Food markets will face many more months of uncertainty due to COVID-19, but the agriculture food sector is likely to show more resilience to the pandemic crisis than other sectors. The COVID-19 crisis has highlighted the risks of unhealthy diets and the extreme fragility of the global food system.



The Food and Agricultural Organization&#8217;s, Food Price Index (FFPI) averaged 93.2 points in June 2020, some 2.2 points (2.4 percent) higher than in May, representing the first month-on-month increase since the beginning of the year. Amid market uncertainties posed by COVID-19, the prices of vegetable oils, sugar and dairy products rebounded to multi-month highs following sharp declines registered in May, while in cereals and meat markets, most prices remained under downward pressure.



The COVID-19 pandemic should spur us to redefine how we feed humanity. The African countries now has a unique opportunity to adopt long-term measures to promote healthier diets, encourage farmers to produce a wider range of food, and strengthen collaboration among the public-health, food, and agriculture sectors. A new approach in agricultural research can play a vital role in transforming food systems and making them more sustainable and resilient.



The need for change is clear. For starters, unhealthy diets are one of the leading risk factors related to COVID-19 fatalities. The Coronavirus disproportionately affects people who are overweight, diabetic, or suffer from cardiovascular disease – all of which are linked to poor diets. The economic reconstruction that will follow the pandemic is an opportunity to provide better nutrition and health for all.



This Covid-19 crisis has also exposed the extreme fragility of the global food system. Social-distancing and lockdown measures to curb the virus’s spread have significantly reduced people’s incomes and thus global food demand.



GDP From Agriculture in South Africa increased in the first quarter of 2020. South Africa needs to invest in agriculture and agroprocessing to reduce basic imports such as Maize, Wheat and Chicken. Zambia has a huge potential for Maize, wheat and livestock market to feed in the food security challenges. GDP From Agriculture in Zambia increased in the fourth quarter of 2019.



The 2007 Botswana Livestock and Meat Industries Act, to provide for the slaughter of domestic livestock, farmed game, wild game and poultry for human consumption and other livestock products has assisted in boosting the economy and more investment are required to expand the agriculture and agroprocessing industry at Botswana. Agriculture in Namibia contributes around 5.1% of the GDP of which 70 % represents the output of the livestock sub &#8211; sector.



The Food and Agriculture Organization of the United Nations estimates that at least 14.4 million people in the 101 net food-importing countries could become undernourished as a result of the economic crisis triggered by COVID-19. In an extreme scenario – a reduction of ten percentage points in global real GDP growth in 2020 – that total rises to 80.3 million.



In the short term, therefore, governments must not only provide financial support to individuals and firms affected by the pandemic, but also act to prevent a food crisis. Longer-term measures must include promoting healthier eating. Three crops – rice, maize, and wheat – provide more than 50% of the calories that humans gain from plants. People in general, but mainly the poorest, do not consume



enough nutrient-rich food such as fruits, nuts, seeds, and whole grains. And about 11 million people die each year as a result of unhealthy diets.



But the race to produce and deliver cheap calories has caused collateral damage, mainly in terms of nutrition and local development. Because the “calories race” relies on value chains that focus on a few basic products from a limited number of countries, many other countries have become net food importers. The pandemic has highlighted their excessive and fragile dependence on a few producers located thousands of miles away and underscored the need for shorter and more diverse value chains.



Policymakers must also foster regenerative production systems that promote biodiversity and improve soil and water quality, which would contribute significantly to climate-change adaptation.



The pandemic has underscored the urgent need to transform agriculture. And the economic reconstruction that will follow it represents a perfect opportunity to provide better nutrition and health for all. A government led initiative to finance small business farmers and provide water, seeds and training for farmers can reduce domestic food security challenges and reduce tons of agricultural imports.



Miyelani Mkhabela is an Executive Director at Antswisa Transaction Advisory Services.

Belarus tractors for Zimbabwe

COVID-19: Now is the time for Africa to grow food

JOHANNESBURG (Reuters) &#8211; South Africa’s central bank has issued a 3.45 billion rand ($200 million) guarantee to bail out the Corporation for Public Deposits (CPD), a government investment arm hit by surging defaults at state agricultural lender Land Bank.



The issue adds a further strain on state finances as the government props up its main power utility and airline, which were already struggling before the coronavirus crisis, and now faces rising defaults at the agricultural lender.



CPD, which purchased various debt instruments from Land Bank, said overall it suffered a 2.8 billion rand loss in the 2019/20 financial year, necessitating the central bank bailout.



Deputy governor of the Reserve Bank (SARB) and chairwoman of the CPD, Fundi Tshazibana, told Reuters in an interview this week the guarantee was to cover the investment arm’s losses in the 2019/20 period and replenish reserves, which had dwindled to zero.



“We had to provision for what we will not be able to recover from the Land Bank. That was one of the reasons why we (central bank) had to provide the guarantee,” said Tshazibana.



“Because of the Land Bank default, we were running at a loss and we weren’t going to be a going concern&#8230;That would have been of real concern to depositors,” she added.



In April the Land Bank, the country’s largest agricultural-focussed lender, defaulted on 50 billion rand of loans repayments and in June it failed to make interest payments of nearly 120 million rand.



On Friday the Land Bank told Reuters it had not made interest payments of around 320 million rand on debt which was due end June.



