<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="386" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/11_10__51339288.jpg" alt="" class="wp-image-400684" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/11_10__51339288.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/11_10__51339288-300x156.jpg 300w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>File photo: Kathimerini</figcaption></figure>



JOHANNESBURG, March 31 (Reuters) &#8211; South Africa&#8217;s rising long term bond yields and the related cost of government borrowing remain a concern, ratings firm S&amp;P Global said in its second quarter economic outlook for emerging markets.



The yield on South Africa&#8217;s benchmark 2030 government bond hit a record-high above 13% in March 2020 at the height of the financial crisis triggered by the coronavirus pandemic.



Yields came down as the central bank slashed lending rates and launched a bond-buying programme. But they have started rising again in 2021, to near the 10% mark, as climbing Treasury yields in the United States lured away lenders.



&#8220;In South Africa, 10-year domestic currency government bond yields have risen about 70 basis points this year. While less abrupt, the rising cost of funding presents a challenge, given that interest rate payments in South Africa are already among the highest among key EMs,&#8221; said S&amp;P in a release dated March 30.



S&amp;P said this month that the 2021 budget did not focus enough on economic reforms, making a sustained rebound in gross domestic product unlikely. The deficit is forecast to more than double to 14% of gross domestic product in the 2020/21 fiscal year, from 5.7% in the previous year.



Foreign investors have avoided the country&#8217;s bonds or demanded a high premium, or yield. The central bank said on Tuesday non-residents had sold 74.6 billion rand of bonds in 2020.



Year-to-date, foreign selling of local bonds was 28.5 billion rand, according to Johannesburg Stock Exchange data.



The Reserve Bank (SARB) last week resisted raising lending rates following hikes by other emerging market central banks, saying the inflation outlook was benign. The bank said it had little control over long-term bond yields.



S&amp;P said in the report the increasing divergence between the U.S. rebound and the rest of the world could &#8220;force central banks to implement defensive interest-rate hikes&#8221; to compensate for the growing yield differential, especially those countries with large fiscal deficits like South Africa. 



(Reporting by Mfuneko Toyana; Editing by Alison Williams)

11_10__51339288

South Africa’s rising cost of funding is concerning, says S&P

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-820x547.jpg" alt="" class="wp-image-400651" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-768x513.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ.jpg 830w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Pic: Waldo Swiegers / Bloomberg</figcaption></figure>



JOHANNESBURG, April 1 (Reuters) &#8211; South Africa&#8217;s seasonally-adjusted Absa Purchasing Managers&#8217; Index (PMI) expanded for third month in a row in March as new sales and exports rose with the easing of coronavirus lockdown restrictions, a survey showed on Thursday.



The index, a gauge of manufacturing activity in Africa&#8217;s most industrialised economy, rose to 57.4 points in March from 53.0 points in February.



The survey showed a broad-based improvement, with all of five subcomponents in survey improving, with only the employment sub-index remaining below the 50-point mark that separates expansion from contraction.



The jump in new sales order was mainly driven by strong exports, the survey said, reflecting &#8220;the recent better-than-expected manufacturing PMI readings in Europe&#8221;, according to Absa.



South Africa&#8217;s trade surplus widened to 28.96 billion rand ($1.96 billion) in February, more than double the surplus in the previous month, extending a trend that began in May last year.



Business activity recorded another sharp increase, up 8.6 points, but Absa questioned whether this would be sustained.



&#8220;Purchasing managers turned slightly less optimistic about expected business conditions in six months&#8217; time,&#8221; Absa said in the release.



The country has seen a sustained drop in the rate of new COVID-19 infections in 2021, leading to a loosening of lockdown restrictions that has supported economic activity, particularly in consumer sectors.



Restrictions have however been temporarily tightened for the upcoming Easter weekend. The slow pace of the rollout of coronavirus vaccines, with the country only expected to achieve herd immunity in 2022, has dampened business sentiment. 



(Reporting by Mfuneko Toyana)

Absa Reboots Image As 100 Years Of Barclays In Africa Ends

South Africa’s Absa PMI expands again in March

NAIROBI, March 31 (Reuters) &#8211; Sub-Saharan Africa is expected to post economic growth of 2.3%-3.4% this year, the World Bank said in a new report on Wednesday, bouncing back from a pandemic-induced 2.0% contraction last year.



Like other economies around the world, the region was forced to adopt strict lockdown measures in the first quarter of last year to try to curb the spread of the coronavirus, hitting key economic activities like tourism and trade.



&#8220;For most countries in the region, activity will remain well below the pre-COVID-19 projections at the end of 2021, increasing the risk of long-lasting damage from the pandemic on people&#8217;s living standards,&#8221; the bank said.



The recovery, which will also be aided by ongoing efforts to vaccinate people against the disease, is expected to vary among individual nations, the World Bank said.



Diversified economies like Kenya and Ivory Coast, as well as mining-dependent ones like Botswana and Guinea, will grow robustly as rising confidence attracts investments, it said.



Significant risks, however, still remain, the bank warned.



&#8220;The resurgence of the pandemic in late 2020 and limited additional fiscal support will pose an uphill battle for policy makers,&#8221; the bank said.



During the second and third waves of the pandemic, some nations have seen their daily COVID-19 infections surge by 40% compared with the first wave of the pandemic, the World Bank said, weighing on recovery prospects.



Last week, Kenya imposed new, partial restrictions on the capital Nairobi and four adjacent counties to curb the spread of the coronavirus as it reels from a third wave of infections.



Governments should support the projected economic recovery by strengthening their policy interventions, the Word Bank said, adding that a new continental free trade bloc inaugurated at the start of this year could be key.



&#8220;The next twelve months will be a critical period for leveraging the African Continental Free Trade Area in order to deepen African countries&#8217; integration,&#8221; it said. 



(Reporting by Duncan Miriri; editing by Richard Pullin)

istockphoto-1250489640-640×640

Sub-Saharan Africa economies to grow 2.3%-3.4% this year – World Bank

*This analysis was produced by the team at Signal Risk&nbsp;



“This will be the government of all Libyans… Libya is one and united.”



These were the crowning words of Prime Minister Abdulhamid Dbeibeh’s inaugural address as he and his government of national unity (GNU) were sworn into power in Tobruk on 15 March. The inauguration concluded the first part of Libya’s United Nations (UN)-led transitional process, which began in October 2020 with the signing of a ceasefire agreement between the formerly adversarial Tripoli- and Tobruk- based governments.



The structure



The GNU is composed of four structures: a three-member presidential council, a three-member prime ministerial office, 26 cabinet ministers, and six ministers of state. In keeping with the principles of the UN-led transition, different geographic regions and interest groups are represented in the GNU with a view to creating a balanced and stable power-sharing formula. This includes natives from each of the historic Tripolitania, Fezzan and Cyrenaica regions, tribal leaders, and those from the commercial, legal and military fraternities.



The GNU’s mandate is simple: to stabilise and <a href="https://www.thesignalroom.com/libya-platitudes-in-palermo/">prepare Libya for general elections</a>&nbsp;that have been scheduled for December 2021. After this, the structure will be dissolved and a permanent administration will come into power.



The dominant formations



Pre-eminent among the GNU’s structures are the prime ministerial and presidential councils, which will jointly spearhead governance in Libya and perform mutual checks and balances. The prime ministerial council is headed up by Dbeibeh – whose seat will remain in Tripoli, in the west of Libya – alongside two deputies “overseeing” two geographic demarcations: Hussein Atiya Abdul Hafeez Al-Qatrani (who is deputy prime minister for east Libya) and Ramadan Ahmed Boujenah (who is deputy prime minister for south Libya).



The three-member presidential council is led by chairman Mohamed Yunus al-Menfi, who will also serve as the representative for Cyrenaica. He is joined by two vice chairmen, Abdullah al-Lafi (who is the representative for Tripolitania region) and Musa al-Koni (who is the representative for Fezzan).



The transition



Dbeibeh and his government’s ascent to power was somewhat smoother than expected.



After <a href="https://www.thesignalroom.com/libya-spoiling-the-broth-1610382589/">the ceasefire agreement in October 2020</a> – which was arguably preserved by factors such as a stalemate between warring sides, conflict fatigue, and increased international engagement – the UN seized the opportunity to expedite the transitional process.



Led by acting Libya envoy Stephanie Williams, and drawing on the roadmap put forward by&nbsp;<a href="https://www.thesignalroom.com/libya-the-flammable-ceasefire-625374214/">the Berlin conference in January 2020</a>, the UN began formalising the Libyan Political Dialogue Forum (LPDF). The 74-member body, which was also composed of a diverse array of Libyan stakeholders, was established in 2019 to guide the country through a potential transitional process; however, its formalisation was stalled due to a resurgence of conflict.



