cycle to diversify and industrialise away from over-reliance on exports of raw materials.

In a statement, Dr Martyn Davies, Deloitte managing director for emerging markets and Africa, said African governments had not, for the most part, taken advantage of the last decade’s growth spurt to diversify, either in their economic structures or their export baskets.

He said the need for economic diversification on the continent was high, even more so given that the growth cycle was at a low point. Economic history had shown that without diversification into manufacturing and services, and away from simple resource extraction, the long-term development prospects of countries were always bleak, he added.

“Nigeria is the leading example of a resource exporter where the disconnect between previously high headline growth figures and developmental reality has been stark.

“The country has never been as dependent on oil as it has been in recent years, with more than 90% of its export earnings coming from oil,” Davies said.

He said the figures for Africa as a whole were troubling too. Commodity exports, on average, accounted for 80% of total merchandise exports from Africa and commodity exports made up 70% or more of export earnings for three-quarters of African countries.

However, a handful of countries, such as Madagascar, Senegal, Morocco and several in East Africa, have avoided over-dependence on a single export, either through good fortune or as a result of strategic policy implementation. Their relatively more diversified export baskets had cushioned them from external shocks, Davies said.

Also, oil-exporting countries with less dependence on the commodity still had a reasonably healthy growth outlook.

Côte d’Ivoire, for example, earned significant foreign exchange revenues from oil exports but its main export earnings stemmed from cocoa.

Countries that had a high dependence on a single non-oil export commodity were also projected to expand at lower rates, said Davies. “Botswana’s dependence on diamond mining is a point of concern, while Zambia’s over-reliance on copper has also limited the economy’s growth prospects.”

Several East African countries had actively promoted export diversification, he added. The strong growth outlook for East Africa in Ethiopia, Kenya, Rwanda, Tanzania, and Uganda was testament to this.

Davies added that these countries’ growth prospects were supported by political stability and pragmatic pro-business policy.

Davies said there was no simple recipe for successful economic diversification, but some of the ingredients were: the quality and quantity of physical infrastructure investments in key sectors; effective trade and industrial policies; improving macroeconomic fundamentals through sound fiscal and monetary policies; productivity growth supported by human capital, skills and technology; a broader enabling environment for both local and international investors; and good governance.

Among these, Davies listed talent and skills, and infrastructure development as particularly important.

“Sustained and sizable investment in people to generate, retain and create opportunities for talent in domestic economies is essential. Sufficient investment in physical infrastructure, including transport, power, communications and technology, is also a necessity,” he said.

Davies added that the shifting value chain of production in Asia presented an enormous opportunity. He said the rising cost pressures on China’s light industrial manufacturing sector would cause manufacturing capacity to be relocated to lower-cost foreign economies.

“As this shift in production out of China’s south-eastern provinces takes place, forward-looking African countries could emerge as ‘new Vietnams’ – offering low-cost destinations for manufacturing investment from China.”

East Africa was well-positioned to assume this role, Davies added. He mentioned Ethiopia and Kenya as leading candidates.

“Reform-minded and progressive African states could seize this opportunity and generate a nineteenth century-style industrial revolution, creating large amounts of employment and new industries in their own economies,” the statement added.

“Coupling this with the disruptors of the fourth industrial revolution – so-called ‘Industry 4.0’ – Africa could achieve the manufacturing competitiveness of early adopters of smart technologies, machines, factories, products and services.”

To take advantage of this potential seismic economic shift, Davies noted, African countries would require suitably qualified workforces.

The emerging markets expert urged African governments to adopt pro-industry policies and build more efficient infrastructure as foundations for economic and export diversification.

“It is not about state intervention, but rather state enablement of business that is the ultimate determinant of development,” Davies concluded.

Source : Engineering news

Gigaba slams Eskom’s ‘mistake’ of contradicting government policy on renewables

Finance Minister Malusi Gigaba says Eskom made a “mistake” by raising its corporate difficulties in relation to the signing of power purchase agreements (PPAs) with renewable-energy generators in a way that undermined the policy position of government on both the energy mix and the renewable-energy programme.