The South African Treasury guarantees around 5.7 billion of the Land Bank’s debt and last week granted the firm 3 billion rand of emergency equity funding.

South_African_Reserve_Bank_Pretoria_1989

Land Bank default forces S.Africa’s central bank into $200 mln bailout of state investment arm

As I write this a huge load of farm machinery is lurching across the Indian Ocean in the bowels of a transport ship bringing with it a supreme irony.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="972" height="647" src="https://www.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1.png" alt="" class="wp-image-375515" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1.png 972w, https://cms.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1-300x200.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1-768x511.png 768w, https://cms.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1-696x463.png 696w, https://cms.cnbcafrica.com/wp-content/uploads/2020/07/Belarus-equipment-reaches-Zimbabwe-1-600x399.png 600w" sizes="auto, (max-width: 972px) 100vw, 972px" /><figcaption>Farming equipment from Belarus arrives in Zimbabwe</figcaption></figure>



The shipment is part of a plan by a far off country, on the road to Russia, bent on teaching Zimbabwe – a country that could once teach the world – how to farm. In a $58 million deal six grain harvesters, 100 tractors, 16 seed drills, five fifth wheel trucks, five semi-trailers are on their way from the former Soviet state of Belarus to the ports of Beira in Mozambique and Durban in South Africa. The shipment is expected by the end of July. Fourteen grain harvesters and 36 units of seed drills are already in Harare. Ships will bring another 20 grain harvester, 340 tractors and 138 seed drills to Zimbabwe by December 2020.



The idea is being nurtured by the consul general for Zimbabwe in Belarus Alexander Zingman. He is the head of AFTRADE DMCC and spends much time travelling between Zimbabwe and the country of his birth. The project is being financed through the Development Bank of Belarus supported by The Eastern and Southern African Trade and Development Bank. The export credit facility has been provided on a long-term basis with competitive interest rates.



&#8220;The aim is to totally mechanize agriculture in Zimbabwe using a comprehensive set of machinery &#8211; tractors, planters, harvesters and trucks &#8211; to cultivate and harvest maize and wheat. This will prevent the harvest losses that Zimbabwe normally faces. It will boost Zimbabwe&#8217;s food security and save the country valuable foreign currency. We will train each farmer who uses this modern equipment. More than 1,000 farmers will get special training courses in Zimbabwe. 10 specialists from Zimbabwe will also be sent to Belarus for two months for training at our manufacturing plants, “he says.



Ten trainers from Belarus are also in Harare, with five more on the way, in a year of training of farmers in Zimbabwe that is hoped will kick start a struggling industry that was once the pride of Africa.



The irony is that 30 years ago such a programme would have been looked upon as an agricultural equivalent of teaching your grandmother to suck eggs. In the 1980s and for most of the 90s Zimbabwe was the breadbasket of Africa with a small, efficient, band of mostly white farmers who fed Southern African and exported food to Europe. It couldn’t last amid the lack of a clear plan for organised land reform and growing political pressure. &nbsp;&nbsp;



When the farm invasions were unleashed by the people in power in 2000, it led to bloodshed and random confiscation that reaped a bitter harvest of lost production and exports that persists until this day. That year with all of its fumbling fury fuelled with the idea that to get rich you merely had to own a farm, is always seen as a turning point for the industry. It created a large slice of the country’s GDP and as it fell, so did the fortunes of Zimbabwe.



The World Bank Zimbabwe production figures for maize – that used to feed the region – tell the story. In 1996 Zimbabwe was growing more than 2.5 million mt of maize; by 2016 that figure had dropped to a mere 500,000 mt of maize. A further sign of lean times, according the World Bank, is that the fertilizer industry was at 75% capacity before 2000 and as low as 30% now. In the halcyon days of 1996, many Zimbabweans would have been incredulous at the idea of trainers and combine harvesters making their way half round the world to teach them farming. In difficult times for the Zimbabwe and its economy almost anything is worth a try.

How Zimbabwe farmers will be trained how to farm with a scheme from Belarus with love

JOHANNESBURG (Reuters) &#8211; South Africa’s rand opened stronger on Friday and was on course for gains of roughly 2% against the dollar this week, after the first current account surplus in 17 years and an upbeat U.S. jobs report.



At 0650 GMT, the rand traded at 16.9350 versus the dollar, around 0.3% firmer than its previous close.



Government bonds were flat, with the yield on the 2030 bond at 9.27%.



On Thursday, central bank data showed a 1.3% of gross domestic product (GDP) surplus on the current account, which has long been a sore spot for Africa’s most industrialised economy. That added to optimism from the U.S. economy creating jobs at a record clip in June.



Although the rand has enjoyed a good week, it is still down some 17% against the U.S. currency so far this year, partly a reflection of deep-seated concerns about the health of domestic public finances.



The finance ministry predicts a deficit on its main budget of more than 14% of GDP this fiscal year and an economic contraction of over 7% in 2020. An economic recession that began last year deepened in the first quarter, before the coronavirus crisis really took hold, data showed this week.

KONICA MINOLTA DIGITAL CAMERA

South African rand opens stronger after positive data

Pandemic costs Africa travel, tourism almost $55 billion &#8211; Reuters



DAKAR (Reuters) &#8211; African countries have lost almost $55 billion in travel and tourism revenues in three months due to the coronavirus pandemic, the African Union (AU) commissioner for infrastructure and energy said on Thursday.