In February, the LPDF gathered in Geneva to elect the heads of a potential unity government. Specifically, in this exercise, leaders from the Tripoli-based Government of National Accord (GNA) and Tobruk-based House of Representatives (HoR) were tasked with presenting a candidate list that comprised a prime minister and members of the presidential council; the LPDF would then vote on the list (and in effect, the leaders of Libya’s transition).



A total of four lists was presented to the LPDF. Most notable among these was that comprised of HoR speaker Aguila Saleh (who was running for head of the presidential council) and GNA Interior Minister Fathi Bashagha (who was running for the prime ministerial seat). Given their prominence, the Saleh- Bashagha union was thought to be undefeatable, especially by the Dbeibeh-Menfi ticket which lacked the familiarity and influence of its rivals.



This appeared to be the case in the first round of voting, as the Saleh-Bashagha ticket claimed an indecisive victory (less than 50 percent or 37 votes); second was Dbeibeh and Menfi. However, in a surprising turn, the Dbeibeh-Menfi ticket claimed 39 votes in the second-round poll, and with that, leadership of Libya’s transition.



Immediately after the vote, there were loose allegations of vote buying by Dbeibeh and Menfi; however, these remain unsubstantiated and were not acted upon.



The pledge and the buy-in



Following the Geneva vote, Dbeibeh made several key promises, in the hope of expediting Libya’s break from its tumultuous past. These include:



<ul class="wp-block-list"><li>Electing a competent government that represents all constituencies</li><li>Reforming state institutions</li><li>Resurrecting the economy and improving service delivery</li><li>Fostering peace and stability</li><li>Combatting corruption</li><li>Centralising the country’s security apparatus (including the departure of foreign militias and the demobilisation, disarmament, and reintegration of local forces)</li></ul>



Unsurprisingly, his cabinet selections were partly aimed at fulfilling these ends, with fresh faces deployed to all government portfolios. This includes the ministries of finance, interior, foreign affairs, economy and trade, industry and minerals, and oil and gas. Tellingly, the country’s contested defence portfolio – which was long sought by HoR-aligned warlord Khalifa Haftar – was not handed to a single individual. Instead, it will be jointly held by members of the country’s presidential council.



Despite the upset, Haftar is among many domestic and international stakeholders to have lauded Dbeibeh and his new formation. In a statement following the inauguration, Haftar expressed “the support of the armed forces for the peace process”. Dbeibeh’s predecessor, Fayez al-Sarraj, also honoured his commitment to hand over power peacefully to the incoming prime minister. Furthermore, Dbeibeh’s candidate picks were endorsed by 132 of the 133 members of the HoR that were present at confidence sessions in Tobruk during the week of 08 March.



Just as important, Dbeibeh and his government have received a stamp of approval from <a href="https://www.thesignalroom.com/libya-the-thin-red-line-1617726443/">Libya’s external partners</a>, which were informally divided between supporters of the GNA and HoR. Since 15 March, Italy, the United Arab Emirates, Egypt, Russia and France have all pledged their support for the prime minister, his new government, and the transitional process.



The Signal



Abdulhamid Dbeibeh’s ascent to power is seen as the outcome of exasperation with the political status quo, and the desire among Libyans for a consensus candidate who could unite the country’s myriad factions. Indeed, Dbeibeh’s rivals – Saleh and Bashagha – were arguably seen as remnants of old and failed regimes (in the form of the HoR and GNA). The two statesmen also had strong ties to limited interest groups, which could prove to be an impediment in a transitional administration. Saleh was seen as an exponent of general Haftar, Egypt, Russia and the United Arab Emirates. His historic support for the general has been a particular point of contention and has resulted in serious criticism from populations that have been negatively impacted by <a href="https://www.thesignalroom.com/libya-haftars-tripoli-advance/">the general’s military campaign.</a> In keeping with his GNA stead, Bashagha is strongly aligned with Turkey, Italy and Qatar. However, his reputation as an unscrupulously ambitious politician who is willing to court all sides to advance his interests has also resulted in some disaffection among sections of the Libyan polity.



Positively, Dbeibeh has demonstrated the political expertise to navigate a complicated Libyan landscape. A businessman by profession, the new prime minister is said to curry favour from most sides of the Libyan polity and the country’s divided international partners. Hailing from Misrata, he has firm ties with one of the strongest tribal groups in Libya, which has historically propped up the GNA. Furthermore, although controversial, his ascendance under former ruler Muammar Gaddafi has also allowed him to establish links with the HoR, much of which consists of supporters of the deceased dictator. Testament to Dbeibeh’s political nous are his cabinet picks. The prime minister has temporarily eased concerns over political bias with a representative and technocratic cabinet. Furthermore, in opting to centralise the defence portfolio, he has outmanoeuvred Haftar in a manner that avoided upsetting the general and other rival armed interests.



Some semblance of political stability is likely to endure until elections are held in December. It appears as if all internal and external stakeholders are on board with the transitional process and the upcoming election, with very few incentives to spoil the process. This may be rooted in the fact that the GNU must dissolve ahead of the ballot; although it is unclear if Dbeibeh and members of his government can compete in the upcoming election and therefore wield the power of incumbency. Regardless, the likes of Saleh, Bashagha – and indeed, Haftar – could make a claim for power in December, in what could amount to a more legitimate administration with a longer stay in office and a less restricted framework. Accordingly, relative calm is expected in the political realm unless Dbeibeh makes any unexpected moves to unsettle powerful stakeholders. These could include the prosecution of an individual such as Haftar. Nonetheless, closer to the election, increased political competition could have a destabilising impact.



Improving the country’s security environment will remain a challenge and require strong assistance from international allies. While the centralisation of the broad security apparatus is a key step towards mitigating the country’s myriad security threats, Dbeibeh’s GNU does not have the military and financial means – or authority – to bring the armed actors under its rule. For one, the GNU has inherited no army, and governing institutions remain relatively bankrupt. Second, <a href="https://www.thesignalroom.com/libya-tumult-in-tripoli/">militants aligned with the GNA</a> – including those from Misrata and Tripoli – did so largely out of self-interest and self-preservation as opposed to concrete allegiance to the governing structure. Similarly, Haftar’s self-styled Libya National Army (LNA) is also ostensibly aligned with his personality as opposed to the HoR, to which Haftar loosely belongs. As such, the GNA and HoR’s “surrender” to Dbeibeh does not necessarily guarantee the fidelity of its militant backers. Furthermore, any move that poses an existential threat to such groups – such as a proposed disarmament, demobilisation and reintegration (DDR) campaign – could prompt a backlash, especially in the absence of the threat of coercion, or incentives from the GNU. To circumvent this, international allies will need to add concrete pressure on militant actors (and their leaders) to participate in the DDR and avoid disruptive tendencies, especially close to the December elections.



Economic growth is possible in Libya in the coming year.&nbsp;<a href="https://www.thesignalroom.com/libya-a-crude-conundrum/">Relatively sustained oil production</a> during late 2020 has significantly boosted a Libyan economy that was severely impacted by a lengthy force majeure and coronavirus-induced shocks in 2020. Indeed, the halt to oil production resulted in financial losses of more than USD 9 billion in 2020. This, along with demand and supply pressures linked to the coronavirus pandemic, led to a 58.7 percent GDP contraction according to the International Monetary Fund (IMF). In a marked change in fortunes, the IMF has forecast growth of 76 percent in the current year, principally led by the commodity market rally, although this is in the context of a markedly low growth base. Nonetheless, growth should stabilise Libya’s deficit and debt metrics. Furthermore, should the transitional process proceed as planned, the country could benefit from expanded development assistance from external partners. However, any flare-up in conflict could see the force majeure reinstated, production halted, and the possibility of comprehensive donor assistance reduced.

Signal Risk on Libya – One and United

<figure class="wp-block-image is-resized"><img loading="lazy" decoding="async" src="https://image.cnbcfm.com/api/v1/image/106859216-16166717552021-03-25t104834z_257028962_rc2aim9q3js9_rtrmadp_0_egypt-suezcanal-ship.jpeg?v=1616671847&amp;w=678&amp;h=381" alt="Stranded container ship Ever Given, one of the world's largest container ships, is seen after it ran aground, in Suez Canal, Egypt March 25, 2021." width="831" height="467"/></figure>



The stranded mega-container vessel, Ever Given in the Suez Canal, is holding up an estimated $400 million an hour in trade, based on the approximate value of goods that are moved through the Suez every day, according to shipping data and news company Lloyd’s List.



Lloyd’s values the canal’s westbound traffic at roughly $5.1 billion a day, and eastbound traffic at around $4.5 billion a day. The blockage is further stressing an already strained supply chain, said Jon Gold, vice president of supply chain and customs policy for the National Retail Federation.