Speaking ahead of his departure for the Spring meetings of the International Monetary Fund and the World Bank in Washington DC, Gigaba stressed that government policy with regard to the integration of independent power producers (IPPs) into the country’s electricity network “remains unchanged” and that there should be no “uncertainty as to our commitment to the energy mix and the renewable-energy programme”.

“That is why, in view of the recent statements by some executive directors at Eskom . . . we’ve had Cabinet coming out to say: ‘We remain committed to renewable energy, to the renewable-energy targets that were outline in the Integrated Resource Plan (IRP) 2010 – we remain committed to all our plans as we have outlined’.”

Gigaba had also met with newly appointed Energy Minister Mmamoloko Kubayi to discuss the delayed signing of PPAs arising from the most recent bid windows of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The 37 outstanding contracts were scheduled to be signed on April 11, but the signing was postponed to enable Kubayi to become fully informed on the progress made under the REIPPPP and to ensure “concurrence” between herself and Public Enterprises Minister Lynne Brown.

It had been agreed that Gigaba and Kubayi would meet with Brown to address both Eskom’s concerns and its public statements that conflicted with stated policy. The issue Eskom was raising would be looked at collectively by the three Ministers, or by the Inter-Ministerial Committee (IMC) on Energy.

“The mistake that Eskom would make is to deal with corporate issues in a manner that undermines the policy decision of government.”

Nevertheless, Gigaba expressed serious misgivings about the manner in which Eskom had dealt with the IPP issue.

“If there are any concerns which have to do with corporate agreements, the strength of their balance sheet, they have to follow the proper channels to raise these issue with government as the shareholders.

“The best for Eskom would have been to go to the Minister of Public Enterprises and say to her: ‘Minister, we have the following issues’. Then the Minister will have to come to me, or call a meeting of the IMC on Energy, which will then deal with the issue collectively. But there is no single entity of government that can just make policy pronouncements on behalf of government, otherwise they will turn us into a Mickey Mouse organisation.”

The South African Renewable Energy Council (Sarec) expressed concern about the missed April 11 deadline, pointing out that “financial closure of duly procured renewable power for 37 PPAs now stands at almost two years.

Sarec chairperson Brenda Martin said that, since President Jacob Zuma’s State of the Nation Address confirmation that all outstanding PPAs would be signed, Eskom and the affected IPPs have been working to ensure that the necessary paperwork was up to date, so that financial closure could be achieved and construction could begin.

Eskom has indicated that it is willing to sign, but that it wants certainty on the cost-recovery mechanism in light of legal uncertainty surrounding the application of the Regulatory Clearing Account (RCA). The use of the RCA has been thrown into question by a Gauteng High Court ruling, which determined the most recent RCA adjustment to be “irrational, unfair and unlawful”. The National EnergyRegulator of South Africa is appealing the judgment, but will not process further RCA applications until legal certainty had been established. Therefore, it has only granted Eskom a 2.2% tariff increase for 2017/18.

In the absence of the RCA, Eskom argues that it does not have a clear mechanism to secure the revenue required to pay for the electricity arising from the renewables power stations. The utility has written to the signatories of the Government Support Framework Agreement (GFSA) – which guarantees support for the State-owned utility in meeting its obligation to buy electricity from renewable-energy IPPs – to discuss a possible triggering of government support in light of the RCA uncertainty. However, there has been no triggering of the GSFA.

PUBLIC-PRIVATE PARTNERSHIPS

The 37 renewables projects carry a combined investment value of R58-billion, as well as the potential to create 13 000 construction jobs. In addition, the REIPPPP has been held up as a model for public-private partnership in South Africa, with the previous bid windows having facilitated 102 projects, with a combined capacity of 6 370 MW and a combined investment value of R194-billion.

Gigaba indicated that he saw even greater scope for private-sector participation in South Africa’ infrastructureprogrammes and indicated that he planned to present short- and medium-term plans to Cabinet soon regarding ways to inject private capital into South Africa’s R1-trillion infrastructure programme.