Amani Abou-Zeid told a news conference the economic impact of lockdowns and border closures to curb the spread of the virus would be severe, with the continent’s air industry hit particularly hard.



She said tourism and travel represented almost 10% of the gross domestic product of Africa.



“We have 24 million African families whose livelihood is linked to travel and tourism,” Abou-Zeid said, adding the downturn had come in a year when Africa was expected to see an increase in travel and air transport.



“The blow is very hard, between the economic losses and the job losses,” Abou-Zeid said. African airlines have seen a 95% drop in revenues, or about $8 billion, along with other losses such as the deterioration of assets, she said.



“Some airlines in the continent will not make it post-COVID-19,” she said, adding the blow came at a time when some airlines were in the early stages of development, while others, such as South African Airways, were in difficulties even before the pandemic.



Abou-Zeid said more resistant carriers such as Ethiopian Airlines were using the opportunity to acquire smaller struggling companies, but the outbreak had put a halt to the AU’s plan for a single African air transport market.



Prosper Zo’o Minto’o, regional director for the International Civil Aviation Organization, told the news conference that African airlines would need an estimated $20 billion to resume operations.



Ivory Coast’s national airline Air Cote d’Ivoire, which restarted domestic flights on Friday, said it had received 14 billion CFA francs ($24 million) from the government to keep it afloat.

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Pandemic costs Africa travel, tourism almost $55 billion

The African continent is home to what is considered a huge growth opportunity – agriculture. With 65% of the world’s available uncultivated arable land, potential exists for African countries to reach their developmental goals and become major players in the global food system.



Despite the continent’s abundance in arable land and water resources, its economies and communities are yet to reap the benefits. Agribusinesses in Africa still face serious challenges and as a result, the sector remains largely untapped.



With poor supply chain channels, inadequate infrastructure, poor access to markets, and a lack of access to know-how of modern farming practices, tools and equipment, smallholder farmers, who contribute 70-80% of the continent’s food production, cannot migrate from subsistence to commercial farming.



The developed world now considers technology as an essential enabler to modern day farming, and without transformation, sub-Saharan Africa risks falling even further behind on the competitive scale; this while the sector remains an important driver of economic growth and employment on the continent. It then becomes critical to consider ways to support and develop what is seen as Africa’s rural last mile. Technology and mechanisation have proven to enhance productivity, yields, cost reduction at scale, improve quality and farm profitability.



While smallholder farmers remain an important grouping, it is one that is typically overlooked by many financial institutions. Many have tried to crack this market but have been unsuccessful.



Agritech solutions, for example, are transforming traditional farming practices and there are now more than 350 active agritech start-ups on the continent who are responding to the potential opportunity. But without connectivity or access to finance, it is often difficult for emerging farmers to take advantage of the benefits of modern farming technologies.



The real challenge lies in delivering a range of financial and non-financial services to farmers and food producers on the continent. It is impossible to overcome this alone. An ecosystem involving multiple players will ultimately close the gap.



This type of ecosystem and platform thinking are the latest themes coming out of international research and stems from the exponential growth of businesses like Alibaba and Amazon. These businesses bring together a network of ecosystem participants to create new markets for producers and consumers.



Standard Bank believes there is a significant opportunity to grow sectors on the continent by partnering with other players to build new platforms and models that enable clients to access services for their financial needs and beyond.



We are embedding this design thinking across all areas of the business, but more actively in Agribusiness where, in 2019, we started on-the-ground research in Uganda to understand the pain points experienced across the agricultural value chain. This would be the starting point of the agriculture ecosystem project.



Our team engaged over 150 stakeholders from farm to fork (input suppliers, farmers and aggregators, to industries involved in processing and value-addition) with a view of building the OneFarm platform to help address these pain points.



This platform aims to bring together a network of digitised solutions that could unlock the ability of all our clients – from input suppliers to off takers and corporates who facilitate the trade – and ultimately improve the quality and quantity of agricultural output across the continent.



Through this exploration, we have learned that education is a fundamental enabler to help farmers to realize the benefits of digitised solutions. The team employed an agronomist to provide training on best practices to the farmers and manage demo farms to better understand the effects of adopting good agronomic practices. In this first iteration, some farmers have increased their capacity by over 100% simply as a result of being able to access finance.



We hope that through OneFarm, we can create a culture where farmers and co-operatives embrace the opportunity to formalise themselves knowing the benefits it will unlock.



In Nigeria, through our investment in Founders Factory Africa, we partnered with local agritech FoodLocker to create a marketplace platform, where machine learning is leveraged to forecast foodstuff demand. This enables large-scale buyers to efficiently procure fast-moving consumer goods and fresh produce from smallholder farmers.



The intention of OneFarm and other initiatives that we have launched within Agribusiness is to leverage platforms to impact a lasting difference in the lives of rural agricultural players. This forms part of greater vision to go beyond the role of financiers or bankers to provide all-encompassing services that drives the ecosystem and helps communities move forward.



Louis van Ravesteyn, Head: Agribusiness – Pan Africa, Standard Bank Group.

shutterstock_123544153

How to grow a fortune in the golden fields of Africa.