“Every day that the vessel remains wedged across the canal adds delays to normal cargo flows,” he said, adding that the trade group’s members are actively working with carriers to monitor the situation and determine the best mitigation strategies. “Many companies continue to struggle with supply chain congestion and delays stemming from the pandemic. There is no doubt the delays will ripple through the supply chain and cause additional challenges.”



The Suez Canal, which separates Africa from Asia, is one of the busiest trade routes in the world, with approximately 12% of total global trade moving through it. Energy exports like liquified natural gas, Crude oil, and refined oil make up 5% to 10% of global shipments. The rest of the traffic is largely consumer products ranging from fire pits to clothing, furniture, manufacturing, auto parts and exercise equipment.



“The key to this problem hinges on how much longer it will take to move the Ever Given,” explained Alan Baer, President of logistics provider, OL USA LLC. “USA importers face arrival delays of three days right now and this will continue to grow as long as the disruption continues.”



<h2 class="wp-block-heading" id="h-horn-of-africa">Horn of Africa</h2>



The Suez has provided some relief for global importers as they increasingly relied on it last year to avoid massive congestion at West Coast ports in the U.S. that added days, if not weeks, to some deliveries coming from Asia.



Baer, who has containers on vessels stuck in both lanes of the Suez Canal, said if it stays closed, vessels will be diverted and go around the horn of Africa, which adds an additional seven to nine days to a trip.



According to BIMCO, the largest of the international shipping associations representing shipowners, the bottleneck will only continue to grow and impact supplies.



“Everyone is making contingency plans as we speak,” said Peter Sand, chief shipping analyst at BIMCO.



<figure class="wp-block-image"><img decoding="async" src="https://image.cnbcfm.com/api/v1/image/106859381-1616683535914-Ships_waiting_to_transit_the_Suez_canal.png?v=1616683601&amp;w=678&amp;h=381" alt=""/><figcaption>BIMCO</figcaption></figure>







“Carriers run a third of their Asia trade strings to the U.S. East Coast via the Suez and two-thirds via Panama Canal,” said Baer. “Disruption is also hitting the import trade from India as well as the Middle East.”



<h2 class="wp-block-heading" id="h-clearing-the-backlog">Clearing the backlog</h2>



According to the World Shipping Council, the Suez canal’s daily vessel throughput capacity is 106. If the canal is closed for two days, it will then take two additional days after re-opening to clear the backlog.&nbsp; The longer the delay, the longer it will take to move out the vessels.



Lars Jensen, CEO of Sea Intelligence Consulting, tells CNBC the schedule reliability for container vessels is already in disarray as a result of the pandemic.



“Right now two out of three container vessels arrive late,” he explained. “And when they are late, they are on average five days late,” he said, adding that a two-day delay isn’t a major problem. “However, the longer this drags out, the worse it gets because you are then talking about effectively removing vessel capacity as well as containers at a point in time where they are already in short supply.”



Stranded container ship Ever Given, one of the world’s largest container ships, is seen after it ran aground, in Suez Canal, Egypt March 25, 2021.Suez Canal Authority | Reuters



<h2 class="wp-block-heading" id="h-inventory-impact">Inventory impact</h2>



In addition to delaying thousands of containers loaded with consumer items, the stranded ship has also tied up empty containers, which are key for Chinese exports.



“Containers are already scarce in China and the backup in the Suez will further stress the inventory,” explained Jon Monroe, maritime trade and logistics consultant with Jon Monroe Consulting. “We are back to a pre-Chinese New Year environment where factories are running at full steam and are struggling to find containers as well as space for their finished goods.”



This delay will impact the arrival of U.S. imports that fill store shelves as well as U.S. manufacturing components.



“Before the Suez Canal disruption, we were expecting the container situation to get worse in April because we were already seeing the scarcity of containers,” said Monroe. “This canal closure will not help. You will start to see product piling up on factory floors.”



<h2 class="wp-block-heading" id="h-consumer-demand">Consumer demand</h2>



Chinese manufacturers are responding to the tremendous global orders for their goods. Pandemic lockdowns have fueled consumer demand over the last year. As a result, a continuous historic flow of vessels holding millions of containers is clogging ports and slowing down processing. The delays have been costly.



<a href="https://www.cnbc.com/quotes/NKE" target="_blank" rel="noreferrer noopener">Nike</a>&nbsp;along with retailers<a href="https://www.cnbc.com/quotes/CROX" target="_blank" rel="noreferrer noopener">&nbsp;Crocs,</a>&nbsp;<a href="https://www.cnbc.com/quotes/GPS" target="_blank" rel="noreferrer noopener">Gap</a>,&nbsp;<a href="https://www.cnbc.com/quotes/PTON" target="_blank" rel="noreferrer noopener">Peloton</a>,&nbsp;<a href="https://www.cnbc.com/quotes/FL" target="_blank" rel="noreferrer noopener">Footlocker</a>,&nbsp;<a href="https://www.cnbc.com/quotes/FIVE" target="_blank" rel="noreferrer noopener">Five Below,</a>&nbsp;<a href="https://www.cnbc.com/quotes/WSM" target="_blank" rel="noreferrer noopener">William Sonoma</a>,&nbsp;<a href="https://www.cnbc.com/quotes/SHOO" target="_blank" rel="noreferrer noopener">Steve Madden</a>,&nbsp;<a href="https://www.cnbc.com/quotes/WHR" target="_blank" rel="noreferrer noopener">Whirlpool</a>,&nbsp;<a href="https://www.cnbc.com/quotes/URBN" target="_blank" rel="noreferrer noopener">Urban Outfitters</a>, and&nbsp;<a href="https://www.cnbc.com/quotes/TSLA" target="_blank" rel="noreferrer noopener">Tesla</a>&nbsp;all cited supply chain problems impacting their business this quarter.



Brian Bourke, Chief Growth Officer of SEKO Logistics tells CNBC, the blockage is creating the perfect storm for retailers who are struggling to restock.



“The timing of this could not be worse,” he said. “You have stimulus checks going into the hands of consumers. After every stimulus check, we have seen a huge surge in product volume. We are talking to businesses that are running out of inventory. How can you have a stimulus if you can’t buy anything? Your wait for your couch can be longer than three months.”

106859216-16166717552021-03-25t104834z_257028962_rc2aim9q3js9_rtrmadp_0_egypt-suezcanal-ship

Suez Canal blockage is delaying an estimated $400 million an hour in goods

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/106841346-1613561356311-GettyImages-1051776834.jpg" alt="Chinese President Xi Jinping, third from left, meets with Angolan president Joao Lourenco, third from right, at the Great Hall of the People in Beijing, China on Tuesday October 9, 2018 Daisuke Suzuki/Getty Images" class="wp-image-397631" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/106841346-1613561356311-GettyImages-1051776834.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/106841346-1613561356311-GettyImages-1051776834-300x169.jpg 300w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Chinese President Xi Jinping, third from left, meets with Angolan president Joao Lourenco, third from right, at the Great Hall of the People in Beijing, China on Tuesday October 9, 2018
Daisuke Suzuki/Getty Images
</figcaption></figure>



After Zambia became the first coronavirus-era debt default on the African continent, analysts are questioning whether nations heavily dependent on Chinese loan financing would be susceptible to debt distress.



The Covid-19 pandemic has posed difficulties for a host of sub-Saharan African countries that have borrowed substantially from China in recent years to fund major infrastructure projects, compounding pressures from a slowdown in the continent’s economic growth and falling commodity prices.



<a href="https://www.cnbc.com/2020/11/23/zambia-becomes-africas-first-coronavirus-era-default-what-happens-now.html">Zambia became the first country on the continent to formally default</a>&nbsp;on its debt in November 2020, opting out of a $42.5 million eurobond repayment.



As Africa’s second-largest copper producer, falling copper prices in recent years rendered its $11 billion debt pile increasingly difficult to manage, but concerns also emerged from eurobond investors regarding the transparency of its Chinese loan payments.



<h3 class="wp-block-heading">What we learned from Zambia</h3>



“The popularity of Chinese creditors has created a more diverse creditor base than the historical primarily Paris Club bilateral lenders, which complicates the resolution of repayment conflicts,” Verisk Maplecroft Research Associate Aleix Montana said in a recent report.



Montana said the Zambia case indicates that beyond just the size of debt, the composition of creditors also plays a role in determining debt risk. Transparency concerns mean Western bondholders are more likely to reject potential debt relief packages in countries borrowing from China, due to fears that debt relief will be used to repay Chinese loans.



Resource-backed loans are often attractive to nations with rich natural resources, a need to finance infrastructure projects and limited access to capital markets. In some of China’s financing arrangements, commodities are used as a means of repayment or collateral, Montana highlighted. Loans are often predicated on future production of resources like cocoa, tobacco, oil or copper.