The plans would reflect the fact that the balance sheets of many of South Africa’s State-owned companies (SoCs) were constrained, as well as the limitation government faced in extending further guarantees to enable those entities to raise the capital required to implement their infrastructureprogrammes. These constraints had been tightened as a result of the decisions of S&P Global Ratings and Fitch Ratings to downgrade South Africa’s foreign currency sovereign credit rating to junk.

“I have asked the department to work seriously on finalising the private-sector participation plan for the infrastructure programmes, because, quite clearly, we need to look at various sources of funding for our infrastructure build.”

 

Source : Creamer Media – Engineering News

Prominent Zimbabweans eye ‘National Transitional Authority’ to run country until ‘fair’ elections

A group of prominent Zimbabweans calling themselves “concerned citizens” have proposed a non-political National Transitional Authority to take over the running of the country from the Mugabe regime until “fair” elections can be held.

The group, which includes leading former supporters of Zimbabwe’s autocratic and ageing president Robert Mugabe, senior business people and former veterans of the war against minority white-rule, is calling for the establishment of an 18-member technocratic ruling council.

Amid an open political revolt by a growing number of Mr Mugabe’s former staunch supporters, the citizens’ group has warned that Zimbabwe risks descending into chaos unless a politically neutral body can be established to steer the country towards reforms and free and fair elections.

Zimbabwe is so desperately short of cash – it uses US dollars – that it recently slashed imports and has struggled to pay civil servants. The cash shortage recently sparked several episodes of social unrest and a national strike on July 6.

The signatories said they hoped their proposal would be supported by the African Union as well as the Southern African Development Community, SADC and the international community.

They also said Zimbabwe would need economic support during any transitional period leading to fresh elections.

So far neither Zanu PF nor the opposition Movement for Democratic Change (MDC) have responded to the announcement.

The group warned of “serious social unrest” and possible “collapse of the state” unless a “Transitional Authority” was created to introduce some “optimism,” and an “acceptable political and socio-economic environment” as well as reforms ahead of fresh elections.

The group says a government of national unity like the one which ran Zimbabwe from 2009 to 2013, would not solve Zimbabwe’s current crisis.

“We are of the opinion that no election in the current political climate, whether called early or in 2018, can resolve the deep structural deficits in the state; and, in any event, no election without considerable reform of the state and the creation of a level playing field, can possibly lead to a legitimate outcome,” they said.

“The Platform of Concerned Citizens (PCC) is a group of like-minded Zimbabweans who have been meeting since October 2015 to discuss the crisis in our country and explore possible solutions.”

Among the 25 who signed the statement are several prominent analysts, human rights activists, academics, business people, as well as some who were part of the liberation organisations prior to independence. Many of them were or are employed or supported by non-governmental organisations.

Elinor Sisulu, a Zimbabwe activist who married into South Africa’s legendary Sisulu family signed the statement, as did Trevor Ncube, a prominent Zimbabwe journalist and publisher of the well known South African newspaper, the Mail & Guardian.  It was also supported by Judith Todd the renowned activist and writer who spent years in exile in the UK after her father, Sir Garfield Todd, a former liberal prime minister of Southern Rhodesia, was ousted by right wing Rhodesians lead by Ian Smith.

Ms Todd, who was has written about how she was subjected to a punishment rape by the Mugabe regime in the mid-1980s after she criticised the Mugabe-backed terror campaign in Matabeleland, was stripped of her citizenship by Mr Mugabe in 2003 over her activism.

The statement from the concerned citizens came 24 hours after the ruling Zanu PF party reacted with fury after a group of former Zimbabwean independence war veterans publicly criticised Mr Mugabe’s 36-year rule, accusing him of “bankrupt leadership [and] corruption” while describing him as the “rot [which] needs to be uprooted”.

The group of veterans, who spear-headed invasions of thousands of white-owned farms from 2000 and helped Mr Mugabe’s violent crackdown on opposition political parties, said they would no longer campaign for the ageing strongman.