DAKAR (Reuters) &#8211; Africa countries have lost almost $55 billion in travel and tourism revenues in three months due to the coronavirus pandemic, the African Union commissioner for infrastructure and energy said on Thursday.



Amani Abou-Zeid told a news conference that due to the prolonged lockdown and border closures to curb the spread of the virus, the air industry will be greatly impacted.



“Some airlines in the continent will not make it post-COVID-19,” she said.

Africa lost almost $55 billion in travel and tourism due to pandemic -AU

(Reuters) &#8211; Tesla Inc on Wednesday became the highest-valued automaker as its shares surged to record highs and the electric carmaker’s market capitalization overtook that of former front runner Toyota Motors Corp.



Tesla shares gained 5% in early morning trade to a record of $1,133, boosting the company’s market cap to $209.47 billion &#8211; roughly $6 billion more than Toyota is currently valued by investors.



Tesla is now worth more than triple the combined value of U.S. automakers General Motors Co and Ford Motor Co.



The shares’ meteoric rise, up more than 163% since the start of 2020, highlight growing confidence among investors about the future of electric vehicles and Tesla’s shift from a niche carmaker into a global leader in cleaner cars.



After several years of losses, Tesla has delivered three straight profitable quarters since the third quarter of 2019 and surprised investors with solid first-quarter deliveries despite the virus outbreak.



Toyota, one of the world’s most profitable automakers, sold 10.46 million vehicles during its 2019 financial year, ending on March 31, 2020. It reported net revenues of 30,226 billion yen, or roughly $281.20 billion, during that time.



Tesla, in comparison, ended 2019 with $24.6 billion in revenues, having delivered 367,200 vehicles last year. Chief Executive Elon Musk in the past said Tesla would deliver at least 500,000 vehicles in 2020, a forecast the company has not changed despite the coronavirus pandemic.



Tesla is expected to report second-quarter delivery numbers this week.

Elon Musk At SpaceX Headquarters

Elon Musk’s Tesla becomes most valuable automaker in latest stock rally

Out from under the pall of gloom over Africa brought by COVID-19 and contracting economies emerges a deal that’ll see locomotives moving freight across the continent on the way to a brighter trading future.



This week the ink dried on a deal signed by TheloDB with the government of Ghana to repair and extend 217 kilometres of railway track to haul everything from iron ore and bauxite to cocoa for export from the coastal ports.



The railway will open up a new trade corridor and is another step towards African Continental Free Trade Area; the single market may have been postponed from July 1 to January, but political will for it appears to be growing across the continent. One of the impediments to this dream of trade on the continent is poor transport infrastructure. According to the African Development Bank, Africa’s total infrastructure needs between $130-170 billion-a-year and has a financing gap of $68-108 billion.



On top of this, the fact that this was a contract won at one end of the continent by an entrepreneur from another end of continent also bodes well for the pan-African future of business.



The entrepreneur behind it all is South African Ronnie Ntuli, the chairman of TheloDB, who worked on the deal for more than two years. He says the company is negotiating for at least two similar rail projects, one in West Africa and the other in Southern Africa.



“My passion in life, as an African, is economic development in the continent. It has to be sustainable development aimed at infrastructure and building industrial capacity,” says Ntuli.



The project will create many jobs and see locomotives shipped to Ghana from manufacturers in South Africa. TheloDB will also train workers in the Ghana run the railway and oversee its operation and maintenance on completion, expected in 2024.



It was difficult closing the project in the world of COVID-19, but Ntuli believes that the pandemic has an unintended consequence.



“Many countries around the world have a lot of capital liquidity and it is going into the capital markets right now,” says Ntuli.



“Our job is to tap into that liquidity so we can do the solid infrastructure projects that the continent needs.” &nbsp;&nbsp;

Thelo_Transnet 3605

A train bound for Africa’s future to emerge from the continent’s COVID-19 gloom.

Fitch Ratings-London/Hong Kong-26 June: The South African government&#8217;s intention to stabilise debt levels within four years, as set out in this week&#8217;s emergency budget, is unlikely to be achieved, Fitch Ratings says. This reflects persistent challenges in reducing expenditure, boosting growth and insulating public finances from struggling state-owned enterprises, as well as reflecting the impact of the coronavirus pandemic, which will drive a sharp rise in debt/GDP this year.



Wednesday&#8217;s emergency budget revised the consolidated budget deficit projection for the current fiscal year (FY21; ending March 2021) to 15.7% of GDP, over double the 6.8% projected in the original budget in February. The main factor is a sharp fall in tax revenues due to the economic fall-out resulting from lockdown measures, as well as the general hit to the economy and some tax relief. The government expects the main budget revenues to be ZAR300 billion &#8211; 6% of GDP &#8211; lower than previously anticipated.



South Africa has recorded 100,000 coronavirus cases and this number could rise substantially, according to government modelling. Nevertheless, the government expects non-interest expenditure to be just ZAR36 billion (0.7% of GDP) larger than projected in February, as the emergency budget plans to offset substantial additional spending on health and economic support through savings in other areas.



We view the government&#8217;s forecast of gross loan debt rising to 81.8% of GDP in FY21, much higher than the 65.6% in the original budget, as realistic. However, we believe its expectation that debt will peak at 87.4% in FY24 is optimistic. This would require sufficient fiscal consolidation to achieve a primary budget surplus in that year, which would be South Africa&#8217;s first since 2008, towards the end of the commodity boom.