<figure class="wp-block-image"><img decoding="async" src="https://image.cnbcfm.com/api/v1/image/106761029-1603698640037-GettyImages-1228100704_1.jpg?v=1603698753&amp;w=678&amp;h=381" alt="A man wearing a face mask selects clothes at a market in Lusaka, capital of Zambia, on Aug. 18, 2020. Zambia's confirmed COVID-19 cases have continued rising, with the total number close to the 10,000 mark."/><figcaption>A man wearing a face mask selects clothes at a market in Lusaka, capital of Zambia, on Aug. 18, 2020. Zambia’s confirmed COVID-19 cases have continued rising, with the total number close to the 10,000 mark.Xinhua/Martin Mbangweta via Getty Images</figcaption></figure>







“Repayment deals based on the future value rather than on the quantity of a commodity are especially risky for the borrower, since a decrease in commodity prices in the global market would require an artificial increase in its production to cover the debt obligations,” Montana said.



Zambia has now applied for debt treatment under the G-20 (Group of Twenty) common framework, which aims to offer poorer nations a transparent level playing field through which to restructure or reduce unsustainable debt obligations.



“Zambia is committed to transparency and equal treatment of all creditors in the restructuring process, and our application to benefit from the G20 Common Framework will hopefully reassure all creditors of our commitment to such treatment,” Finance Minister Bwalya Ng’andu said in a recent statement.



<h3 class="wp-block-heading">Oil producers and ‘resource-backed’ loans</h3>



Montana expressed concern about high debt levels in oil exporting countries such as Angola and the Republic of Congo, both of which saw their national currencies devalued in recent years by the broad decline in oil prices.



This makes foreign currency-denominated repayments relatively more expensive, while the use of reserve-based lending also exacerbates the countries’ risk of debt distress, Montana suggested.



The UN Economic Commission for Africa (UNECA) has also highlighted both Angola and the Republic of Congo as being particularly at risk.



“Apart from being two of the countries with the highest risk in public debt and economic growth in our indices, they are two of the countries that have borrowed more heavily from China,” Montana said.



The combination of the external economic downturn, persistent high debt levels and substantial proportion of resource-backed loans render Angola uniquely vulnerable, he contended.



“The case of Angola is particularly concerning, since it is estimated that around 75% of the total Chinese debt is funded this way, often secured by oil exports,” he said.



“Angola is the country with the highest amount of Chinese loans, spread across 100 projects to finance oil and power state-owned enterprises.”



Montana suggested that companies and investors in Angola can expect credit ratings to further deteriorate, suggesting a sufficient oil price recovery may not come soon enough for the country to meet its debt restructuring obligations in 2021.



<figure class="wp-block-image"><img decoding="async" src="https://image.cnbcfm.com/api/v1/image/106841351-1613561648948-GettyImages-1068696374.jpg?v=1613561790&amp;w=678&amp;h=381" alt="LUANDA, Angola - After the end of Angola's bloody civil war in 2002, the country enjoyed a decade of rapid growth fuelled by its booming oil sector. But in 2014, a global slump in the price of crude, which accounts for 70 percent of government revenues, and the failure of the authorities to diversify the economy, plunged Angola into a serious financial crisis."/><figcaption>LUANDA, Angola &#8211; After the end of Angola’s bloody civil war in 2002, the country enjoyed a decade of rapid growth fuelled by its booming oil sector. But in 2014, a global slump in the price of crude, which accounts for 70 percent of government revenues, and the failure of the authorities to diversify the economy, plunged Angola into a serious financial crisis.RODGER BOSCH/AFP via Getty Images</figcaption></figure>







Other highly-indebted countries such as Ghana and Mauritania are less exposed to Chinese debt, Montana pointed out, while Ethiopia, Cameroon, Kenya and Uganda have borrowed more heavily from China but are at a lower risk of default.



However, Pangea-Risk CEO Robert Besseling told CNBC that some of the steps taken by Angola since the onset of the pandemic should ease concerns about debt distress.



Angola has joined the G-20 DSSI (Debt Service Suspension Initiative), granting a temporary suspension of repayments to bilateral creditors in the wake of the pandemic. It has also restructured a sizable amount of Chinese debt and remains “in the IMF’s good books, at least for now,” Besseling said.



Angolan Finance Minister Vera Daves de Sousa told a Reuters conference in January that Africa’s second-largest oil producer will look to take advantage of the “three years of breathing space” granted by the debt relief program from its $20 billion-plus in Chinese loan obligations. CNBC has contacted the government of Angola for comment.



“I would rate Angola as being exposed to a long-term threat of economic decline due to an over-reliance on its faltering oil sector, but at mitigated risk of sovereign default in the medium term due to the government’s debt relief and loan restructuring, alongside continued multilateral support.”

Chinese President Xi Jinping, third from left, meets with Angolan president Joao Lourenco, third from right, at the Great Hall of the People in Beijing, China on Tuesday October 9, 2018 Daisuke Suzuki/Getty Images

106841346-1613561356311-GettyImages-1051776834

Africa’s reliance on Chinese loans has experts concerned about more debt defaults

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-820x547.jpg" alt="" class="wp-image-395533" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/01/GettyImages-1036436870-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>The logo of the South African Reserve Bank (SARB) sits on a document during a news conference following a Monetary Policy Committee meeting in Pretoria, South Africa, on Thursday, Sept. 20, 2018. The South African economy entered its first recession since 2009 in the second quarter. Photographer: Waldo Swiegers/Bloomberg via Getty Images</figcaption></figure>



The South African Reserve Bank (SARB) kept its benchmark rate unchanged arguing the risks to its inflation outlook remained balanced.



The repo rate remained at 3.5 percent after the bank last year slashed it by 300 basis points to shield the economy from coronavirus imposed lockdowns that shackled economic activity at home and abroad pushed inflation to the lowest in 16 years.



Economists unpack Kganyago’s rate decision &amp; economic outlook for 2021





“Monetary policy eased financial conditions and improved the resilience of households and firms to the economic implications of Covid-19, and continues to be accommodative,” Governor Lesetja Kganyago told a press briefing after a meeting of the bank’s Monetary Policy Committee.



He added that the Bank has also taken important steps to ensure adequate liquidity in domestic markets and that regulatory capital relief has also been provided, sustaining lending by financial institutions to households and firms.



South Africa’s economy is forecast to have contracted by about 8 percent last year after the lockdowns, power shortages and subdued demand for South African exports due to lower global demand.



The majority of economists surveyed by Reuters had forecast a no change stance though some argued the bank could have been more proactive by cutting rates again to stimulate an economy struggling with record unemployment around 40 percent.



First National Bank Chief Economist Mamello Matikinca-Ngwenya said the bank could have taken advantage of lower inflation to cut and stimulate demand amid a tame inflation outlook.



“While the SARB may have decided to keep the repo rate unchanged at 3.5%, we believe there is room for further easing. The current economic shock has kept demand in the economy very low, and as a result, inflation has remained firmly anchored below the midpoint of the target band.”



&nbsp;“High-frequency data shows that while the economy continued to expand into 4Q20, the recovery trend was losing steam. Importantly, these trends emerged before the implementation of level 3 lockdown restrictions in December,” she said.



However Kganyago said monetary policy needs the support of fiscal policy, in particular around the implementation of structural reforms that have been long promised.



“Such steps will enhance the effectiveness of monetary policy and its transmission to the broader economy,” he said.

South African Reserve Bank Rate Announcement Ahead Of Stimulus Plan

South African central bank holds key rate on low inflation

The global economy faces profound uncertainties, particularly in the face of the&nbsp;<a href="https://theconversation.com/africa/covid-19">COVID-19</a>&nbsp;pandemic. In addition, faith in the efficacy of international bodies such as the&nbsp;<a href="https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm">World Trade Organisation</a>&nbsp;(WTO) has been weakened by a power struggle between China and the US.



As the process for appointing a new head of the organisation moves into its final phase, it’s worth considering what front runner Ngozi Okonjo-Iweala could bring to the complex role of managing an international organisation, including designing and implementing reforms.



The WTO&nbsp;<a href="https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm">describes itself</a>&nbsp;as a forum for governments to negotiate trade agreements. A key objective of the WTO is the liberalisation of trade for the mutual benefit of its members. This concept has become a divisive issue as a result of the perceived imbalances in the rights and obligations of members and the perceived uneven distribution of the gains from trade.



Okonjo-Iweala would be in a position to use her multifaceted experiences to energise the WTO’s 164 members to work harder to achieve the value of the multilateral trade systems. Given her experience in being able to diplomatically manage people and institutions resistant to change, she could also provide the impetus for member countries to overcome the challenges that have paralysed the trade organisation for years.



Okonjo-Iweala has gained acute negotiation skills from her experiences in negotiating with institutions and countries, as she did when she negotiated for Nigeria’s debts relief.