Zanu PF won a massive if disputed victory at the last elections in 2013, and many commentators say the party is now consumed by factional fights over a successor to 92-year-old Mr Mugabe who says he will fight the next elections in 2018, and intends to stay in office until he dies.

In a statement released to the press on Saturday, the group of ‘concerned citizens’ says the present parliament and senate would continue, but it makes no mention of Mr Mugabe’s executive presidency.

Analysts have said the war veterans’ surprise intervention against their former leader has sealed the fate of the Mugabe regime.

“This is the beginning of the end for Mugabe,” said Takavafira Zhou, a political scientist from Masvingo State University.

“The war veterans have realised Mugabe is sinking and with him his regime. They don’t want to sink with the ship,” said Mr Zhou.

 

Source – The Telegraph

 

700 delegates expected at Victoria Falls SADC Summit

About 700 high level delegates are expected to attend the Sadc Heads of State and Government Summit in Victoria Falls next month. Foreign Affairs Minister Simbarashe Mumbengegwi told journalists in Harare today that Sadc Executive Secretary Dr Stergomena Lawrence Tax has already visited Zimbabwe twice to assess preparations and was satisfied.

Around 450 delegates are expected during the course of the Summit and 700 at the opening and closing sessions. Minister Mumbengegwi said:

“We are working closely with the Sadc secretariat in preparation for the Summit. Dr Tax has been here to consult. We are working very closely with the secretariat to make sure that everything is on track.

For Zimbabwe, this is a very important role that has been bestowed upon our President. It means that for the next three years Zimbabwe will be playing an important leadership role in Sadc.

Already we have been playing an important role as Deputy Chair by chairing meetings when the incumbent Chair, which is Malawi, has not been available. During our role as Chair from August this year to August next year, Zimbabwe will be the centre of activity for Sadc. From August 2015 to August 2016, we will continue to sit in the Sadc Troika as outgoing chair.”

Source – Zimbabwesituation

Zimbabwe economy haunts clueless Zanu PF

Any hope that Zimbabweans had of a quick economic recovery were dashed last week when government admitted that it had failed to pay its external debt — amounting to over $10 billion amid concerns of more suffering in store for the people.

Economic analysts say with Zimbabwe’s poor debt payment record, it will be difficult for any international lender to extend credit lines to the country.

Finance minister Patrick Chinamasa last week said the country was failing to access new financing, which was critical for economic revival, because Zimbabwe was in arrears in servicing its external debt.

“No one wants to lend Zimbabwe money anymore because we have defaulted in the past. Whether we go to Zambia or to Malawi, it’s the same thing because we are indebted to these countries. We are on our own and we have to be more innovative,” said Chinamasa at the Zimbabwe International Trade Fair business conference.

The southern African nation — with a poor debt payment record and risks losing assets over failure to clear liabilities — is currently engaging International Monetary Fund (IMF) towards revising the country’s debt overhang estimated at $10,7 billion.

Harare-based economist John Robertson told the Daily News that government has to make new choices to change policies which can attract investors.

“People are reluctant to forgive debts, let alone offer any financial relief if we don’t change policies that got us into this mess. The more time we take to fix our economy means we will require more money to get things right,” he said.

Robertson indicated that government should prioritise rebuilding productive capacity but this requires a lot of capital.

“We can only address our economic inefficiencies by making sure we use internally-generated resources. At the same time, our behaviour is very bad, we need to change our behaviour in order to implement policies that are clear and can be able to attract investment inflows. At the moment we are in a precarious situation,” he said.

Economist Godfrey Kanyenze said the only solution to the economic problems lies in Zanu PF transforming the way it is governing the country.

“Many lenders are waiting to see how Zimbabwe performs on the IMF debt clearance plan agreed on last year before they can part with their funds,” he said.

Kanyenze said despite the agreement, the government is failing to implement resolutions that will put the country’s economy on the road to recovery and as such, no-one wants “to throw their money into a pit”.

“When an IMF team visited early this year to assess progress, they found that Zimbabwe had ignored some of the issues agreed on — issues such as reducing the public sector wage bill and minimising the vulnerabilities in the banking sector,” he said.