The government aims to cut expenditure by ZAR230 billion over FY22 and FY23 relative to earlier plans and then implement additional cuts, complemented by small tax-raising measures. Details will be presented in the Medium-Term Budget Policy Statement in October.



Revenue projections beyond the current fiscal year appear conservative, and revenues may exceed government forecasts (the government predicts that revenues will still be ZAR202 billion below its February projections in FY23). However, Fitch believes planned expenditure cuts seem ambitious not least because they would significantly weaken the economic recovery. South Africa&#8217;s recent experience highlights the challenges of meeting fiscal targets. February&#8217;s budget abandoned the earlier target for a primary budget balance by FY23 (excluding support for state-owned electricity company Eskom).



Social and political factors, including exceptionally high inequality, powerful trade unions and deep divisions within the governing African National Congress, present significant hurdles for spending cuts. For example, the government has still not agreed the wage bill savings with public sector trade unions for FY21 that were included in the February budget. A comprehensive adjustment of the large public sector wage bill may not be possible until the current three-year agreement expires in April 2021, and negotiations then are likely to be difficult.



Key reforms to Eskom that would support the economy and reduce the burden on the public finances, and relatively minor measures to accelerate GDP growth, have also faced significant political hurdles. Although the challenges in restructuring state-owned flag carrier South African Airways, which filed for business rescue protection last December, are small from a macroeconomic standpoint, they illustrate the difficulty in addressing budget pressures from troubled state-owned enterprises in the face of trade union opposition. Our downgrade of South Africa&#8217;s Issuer Default Rating to &#8216;BB&#8217; on 3 April resulted from the lack of a clear path towards government debt stabilisation as well as the expected impact of the coronavirus pandemic-related shock on public finances and growth. The Outlook on the rating is Negative. A continued rise in government debt/GDP and failure to formulate a clear and credible path towards stabilising the government debt/GDP ratio could lead to negative rating action

SA Finance Minister Tito Mboweni delivers his emergency budget

#SpecialBudget2020: Finance Minister Tito Mboweni delivers emergency budget (full speech)

South Africa unlikely to sort out its debt in four years – Fitch.

Finance Minister Tito Mboweni’s emergency budget on June 24 was meant to provide a roadmap showing how the government intends to deal with a dire fiscal situation.



Unfortunately, the speech underwhelmed on detail.



We already had a good idea of what the Treasury expects with regard to the economic and fiscal outcomes this year -due to the ‘leaks’ over the weekend- &nbsp;but what we were looking for was detail on how Mr Mboweni plans to manoeuvre the ship back on course.



The Treasury now expects GDP to contract by 7.2% this year compared with the 0.9% growth rate expected in February; the fiscal deficit is expected to reach 15.7% of GDP in FY 2020/21 compared with the 6.8% of GDP deficit projected at the start of the year; while public debt is now expected to end the fiscal year at 81.8% of GDP from 65.6% of GDP previously.



In the official budget publication, the Treasury puts forward two scenarios: active and passive. The passive scenario refers to the debt trajectory if current trends persist, while the active scenario incorporates all the intended adjustments.



The passive scenario sees public debt remaining on a strong upward trajectory, reaching 114% of GDP by 2024/25, while the active scenario sees public debt peaking at 87.4% of GDP in FY 2023/24.



Mr Mboweni noted that the government needs to find spending adjustments of about R230bn over the next two years.



Tax measures of R40bn over the next four years will also be required.&nbsp; Details with regard to these tax proposals will be given in the 2021 budget. Nothing was said about South African Airways (SAA). The Land Bank will be recapitalised with R3bn.



No further information was given with regard to the ongoing public sector wage dispute or the government’s intentions after the current bargaining round ends next fiscal year.



Mr Mboweni stated that this year, nearly half of all consolidated revenue will go towards the compensation of workers in the public sector.



On the ongoing wage dispute, the finance minister stated, “Minister Senzo Mchunu is negotiating with our partners in the labour movement to find a balanced solution that sets compensation at an appropriate, affordable and fair level. We wish him well.”



It is important to note that the R230bn in spending cutbacks required over the next few years is in addition to the R160bn cut to the public-service wage bill set out in the 2020 budget. In commenting on the latter, Mr Mboweni stated: “Failure to achieve these reductions will require larger reductions to wages and other spending areas in the outer years of the spending framework, and higher revenue increases.”



Mr Mboweni confirmed that the country would be borrowing $7bn from international finance institutions.



During his post-address media briefing, the finance minister said that South Africa would be asking the IMF to approve a $4.2bn loan in early July.



It was previously said that the country would be making use of a $1bn facility from the National Development Bank- that is, the BRICS Bank-&nbsp; meaning the balance is likely to come from the World Bank.



Approaching the IMF and World Bank for assistance will rankle many within the ruling African National Congress (ANC) and its alliance partners. Mr Mboweni found himself in the cross hairs in April when ANC Secretary General Ace Magashule and his alliance counterparts called on President Cyril Ramaphosa to reject an approach to the IMF or World Bank for assistance in the fight against Covid-19 following comments by the finance minister.