In addition, Okonjo-Iweala has held top positions in several international bodies, including corporates as well as not for profit organisations. Her ability to serve in senior positions in these disparate cultural settings means that she will be able to navigate the complex terrain of an organisation that has a mandate to serve the interests of 164 member states.



Her international exposure also means that she has developed an extensive network across the globe which she is bound to call on in the WTO job.



In addition, Okonjo-Iweala has a proven track record in carrying out successful reforms both at the World Bank and as the&nbsp;<a href="https://mitpress.mit.edu/books/reforming-unreformable">finance minister in Nigeria</a>. Carrying out these reforms would have required negotiating with various constituencies.



<h2 class="wp-block-heading" id="h-the-early-days">The early days</h2>



Ngozi Okonjo-Iweala was born to a royal family of Chukwuka and Kamene Okonjo on 13 June 1954, in Delta State, Nigeria. Her parents were both professors at the University of Ibadan. She completed secondary school at the International School Ibadan and St. Anne’s School, Molete, Ibadan. The young Ngozi Okonjo-Iweala proceeded to Harvard University. She graduated in 1977 with honours in economics. She went on to complete a PhD in regional economics and development at Massachusetts Institute of Technology.



Okonjo-Iweala’s professional life points to decades in the thick of economic policy – global as well as local.



She worked for many years at the World Bank where she started as an intern. After gaining her PhD she returned to the bank to work as a development economist. She was to spend 25 years at the institution, rising to the position of vice president.



Okonjo-Iweala spearheaded several World Bank initiatives to assist low income countries during the&nbsp;<a href="https://openknowledge.worldbank.org/handle/10986/16505?locale-attribute=en">2008-2009 food and financial crises</a>. For example, as managing director of the World Bank from 2007 to 2011, she had oversight responsibility for the World Bank’s $81 billion operational portfolio in Africa, South Asia, Europe and Central Asia.



In 2010, she was chair of the World Bank’s successful drive to raise $49.3 billion in grants and low interest credit for the poorest countries in the world.



<a href="https://www.theguardian.com/business/2012/apr/16/world-bank-president-jim-kim">In 2012</a>&nbsp;she became the first female and black candidate to contest for the presidency of World Bank Group. She lost to Jim Yong Kim, the president of Dartmouth College.



Having worked for about 25 years in the World Bank, negotiating and pushing for progressive agreement and development, Okonjo-Iweala has developed keenly honed negotiation skills.



In addition, she is an outsider to the WTO who offers the comprehensive skills and experience needed to shake up the organisation and bring progress to world trade. Her African origin places her on political neutral ground, enabling her, among other things, to objectively mediate issues between China and US.



These skills and traits also mean that she’s in a strong position to build a trade institution where there is greater trust among its members.



<h2 class="wp-block-heading" id="h-her-service-to-nigeria">Her service to Nigeria</h2>



In 2003, she was appointed Nigeria’s minister of finance by the then President Olusegun Obasanjo. She became the first female finance minister and had several reforms to her credit.



As minister of finance in Nigeria, she spearheaded negotiations with the Paris Club of Creditors&nbsp;<a href="https://www.cgdev.org/topics/nigerian-debt-relief#:%7E:text=In%20October%202005%2C%20Nigeria%20and,of%20any%20Paris%20Club%20debt.">that led to the wiping out of $30 billion of Nigeria’s debt</a>, including the outright cancellation of $18 billion.



She had several battles with powerful political interests in Nigeria. She slashed the number of agencies in the country. She drastically cut fuel subsidies in a subsidy scheme that was enmeshed in a&nbsp;<a href="https://www.theguardian.com/world/2012/apr/19/nigeria-fuel-subsidy-scheme-corruption">difficult web of corruption</a>&nbsp;that made the country lose $6.8bn over a three-year period.



Okonjo-Iweala introduced practical economic reforms which changed the worldview of Nigeria as seemingly hopeless and comatose. She turned around the largest economy in Africa.



Nigeria, for the first time in history, had electronic financial management reforms. She also introduced macroeconomic reforms and many policy strategies like a medium term expenditure framework and medium term budgeting.



For a brief period in 2006, Okonjo-Iweala served as Nigeria’s first female minister of foreign affairs. After resigning from government she set up a research organisation, NOI Polls.



In 2011 she was reappointed as minister of finance and coordinating minister of the economy by the then President of Nigeria, Goodluck Jonathan. She served in the position until 2015. In that time, Nigeria’s economic growth rate remained at an average of 6% per annum.



Under her leadership, Nigeria’s Bureau of Statistics&nbsp;<a href="https://www.bloomberg.com/news/articles/2014-04-06/nigerian-economy-overtakes-south-africa-s-on-rebased-gdp">rebased the gross domestic product</a>for the time first in 24 years. This saw Nigeria emerge as the largest economy in Africa. She took a lot of heat for the government’s decision to remove the fuel subsidy. Protests ensued and the policy was reversed.



I have no doubt in my mind that Okonjo-Iweala would be an exemplary leader of the global trade organisation because she would balance policies between the advanced economies and developing ones to achieve sustainable global economic growth and development.

Okonjo-Iweala

Ngozi Okonjo-Iweala: how global and local experience would play out in WTO top job

WASHINGTON (Reuters) &#8211; Countries and institutions must do more to help African states weather the global pandemic and its economic impact, the International Monetary Fund said on Friday, noting the region faced a projected financing gap of $345 billion through 2023.



IMF Managing Director Kristalina Georgieva told a conference that African states had spent an additional 2.5% of gross domestic product on average to help their populations, and institutions like the IMF had also stepped up, but more aid was needed. Private lending also remained subdued, she said.



“The pandemic will not be over anywhere until it is over everywhere,” Georgieva said. “All of us, countries and institutions, must do more to support Africa to cope with the next phase of this crisis.”







Despite sizeable domestic adjustments, African states still need $1.2 trillion in financing through 2023, she said, adding that some heavily indebted countries were being forced to choose between debt service and additional health and social spending.



Current commitments from international lenders and official bilateral creditors would cover less than a quarter of the projected needs, and private lending remained limited, leaving the projected $345 billion funding gap, she said.



The pandemic, coupled with a collapse in commodity prices and a plague of locusts, have hit African economies particularly hard, putting 43 million more people at risk of extreme poverty, according to World Bank estimates. African countries have reported more than 1 million coronavirus cases and some 23,000 deaths.







The IMF is calling on members to make new pledges so the fund can increase its concessional lending capacity, and to loan their Special Drawing Rights &#8211; the IMF’s currency &#8211; to poorer countries.



It also backs an extension of the Group of 20’s moratorium in official bilateral debt payments beyond the end of 2020, and steps to strengthen the architecture for debt restructuring.

IMF_logo

IMF chief sees $345 billion financing gap for African states

Abidjan, Côte d’Ivoire, 8 October 2020 – The African Development Bank hosted an online seminar 7 October as part of the fourth annual Global Infrastructure Forum, drawing together representatives of government, the private sector and multilateral development institutions to discuss strengthening infrastructure development in the COVID-19 pandemic era. The Bank’s workshop, titled Infrastructure Project Preparation: Ensuring Sustainability and Resilience Post COVID-19, took the form of a panel discussion on the critical roles that government, multilateral lenders and the private sector can play in building much-needed infrastructure in an economic climate made more challenging by the ongoing pandemic. The COVID-19 pandemic has sharpened Africa’s already urgent need for added infrastructure spending. The African Development Bank estimates Africa’s infrastructure financing needs at up to $170 billion a year by 2025, with an estimated financing gap of as much as $108 billion a year. The webinar panel comprised Lamine Lo, Director, Financing and PPPs in the Ministry of Economic Planning and Cooperation, Senegal; Solomon Quaynor, Bank Vice President, Private Sector, Infrastructure &amp; Industrialization; Jerome Haegeli, Group Chief Economist and Managing Director, Swiss Re, and Dr. Srinivas Sampath, Chief of the PPP Thematic Group, Asian Development Bank. Quaynor noted that African countries typically lack the fiscal space of wealthier ones to cushion the pandemic’s impacts. He also noted that the pandemic posed a challenge also for institutions like the African Development Bank. “We’re going to have to innovate, come up with better project preparation approaches, we’re going to have to design risk mitigation instruments because a lot of private sector would not be willing to take the risk of government obligations without a counter-guarantee.” The follow-up question and answer session led to a wide-ranging discussion that offered the panelists an opportunity to showcase some of the innovations that are being rolled out and share their projections. Topics included climate change, infrastructure recycling and leveraging pension funds and sovereign wealth funds to develop infrastructure. In response to a question about government’s role in creating an enabling environment, Lamine Lo laid out Senegal’s priorities post COVID-19, listing the health sector, agriculture, education and pharmaceutical sector. “Why these sectors? It is driven by lessons learned from COVID-19 but it is also driven by the need to build an economy which is sustainable.” Underscoring the longer-term nature of climate change impacts, Haegeli observed that “COVID-19 is a human tragedy, it’s the deepest recession of our lifetimes, but it has an expiry date, climate change and biodiversity don’t, that’s why I think there’s even more upside to act.” There was consensus among the panelists that MDIs, including the African Development Bank and Asian Development Bank, have a critical role to play in preparing projects for investment, tapping new sources of financing and supporting the recycling of assets. “There is enough project preparation support available in the multilateral community. There is ADB’s project preparation facility, EBRD’s facility, the World Bank, GIF, and clients should use them,” said ADB’s Sampath. In their closing remarks, panelists blended realism with optimism while reaffirming the need for change and collaboration. “We need to refuel the global economy’s tank. While we refuel, let’s exchange the engine, let’s put in new batteries. And that’s why we need sustainable infrastructure. That’s at the core of the global recovery,” Haegeli said.