Another economist Christopher Mugaga said what is urgently required, without regret, is pursing the formalisation of negotiating the repayment of debt.

“Chinamasa remains in a Catch 22 situation. He alone cannot do much on the economic turnaround. On behalf of government, the Finance minister needs to implement the Staff Monitored Programme in good faith,” he said adding that as a country, we also need to align our policies with international standards.

“For instance, the ratio of government’s wage bill to the country’s Gross Domestic Product (GDP) should be reasonable and conform to global norms,” Mugaga said.

Socio-economic commentator Francis Mukora said it would be impossible for other countries to chip in with financial assistance given the deteriorating economic conditions in the country.

“I doubt if there is anyone who is willing to extend loans to a country with a bad reputation for failure to repay and is saddled with a non-performing economy — leaving Zimbabwe with no capacity to service such loans,” he said.

Zimbabwe’s efforts to secure $27 billion to fund its ambitious economic blueprint — the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) — were dealt a major blow when China indicated that it would not extend any budgetary support to the cash-strapped nation.

The Asian giant, generally considered an all-weather friend of Zimbabwe, said its foreign policy does not allow it to provide budgetary support to sovereign nations.

Cognisant of the worsening economic situation in the country, President Robert Mugabe recently pleaded with foreign investors to come and invest in Zimbabwe despite threats of the indigenisation policy.

Mugabe said the controversial policy, which forces foreign-owned firms operating in the country to cede 51 percent of their shareholding to locals, was misunderstood and he vowed to uphold property rights.

However, market experts argue that despite Mugabe’s calls for investors to consider Zimbabwe as an investment destination, a lot has to be done to assure investor confidence over the indigenisation policy.

A recent report by the Consultancy Africa Intelligence (CAI) maintains that “for economic empowerment programmes to succeed, policy implementation must be transparent for foreign investors to maintain or increase Foreign Direct Investment (FDI) flows into the host country.”

CAI, however, cautioned on the need for policy clarity on the protection of property rights.

“But there has been a significant increase in FDI outflows because the law, when enacted, lacked clarity on the protection of property rights,” read part of the report.

Zimbabwe’s failure to pay external debts is also cascading down into parastatals and individuals who are defaulting on servicing their loans.

This comes after Old Mutual Financial Holdings recently noted that nearly 72 percent of the $10 million loans disbursed by CABS to the youth under the Zimbabwe Youth Council (ZYC) since 2009 are non-performing.

Source – Zimbabwe Situation

Zimbabwe: Govt Cuts Most Mining Fees

Zimbabwe has significantly cut most mining fees while scrapping the $5 million registration fees for diamonds, according to a Government notice published last week. According to the new charges published on Friday, registration fees for platinum special prospecting licence have been slashed from $2,5 million to $750 000.

Application fees for an ordinary platinum prospecting licence is now $500 from $500 000. The application for a special platinum prospecting is unchanged at US$500 000.

The application or renewal fees for diamonds has remained at $1 million while registration or renewal fee for coal and energy related has been cut to $100 000 from $500 000.

The application fees for coal, coal bed methane, gas mineral, mineral oils and nuclear energy remains at US$100 000.

In the new regulations, applications for registration as an approved prospector paid every five years has been slashed to $4 000 from $5 000 while special prospecting licence for a mining district and the whole country has been reduced to $2 500 from $3 000 and $2 500 from $3 000 respectively.

Analysts said they were still studying the “actual impact” of the new mining fees but the new fees structure would go some way in reducing the cost of mining in Zimbabwe.

“This is what the miners have been calling for but we are still studying the impact of the new pricing structure,” former Chamber of Mines president Mr Victor Gapare said in an interview.

Zimbabwe’s economy is expected to grow by an average 7,3 percent in the next five years, with mining being one of the most critical sector expected to drive that growth.

However, the analysts said the high charges were threatening the viability of the sector, which requires as much as US$6 billion in new investments.

Zimbabwe has the world’s second-largest platinum reserves after South Africa, as well as significant gold, diamond, coal, iron ore and chrome resources.

Source –  AllAfrica