The perhaps unavoidable decision to turn to international finance institutions will no doubt expose ideological cleavages within the alliance, as Mr Mboweni, with the presumed backing of Mr Ramaphosa, may be seen to have crossed a red line.



No major intentions with regard to policy reform were mentioned. While a budget reading does not usually play host to such announcements, many hoped that the unprecedented nature of the situation would encourage bold action.



Mr Mboweni did, however, state that a firm policy basis has been laid by the Treasury’s Towards an Economic Strategy for South Africa paper, which was considered by Cabinet and accepted last year.



After conceding that progress has been slow, partly attributable to Covid-19-related delays, the finance minister stated that “we are now ready”.



Another noteworthy comment by Mr Mboweni, in referring to the policy shifts put forward by his policy document, went “One of these is to shift away from the electricity supply system that was introduced in 1923, when George V, the Queen’s grandfather, was the king of what was known as the Union of South Africa. The last few years have shown the inefficiency of this archaic system. Provisional allocations to Eskom were made on the understanding that government’s Electricity Roadmap would be implemented.&nbsp; Progress is slow.&nbsp; The principle of zero-based budgeting is that we must see demonstrable value for money: Eskom will need to show progress in meeting the milestones as laid down in the Roadmap. This is non-negotiable. Progress on the other reforms will be given in the MTBPS [Medium-term Budget Policy Statement].”



The emergency budget describes a desirable fiscal destination but does not provide a credible roadmap to get there.



Mr Mboweni used a significant proportion of the speech to give listeners an economics and history lesson on sovereign debt crises, suggesting that there are a few that still need some convincing.



Given that the current wage dispute is ongoing in the courts, it is understandable that no further details were provided on the matter.&nbsp; But given the importance of containing this spending, the lack of a medium-term plan left the speech wanting.



Furthermore, Mr Mboweni highlighted the severity of the fiscal situation by starting the speech with a striking statistic: “This year, out of every rand that we pay in tax, 21 cents goes to paying the interest on our past debts.”



This, combined with the fact that around half of all consolidated revenue will go towards the compensation of workers in the public sector, clearly shows why the country is in such a fiscal mess.



Jacques Nel &#8211; Economist

THE WEEKEND READ: Analysis– a budget long on words but short on detail.

South African finance minister Tito Mboweni painted a bleak picture of the South African economy during his emergency budget speech and quoted the Bible in plotting the way forward for a struggling economy expected to contract by 7.2% this year.



In a 40 minute speech Mboweni outlined a package of support for some state owned enterprises warnings of a the dangers of debt and a sovereign debt crisis. He said he was going to borrow $7 billion from international lenders to try to shore up the money-starved economy.



&#8220;Enter through the narrow gate for wide is the gate and broad is the road that leads to destruction and many find it. The narrow road is the one that leads to life and few can find it,&#8221; says Mboweni quoting the gospel of Matthew in the Bible. He warned that South Africa could face the same fate as the wrecked German economy of the 1920s and Zimbabwe and Argentina in more recent years. 



Mobweni said the government&#8217;s tax target was likely to fall short by R300 billion making more borrowing inevitable and the repayments crippling with a national debt expected to top R4 trillion by the end of the year. He said for every Rand the country earned it had to spent 21 cents merely paying back debt.



The government has revised its revenue down from R1.43 trillion to R1.16 trillion as COVID-19 virtually shut down the economy for nearly three weeks.



Mboweni said the government was planning to narrow the deficit and stabilize debt at 87.4% of GDP by 2023/24. 



On the other side of the coin, Mboweni was forthcoming with taxpayers&#8217; money in giving R100 billion to the infrastructure fund and R3 billion to help restructure the struggling Land Bank.

PRETORIA, SOUTH AFRICA - MARCH 16: Finance minister, Tito Mboweni briefs the media on the details of government interventions in various sectors of the departmental portfolios on COVID-19 at DIRCO Media Centre.

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“Broad is the road that leads to destruction,” bleak words in a bleak budget from Tito Mboweni.

Tito Mboweni said his emergency budget would address debt as well as gathering money tot fight COVID-19.



&#8220;We have accumulated far too much debt.This downturn as severe as it is will make it worse. Out of every Rand we collect in tax 21 cents will go to paying debt,&#8221; says the finance minister.



&#8220;This Hippo is eating or children&#8217;s inheritence and we have to do all we can to close its mouht.&#8221; 



&#8220;We have flattened the curve and saved many lives. As a farmer will tell you when the storm is raging you have to protect you plants&#8230;.the storm shall pass,&#8221; says Mboweni.



The once mighty South African economy could contract by between 7 and 16 % this year losing more than a million jobs in the process.



&#8220;I think we can forget about growth this year and probably next year,&#8221; Isaah Mhlanga, the chief economist at Alexander Forbes, told CNBC Africa. 



Mboweni has to find at least R130 billion to shore up a gap in finance an a R500 billiion stimulus package to help the South African economy weather the COVID-19 pandemic. 



Despite huge spending gap that Mboweni has to bridge t, economist Azar Jammine reckons the finance minister won&#8217;t tinker with tax.



&#8220;My view is he probably won&#8217;t do so. The amount of additional revenue you might collect would be a drop in the ocean, if you think that increasing VAT by one per cent would merely raise R24 billion which is a minute amount compared to what is needed,&#8221; says Jammine.