“There are many building blocks we can put in place, both in terms of managing the crisis, as well as medium to long-term infrastructure, quality preparation of infrastructure projects, and making sure they are structured and attractive for the private sector to come in and invest because this is not something MDBs and the government alone can do,” said Sampath. “Never waste a crisis, advised VP Quaynor. “One of the potential positive impacts of this crisis is it’s pushing all of us to really focus priorities. And also make sure that we build quality infrastructure that maximizes the positive impacts to the economy and we also build it to withstand natural disasters, pandemics and epidemics going forward.” The Global Infrastructure Forum 2020, themed Building a resilient future post COVID-19, runs from 6-8 October across multiple time zones.

AFDB_Logo

COVID-19 crisis is pushing us to refocus priorities, says Bank Vice President Quaynor in Global Infrastructure Forum event on infrastructure project preparation

GENEVA (Reuters) &#8211; Former Nigerian finance minister Ngozi Okonjo-Iweala and South Korean trade minister Yoo Myung-hee are the final candidates to head the World Trade Organization, ensuring the watchdog will have the first female leader in its 25-year history.



The WTO said on Thursday the two women were the remaining candidates for director-general after the field was cut from five to two, confirming what Reuters reported on Wednesday.



The winner will replace Brazilian Roberto Azevedo, who stepped down a year earlier than expected at the end of August.



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The WTO, under fire by the U.S. President Donald Trump’s administration which froze its appeals body by blocking its appointment of judges, aims to find a successor for Azevedo by early November. It is also trying to navigate worsening U.S.-China trade relations.



“Both of the women that are in the final round are remarkably well-qualified. This is something on which everyone has agreed,” WTO spokesman Keith Rockwell told reporters, making the announcement at its Geneva headquarters.



RELATED COVERAGE<a href="https://www.reuters.com/article/us-trade-wto-explainer/explainer-how-the-next-wto-chief-will-be-chosen-and-the-task-ahead-idUSKBN26T1YK"></a><a href="https://www.reuters.com/article/us-trade-wto-explainer/explainer-how-the-next-wto-chief-will-be-chosen-and-the-task-ahead-idUSKBN26T1YK">Explainer: How the next WTO chief will be chosen and the task ahead</a>



Okonjo-Iweala, 66, a former Nigerian finance and foreign minister, is an economist and development specialist now serving as board chair of global vaccine alliance Gavi. She has said the WTO should play a role in helping poorer countries access COVID-19 drugs and vaccines.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://www.cnbcafrica.com/wp-content/uploads/2020/08/hqdefault-11.jpg" alt="" class="wp-image-377986" width="689" height="527"/><figcaption>Nigeria’s Okonjo-Iweala shares her vision for global trade</figcaption></figure>



Yoo, 53, South Korea’s trade minister, is pitching herself as a seasoned operator on trade in increasingly protectionist times after clinching deals with the United States, China and others, while supporting global trading rules.







Kenyan sports minister Amina Mohamed, Saudi royal court adviser Mohammad Al-Tuwaijri and British ex-international trade minister Liam Fox dropped out of the race after failing to garner sufficient backing from the WTO’s 164 members.



The WTO will hold a third and final selection round on Oct. 19-27, with a view to having a director-general in place by early November, when the U.S. presidential election also takes place.



“I don’t think the domestic political situation of any country has really entered into this at all, as far as I can tell,” Rockwell said when asked if the U.S. vote had had an impact.



The winning candidate will face formidable challenges with rising global tensions and protectionism during a COVID-induced slowdown, as well as pressure to drive reforms.



WTO negotiations on cutting subsidies on fishing are due to conclude in December, Rockwell said, adding: “It’s clear that whichever woman assumes this job will have a very full plate from day one.”

Nigerian, South Korean women to vie for WTO leadership

(Reuters) &#8211; Tesla Inc&nbsp;<a href="https://www.reuters.com/companies/TSLA.O">TSLA.O</a>&nbsp;has a chance at producing 500,000 cars this year, Chief Executive Officer Elon Musk told employees, according to an internal email seen by Reuters.



The company’s shares were up 2.5% at $425.67.



Tesla said in January that 2020 vehicle deliveries should comfortably exceed 500,000 units, a forecast the company has left unchanged despite the COVID-19 pandemic.



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://www.cnbcafrica.com/wp-content/uploads/2020/02/hqdefault-306.jpg" alt="" class="wp-image-361004" width="683" height="521"/><figcaption>How Elon Musk Took Tesla To Hell And Back With The Model 3</figcaption></figure>



“This all comes down to Q4. Please take whatever steps you can think of to improve output (while increasing quality)”, Musk wrote to employees on Wednesday.



Industry blog Tesmanian first reported on the news earlier in the day. (<a href="https://bit.ly/3nvhLHE">bit.ly/3nvhLHE</a>)



Last week, Tesla said it delivered 139,300 vehicles in the third quarter, an all-time record for the electric-car maker. The company will have to increase deliveries to nearly 182,000 in the fourth quarter to reach its ambitious year-end target.







Tesla’s delivery push has been supported by its new Shanghai factory, the only plant currently producing vehicles outside California.



The company began delivering Model 3s from its Shanghai factory in December and has said it aims to produce 150,000 Model 3 sedans in the factory this year.



Reuters could not immediately reach Tesla for comment.

Elon Musk At SpaceX Headquarters

Tesla has a shot at producing 500,000 cars this year, African born Elon Musk says in memo

BENGALURU/JOHANNESBURG (Reuters) &#8211; Volatility in emerging market currencies will not let up in the next six months as U.S. presidential election jitters mount and domestic economic growth tapers off, a Reuters poll of market strategists showed.



Most emerging market currencies were forecast to weaken or at best cling to a range over the next three to six months but will rise about 2% on average in a year, supported by a weaker dollar, the Sept. 28-Oct. 5 poll found.



Reuters surveys since the global shutdown in activity in March have been consistently concluding emerging market currencies will not recoup even half their coronavirus-induced 2020 losses within a year.



Still, a steep dollar selloff, which just posted its worst quarter in three years as expectations for a swift recovery from the COVID-19 recession made investors exit safe havens, has helped currencies in less developed countries rise. That comes despite deep economic troubles from the pandemic.



“EM currencies are running on empty without capital inflows or a resounding macro narrative. The large output gap and lower level of economic activity will have a disproportionately negative impact on currencies,” said Jason Daw, head of emerging markets strategy at Societe Generale.



“EM FX has tended to weaken in the lead up to and for several months after a challenger victory in the contest for the White House. A Democratic sweep, our central scenario, could result in weaker EM currencies.”







A Reuters/Ipsos poll on Sunday found 51% of voters were backing Democrat Joe Biden while 41% said they were voting for President Donald Trump.



<h2 class="wp-block-heading" id="h-event-risk">EVENT RISK</h2>



The Chinese yuan&nbsp;<a href="https://www.reuters.com/quote/CNYUSD">CNY=CFXS</a>, the most actively traded emerging market currency but also tightly managed by its local authorities, was predicted to edge up about 1% to 6.70 per dollar in a year from now.



“We expect CNY to continue to gain ground against a backdrop of broad USD weakness and a favourable external balance. However, in the near term, the upcoming U.S. presidential election on Nov. 3 is a key event risk,” said Irene Cheung, senior strategist at ANZ.



“We however see the risk of volatility in the coming weeks &#8230; Any delay in or contest of the U.S. election result could see a prolonged period of uncertainty.”



All but one of 68 FX strategists who answered an additional question said already-high volatility in emerging market currencies would increase rapidly or remain the same over coming months.







South Africa&#8217;s rand&nbsp;<a href="https://www.reuters.com/quote/ZARUSD">ZAR=D3</a>, which has been on a rollercoaster ride since April, is expected to gain nearly 0.5% to 16.5 per dollar in 12 months. The rand&#8217;s appeal has been enhanced by the lack of alternative high-yielding currencies as growing geopolitical risks diminished the appetite for assets in Turkey and Russia.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://www.cnbcafrica.com/wp-content/uploads/2020/09/103026087-Rand.jpg" alt="Waldo Swiegers | Bloomberg | Getty Images" class="wp-image-381748" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/09/103026087-Rand.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/103026087-Rand-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/103026087-Rand-696x391.jpg 696w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Waldo Swiegers | Bloomberg | Getty Images
</figcaption></figure>



The increase in forward volatility in the rouble&nbsp;<a href="https://www.reuters.com/quote/RUBUSD">RUB=</a>&nbsp;and lira&nbsp;<a href="https://www.reuters.com/quote/TRYUSD">TRY=</a>&nbsp;is more pronounced for key events and dates that occur later in the election process, Barclays wrote in a note to clients.



“The move is consistent with a lower likelihood of a contested and delayed result, but resulting in outsized moves in the rouble and lira as the race, according to prediction markets, has moved in favour of Biden in recent days.”



Turkey&#8217;s lira&nbsp;<a href="https://www.reuters.com/quote/TRYUSD">TRY=</a>&nbsp;slumped to a record low last month and Russia&#8217;s rouble&nbsp;<a href="https://www.reuters.com/quote/RUBUSD">RUB=</a>&nbsp;returned to levels last seen in March on fears the countries would get dragged into military conflict in the South Caucasus.



The lira, which has plunged nearly 30% this year, is set to depreciate 3.2% more to 8.0 per dollar in the next 12 months, the poll showed.



But the Russian rouble, which has lost over 25% of its value against the dollar this year will gain over 9.0% to 71.0 per dollar by this time next year.



“Apprehensions around potential new international sanctions and the uncertainties related to the U.S. elections may keep the rouble on the defensive with higher volatility likely until the end of the year,” said Lee Hardman, currency analyst at MUFG.

101416618-rand

More trouble ahead for erratic emerging market currencies – Reuters poll

LONDON (Reuters) &#8211; World stock markets neared a more than two-week high on Tuesday after U.S. President Donald Trump’s return to the White House from hospital where he was treated for COVID-19, and expectations of a new U.S. stimulus package being agreed rose.



Europe saw a stuttering start with London&#8217;s FTSE&nbsp;<a href="https://www.reuters.com/quote/.FTSE">.FTSE</a>&nbsp;dipping and not much traction from France&nbsp;<a href="https://www.reuters.com/quote/.FCHI">.FCHI</a>, Italy&nbsp;<a href="https://www.reuters.com/quote/.FTMIB">.FTMIB</a>&nbsp;or Germany&nbsp;<a href="https://www.reuters.com/quote/.GDAXI">.GDAXI</a>, despite a &#8220;remarkable&#8221; jump in German industrial orders.



Wall Street and most of Asia rallied overnight after Trump’s return from the Walter Reed Medical Center military hospital outside Washington eased nerves about possible disruption to next month’s Presidential election.



Gold, bonds and the dollar suffered losses amid the modestly improved risk appetite, though Wall Street futures had slipped into the red and oil was losing its strong overnight momentum.



“The market is slightly short of oomph,” said Societe Generale’s Kit Juckes, pointing to Europe’s subdued start.



“It has not managed to get a meaningful lift from it (Trump leaving hospital) and I think it is threatening to take a time out and wait for what comes next,” he added.







<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://www.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-2.jpg" alt="" class="wp-image-352574" width="698" height="518" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-2-80x60.jpg 80w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-2-265x198.jpg 265w, https://cms.cnbcafrica.com/wp-content/uploads/2019/12/gettyimages-642093036-594x594-2-485x360.jpg 485w" sizes="auto, (max-width: 698px) 100vw, 698px" /><figcaption>WASHINGTON, DC &#8211; FEBRUARY 16: U.S. President Donald Trump stands during a news conference announcing Alexander Acosta as the new Labor Secretary nominee in the East Room at the White House on February 16, 2017 in Washington, DC. The announcement comes a day after Andrew Puzder withdrew his nomination. (Photo by Mario Tama/Getty Images)</figcaption></figure>



Trump returned to the White House on Monday after a three-night hospital stay and said he felt “real good”, although one of his doctors cautioned that he may not be out of the woods until later in the week.



MSCI&#8217;s broadest index of Asia-Pacific shares&nbsp;<a href="https://www.reuters.com/quote/.MIAP00000PUS">.MIAP00000PUS</a>&nbsp;had risen 0.7% to a two and a half week-high, with Hong Kong&nbsp;<a href="https://www.reuters.com/quote/.HSI">.HSI</a>&nbsp;climbing 0.8% and Japan&#8217;s Nikkei&nbsp;<a href="https://www.reuters.com/quote/.N225">.N225</a>&nbsp;adding 0.5%. China&#8217;s markets remained closed for a public holiday.



U.S. stimulus hopes were still bubbling in the background after House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone for about an hour and said they were preparing to talk again on Tuesday.



“If we do see some form of stimulus coming through, I think the market will take it in a positive light,” said J.P. Morgan Asset Management’s Chief Asia Market Strategist Tai Hui.



<h2 class="wp-block-heading" id="h-central-focus">CENTRAL FOCUS</h2>



S&amp;P 500 futures were a touch weaker after the best daily gain on the S&amp;P 500 index&nbsp;<a href="https://www.reuters.com/quote/.SPX">.SPX</a>&nbsp;in a month overnight, while the optimism hit gold and other safe haven assets.



Spot gold fell 0.1% to $1,911 per ounce, after hitting a two-week peak on Monday, and U.S. gold futures were down 0.21%.



Bond markets also joined in, as a sharp selloff in U.S. bonds on Monday carried over into Asia and Europe.



Benchmark 10-year German government bond yields, which move inverse to price, hit their highest in over a week. Japanese government bond futures fell to a one-month low in the steepest drop in more than five weeks and South Korean yields jumped.



However, analysts said selling in other Asian markets was more subdued than in the U.S. market because regional investors are beginning to price in a victory for Democratic presidential candidate Joe Biden in the Nov. 3 election.







European Central Bank president Christine Lagarde and U.S. Federal Reserve chief Jerome Powell were also scheduled to speak later in the day, giving traders extra reason for patience.



“The selloff in U.S. yields is more driven by Trump getting out of hospital,” said DBS rates strategist Duncan Tan in Singapore. “That narrows some of the uncertainties around the election process. In the short term, at the very least, it removes the tail risk of having to consider if Trump or Biden is unable to participate in the election.” U.S. 10-year yields were steady at 0.77% while in the currency markets, the dollar was under pressure from most other majors with the exception of the safe-haven Japanese yen.



The dollar gained on the yen to reach 105.62 yen, not far short of its highest levels in three weeks.



The Australian dollar gained briefly after the Reserve Bank of Australia left rates on hold, as expected, but later fell back, and the potential for further monetary easing capped gains.



Oil jumped more than 5% overnight and edged higher still in Asia, supported by the Trump news and a supply squeeze as a strike shut six Norwegian offshore oil and gas fields.



U.S. crude last stood at $39.15 a barrel, up 0.2% and, Brent crude rose 0.1% to $41.35.

wall street

World stocks inch to two-week high after Trump leaves hospital

ABUJA (Reuters) &#8211; The Nigerian unit of oil major Chevron&nbsp;<a href="https://www.reuters.com/companies/CVX.N">CVX.N</a>&nbsp;plans to cut its local workforce by 25% to reduce costs, it said on Saturday, due to weak demand for oil in the wake of the coronavirus pandemic.



The company, which operates a joint venture with Nigeria’s state-owned NNPC, said it needed to make the adjustments to remain competitive in light of the prevailing business climate. It did not say how many jobs would be affected but said the cuts would affect workers across its operations.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="640" height="360" src="https://www.cnbcafrica.com/wp-content/uploads/2020/02/1571595826001_6129464868001_6129473455001-vs.jpg" alt="" class="wp-image-355059" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/02/1571595826001_6129464868001_6129473455001-vs.jpg 640w, https://cms.cnbcafrica.com/wp-content/uploads/2020/02/1571595826001_6129464868001_6129473455001-vs-300x169.jpg 300w" sizes="auto, (max-width: 640px) 100vw, 640px" /><figcaption>Here’s how Coronavirus outbreak impacts oil markets and Nigerian economy</figcaption></figure>



It added in a statement there were no plans to move jobs abroad and it was engaging with its workforce on the plan. Employees will retain their jobs until the reorganisation is completed.