South Africa has been borrowing more than a billion Rand a day to keep the economy afloat through the issue of bonds.



&#8220;The question I have is this appetite for buying debt, I think the longer the bonds are issued in these volumes the less the appetite is likely to be,&#8221; says Annabel Bishop, the chief economist at Investec.

COVID-19: “This Hippo is eating our children’s inheritance”Tito Mboweni on debt in the emergency budget

This week the finance minister Tito Mboweni tweeted the metaphor of closing a hippo’s mouth to hint how hard a job he faces closing the fiscal gap. It may be easier for Mboweni to catch a real life hippo and wrestle with it rather than to solve South Africa’s gaping debt problem – expected to rise to 80% of GDP by early next year.



On the afternoon of June 24 Mboweni will outline his emergency budget in the hope it will help South Africa ride out he COVID-19 storm and find elusive growth. South Africa’s once mighty economy is expected to contract by more than 10% this year and shed more than a million jobs. Figures out this week show unemployment in South Africa has already reached 30.1 % and youth employment has risen to 59%. Mboweni has warned that South Africa could face a sovereign debt crisis by 2024 forcing it to go cap-in-hand to the International Monetary Fund for a bailout.



Mboweni is expected to reveal a budget deficit for this year projected at close to 15% of GDP, a severe injury to government finances as the economy contracts alongside a huge collapse in tax revenue of up to R300bn.In all of this Mboweni has to decide whether to throw more scarce taxpayers money at the losing making state owned enterprises – his cabinet colleagues say he should, the finance minister feels he shouldn’t.



“SA’s debt is further estimated to rise to 90.9% by 2023 and over 100% by 2025, climbing to a massive 113.85 by 2029. SA is likely headed for further substantial credit rating downgrades from Moody’s, Fitch and S&amp;P, and likely quite rapidly, from out of the BB category into the single B category, which is just above C grade,” says Annabel Bishop, Chief Economist Investec



“There is not much wriggle room that the fiscus has left coming into 2020 and now we face this miracle budget with a shortfall in revenue,” says Nesan Nair a senior portfolio manager at Sasfin.



“But as far as investors are concerned there is not better person than Tito Mboweni to do the job.”



Nolan Wapenaar, of Anchor Capital, said he was expecting a deficit of about 14, which was a significant gap to be financed.



“The country is selling bonds to the tune of a billion Rand a day. We need to get into financial shape and get out of the dire financial shape we are in,” he says.



Bernard Sacks, a senior tax partner at Mazars, believes that cutting corporate tax could help get the economy back into shape.



“In world terms we are not competitive at 28 %; we need to be at 20 % to attract foreign investment. That level of tax would see money come in and South Africans trained and put to work…I don’t think we will see the minister raise tax rates which is just as well because most companies are punch drunk right now,” says Sacks.

COMMENT: Why it may be easier for Tito Mboweni to wrestle a hippo rather than close its mouth.

ABIDJAN (Reuters) &#8211; Ivory Coast’s cotton industry will struggle to cover its costs after exporting just 20% of last season’s 210,902 tonnes of fibre because of COVID-19 disruptions in top buying destinations in Asia, the cotton ginners’ association told Reuters on Monday.



In a normal year, the West African nation would have exported almost all of its fibre by now.



Instead, the crisis has caused delays and the cancellation of some contracts with buyers in Pakistan, India and Bangladesh, the association’s executive secretary said.



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Global cotton prices have fallen by more than 11% this year, after efforts to slow the spread of the novel coronavirus forced clothing shops to close, dented demand and accelerated a decline triggered by the U.S.-China trade war. &lt;COT/N&gt;



As a result, Ivory Coast’s cotton sector “is facing difficulties mobilising funds to cover costs relating to the collection of fibre, transport and payment of producers,” said Brou Kouakou, declining to provide figures.



The need to store stocks longer and extend loans as a result of coronavirus-linked delays has further increased costs, he said.

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COVID-19 -Coronavirus slowdown squeezes Ivory Coast cotton sector – Reuters

The Fourth Industrial Revolution takes the automation of manufacturing processes to an unprecedented level, with the introduction of smart, autonomous systems that are capable of self-cognition, self-optimization and self-customization. While these processes present numerous opportunities for producers and manufacturers, it creates a heightened level of uncertainty for policymakers and development practitioners. This is partly due to the new challenges that will arise, especially in terms of employment, educational systems and industrial policies.



The June 16 1976 Uprising that began in Soweto and spread countrywide profoundly changed the socio-political landscape in South Africa, yet 44-year later youth unemployment is still a struggle. The youth &nbsp;&nbsp;unemployment rate in South Africa&nbsp;is expected to be 70 percent by the end of 2020, as Covid19 puts jobs at risk for about 1.6 million to 2.5 million in South Africa. The International Labour Organization estimates&nbsp;1.6 billion jobs to be lost because of COVID-19 that could make it even worse for South Africa.



Secondary challenges for youth are the current Education that’s not aligned with the needs of the Fourth Industrial Revolution and Future Revolutions and financial exclusion at institutions of higher education and training.



Ultimately, the aim of Industrial revolution awareness for youth and families is to explore the potential impact of Industry 4.0 and digital technologies on developing countries and youth participation in the future job market, given the changing dynamics. The transformative potential of digital technologies is clear and must therefore be properly understood and utilized to take advantage of opportunities, while mitigating the challenges, specifically for the youth.