Prices of oil, Nigeria&#8217;s main export, fell sharply early this year and in April global benchmark Brent&nbsp;<a href="https://www.reuters.com/quote/LCOc1">LCOc1</a>&nbsp;hit a 21-year low below $16 as the coronavirus outbreak hit demand, though oil markets have recovered since then.



The International Energy Agency (IEA) trimmed its 2020 oil demand forecast in September, citing caution about the pace of economic recovery from the pandemic.

shutterstock_306272309

Chevron Nigeria plans to cut 25% of staff after oil price drop

Despite being one of the fastest-growing economies on the continent and offering a vast number of investment opportunities, Ghana unfortunately has one big hurdle standing in its way: fiscal finances.



Ghana can boast about its successes, but troubling government finances have been the norm, with fiscal slippages regularly occurring in election years.



The current Covid-19 pandemic is set to compound the problems for the country as government needs to support the economy through a fiscal stimulus injection.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="800" height="600" src="https://www.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862.jpg" alt="" class="wp-image-374206" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862.jpg 800w, https://cms.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862-300x225.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862-768x576.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862-696x522.jpg 696w, https://cms.cnbcafrica.com/wp-content/uploads/2020/06/shutterstock_270259862-600x450.jpg 600w" sizes="auto, (max-width: 800px) 100vw, 800px" /><figcaption>Ghana. Shutterstock </figcaption></figure>



The Ghanaian government’s fiscal account is set for a marked deterioration this year.



The minister of finance, Ken Ofori-Atta, in his revised budget in July said that at that point 19 out of 28 state-owned organisations (SOEs) were projecting losses for this year.



When Mr Ofori-Atta addressed Parliament in March this year, he said that the total fiscal impact of Covid-19 is estimated at GH¢9.5bn (2.5% of GDP).



The overall fiscal deficit, considering the expected shortfall in revenues and extra expenditure, is now projected to rise by GH¢25.3bn (6.6% of GDP) to GH¢44.1bn (11.4% of GDP) in 2020, from a previous projection of GH¢18.9bn (4.7% of GDP).



Recently, the Monetary Policy Committee press release noted that for the first seven months of the year, local authorities recorded an overall budget deficit of 7.4% of GDP, which is wider than the target of 7.2% of GDP.



While revenues have come in slightly over target, it was significantly higher expenditures compared to target that resulted in the wider fiscal deficit.



As a result of the ongoing fiscal battle, S&amp;P Global Ratings (S&amp;P) lowered Ghana’s long-term foreign and local currency sovereign credit ratings to B- in mid-September, while the outlook is stable.



In April, the ratings agency warned that the Covid-19 pandemic is hurting medium-term fiscal consolidation plans.



S&amp;P says that the problems originally envisaged for the country have now materialised.



The slowdown in local economic activity has led to weaker tax revenue, while government spending rose sharply due to Covid-19-related support measures.



This has resulted in a much wider fiscal deficit than initially expected.



The ratings agency now forecasts the fiscal deficit to widen to 13.5% of GDP, which is in line with our own deficit forecast of 13.2% of GDP.



According to S&amp;P, the “scope for a sizeable fiscal adjustment post pandemic is likely to be limited”.



Furthermore, the medium-term targets published by local authorities point towards a much slower fiscal consolidation path.



The Fiscal Responsibility Act, which requires government to maintain the fiscal deficit below 5%, is also suspended for the time being.



According to the S&amp;P’s calculations, government debt will remain above 70% until 2023, while interest payments will likely cover half of fiscal revenue.



Although the fiscal shortfall has been fairly covered this year, it might be more difficult to access finance if the deficit remains at elevated levels next year.



The rating action by S&amp;P followed an announcement by Fitch Ratings in August that “the country’s slow fiscal consolidation may add to rating strains”.



The revised budget tabled by the minister of finance incorporated a much wider fiscal deficit than our initial forecast and, for that matter, the consensus forecast.



As a result, we adjusted our fiscal deficit forecast to 13.2% of GDP.



Our projection for fiscal expenditure has been brought in line with that of the revised budget; however, recent statistics point towards even higher overall expenditures for the year.



Despite revenues rising slightly over the first seven months compared to target, we still expect overall revenues to decline by year-end.



We are much more pessimistic on the government debt component, as we expect the debt-to-GDP ratio to remain above 80% over the medium term.



This is mostly a result of a more pessimistic view on economic growth and subsequently a lower nominal GDP base.



Pieter du Preez &#8211; Senior Economist

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Analysis – why Ghana is no longer the poster child for African economic reform

CHICAGO/WASHINGTON (Reuters) &#8211; American Airlines and United Airlines, two of the largest U.S. carriers, said they were beginning furloughs of over 32,000 workers on Thursday as hopes faded for a last-minute bailout from Washington.



Both airlines told employees, however, in memos seen by Reuters on Wednesday that they stood ready to reverse the furloughs, which affect about 13% of their workforces before the pandemic, if a deal was reached.



Tens of thousands of other employees at those airlines and others including Delta Air Lines and Southwest Airlines have accepted buyouts or leaves of absence aimed at reducing headcount as carriers battle a health crisis that has upended the global travel industry.



U.S. airlines have been pleading for another $25 billion in payroll support to protect jobs for a further six months once the current package, which banned furloughs, expires at midnight EDT.







Earlier, U.S. Treasury Secretary Steven Mnuchin said talks with House of Representatives Speaker Nancy Pelosi had made progress on a bipartisan aid plan, although no deal was reached and Senate Majority Leader Mitch McConnell called a $2.2 trillion coronavirus relief proposal “outlandish.”



In a memo to employees, American Chief Executive Doug Parker said Mnuchin told him that he and Pelosi were continuing to negotiate on a bipartisan COVID-19 relief package that would include an extension of aid for airlines and could reach an agreement in coming days.



“Unfortunately, there is no guarantee that any of these efforts will come to fruition,” Parker said.



RELATED COVERAGE<a href="https://www.reuters.com/article/us-health-coronavirus-american-airline-j/american-airlines-ceo-leaves-door-open-to-delaying-oct-1-furloughs-cnn-idUSKBN26L2P3"></a><a href="https://www.reuters.com/article/us-health-coronavirus-american-airline-j/american-airlines-ceo-leaves-door-open-to-delaying-oct-1-furloughs-cnn-idUSKBN26L2P3">American Airlines CEO leaves door open to delaying Oct 1 furloughs: CNN</a>



American will furlough 19,000 employees, including some 1,600 pilots. More than 13,000 United employees will be on furlough, but not any pilots following an agreement reached this week.



“Tomorrow, tens of thousands of essential aviation workers will wake up without a job or healthcare and tens of thousands more will be without a paycheck,” Association of Flight Attendants-CWA President Sara Nelson said in a statement that urged lawmakers to reach a deal.



Nick Calio, who heads the airline trade group Airlines for America, said earlier that the industry was still pursuing all potential avenues for new assistance as time runs short.







“People keep talking, but we need results,” Calio told Reuters. “We are hopeful but not confident about them reaching a deal on a larger bill.”



U.S. airline shares ended flat on Wednesday.



Weeks of intense airline lobbying has won over many but not all Washington lawmakers, while drawing attention to the plight of other pandemic-hit industries as the crisis persists.Slideshow&nbsp;( 2 images )



U.S. airlines are operating about half their 2019 flying schedules and suffering a 68% decline in passenger volumes.



The impact of the coronavirus on travel may cost as many as 46 million jobs globally, according to projections published on Wednesday by the Air Transport Action Group.



Airlines have argued they need trained employees to help drive an economic recovery as the pandemic subsides. American Airlines’ Parker told CNN he believed one more round of aid would be sufficient.

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Economy

South Africa’s rising cost of funding is concerning, says S&P

South Africa’s Absa PMI expands again in March

Sub-Saharan Africa economies to grow 2.3%-3.4% this year – World Bank

Signal Risk on Libya – One and United

Suez Canal blockage is delaying an estimated $400 million an hour in goods

Africa’s reliance on Chinese loans has experts concerned about more debt defaults

South African central bank holds key rate on low inflation

Ngozi Okonjo-Iweala: how global and local experience would play out in WTO top job

IMF chief sees $345 billion financing gap for African states

COVID-19 crisis is pushing us to refocus priorities, says Bank Vice President Quaynor in Global Infrastructure Forum event on infrastructure project preparation

Nigerian, South Korean women to vie for WTO leadership

Tesla has a shot at producing 500,000 cars this year, African born Elon Musk says in memo

More trouble ahead for erratic emerging market currencies – Reuters poll

World stocks inch to two-week high after Trump leaves hospital

Chevron Nigeria plans to cut 25% of staff after oil price drop

Analysis – why Ghana is no longer the poster child for African economic reform

Top U.S. airlines starting 32,000 furloughs as bailout hopes fade

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