Youth training Forum to adapt with current and future industrial revolution focusing on Soft skills (uniquely human skills) such as creativity, complex problem-solving, emotional intelligence and critical thinking, which will be irreplaceable by machines; Technical skills ( Computer programming, coding, project management, financial management, mechanical functions, scientific tasks, technology-based skills); Entrepreneurship ( Initiative, innovation, creativity, industriousness, resourcefulness, resilience, ingenuity, curiosity, optimism, risk-taking, courage, business acumen, business execution) needs to be &nbsp;considered for the empowering of young people and ensuring inclusiveness and equality.



There is a general consensus that Socio-economic features in South Africa including structurally high unemployment and income and wealth inequality are longstanding and deeply-entrenched constraints on the country&#8217;s growth potential. Deep inequalities – South Africa&#8217;s income inequality is among the highest globally, as measured by the Gini index – and resistance to reforms from key stakeholders limit the government&#8217;s room to adopt and implement structural reforms.



Adaptive challenges&nbsp;are volatile, unpredictable, complex and ambiguous in nature.&nbsp;Solutions&nbsp;to this type of&nbsp;challenge&nbsp;usually require people to learn new ways of doing things, change their attitudes, values and norms and adopt an experimental mind-set.



South African progress has also been distributed unevenly, both within our demographics such as race, gender and generations. Adding to the problem, however, is the fact that certain sections of the population, often women, children, people with disabilities and majority groups, are systematically left behind.



Reducing poverty, youth unemployment and inequality must be the main objectives of South African private and public leaders.&nbsp; The 2030 Agenda aims to ‘end poverty in all its forms everywhere’ (SDG 1) and to ‘reduce inequality within and among countries’ (SDG 10). The significance of the issues of poverty and inequality is also manifested in the implementation principle of the 2030 Agenda ‘Leave no one behind’ (LNOB). Leaving no youth behind will assist South Africa not to create future unemployment and add to welfare spending to the continuous generated future dependence, a big risk for the nation that needs to be mitigated. The SDG 1 and SDG 10 of the 2030 Agenda and the ‘Leave no one behind’ principle needs to be practically strengthened for the South Africa, in building a developmental state.



South Africa will need to solve it’s intractable challenges to reinstate it’s economic development and growth objectives, through an economic investment collaboration to re-establish mining, agriculture and manufacturing sectors, to reactivate the services industries for a holistic economic development and growth national happiness improvement. Miyelani Mkhabela is an Executive Director at Antswisa Transaction Advisory Services

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Youth Day 2020: OPINION: Why a changing world means more trouble for South Africa’s youth.

<h3 class="wp-block-heading">KEY POINTS</h3>



<ul class="wp-block-list"><li>Benedict Oramah reappointed President of African Export-Import Bank for another five-years.</li><li>Between 2015 and 2019, Afreximbank disbursed more than US$30 billion in support of African trade with over US$15 billion channeled towards the financing and promotion of intra-African trade.</li></ul>



By Afreximbank



Cairo, 14 June 2020: – Shareholders of African Export-Import Bank (Afreximbank) have voted and re-appointed Prof. Benedict Oramah as President of the Pan-African multilateral financial institution for a second 5-year term.



The decision was announced today in Cairo following Afreximbank’s 27th&nbsp;Annual General Meeting of Shareholders which was held by circulation of resolutions due to the COVID-19 pandemic situation.



In an acceptance statement released shortly thereafter, President Oramah told Shareholders that the Bank’s ultimate goal under his second term of office is the realisation of Africa’s strategic ambition to create an integrated market.



“We want an Africa where the foundations of the African Continental Free Trade Agreement (AfCFTA) are laid expeditiously so that the 84,000 kilometres of borders that have divided us for ages can begin to come down,” said prof. Oramah who added that AfCFTA would “drive the industrialisation of Africa, support the emergence of regional value chains, turn Africa’s creative and cultural assets into engines of growth, grow jobs for the continent’s youth, convey respect to Africans wherever they may be and better prepare the continent to compete more effectively in the global markets.”



Prof. Oramah highlighted that between 2015 and 2019, Afreximbank disbursed more than US$30 billion in support of African trade with over US$15 billion channeled towards the financing and promotion of intra-African trade.



“We will aim to double intra-African trade financing so that by the end of my term, it will constitute no less than 40% of the Bank’s total assets, with aggregate disbursements, on a revolving basis, over the 5 years exceeding US$30 billion,” he announced.



In office since 2015, Prof. Oramah’s re-appointment was one of the key decisions taken by shareholders during the Bank’s 2020 General Meeting.



A resolution proposing the re-election of Mr. Stefan-Luis Francois Nalletamby as a director representing Class “A” Shareholders and Mr. Kee Chong Li Kwong Wing as a director representing Class “B” Sharefolders was also approved by the meeting.



In addition, the 2019 audited accounts were approved, as well as the proposal to raise an additional US$500 million in equity within Afreximbank’s current Strategic Plan dubbed “IMPACT 2021-Africa transformed”. The approval to raise additional equity was in recognition that an amount of US$1 billion earlier authorized to be mobilized had almost been fully raised.



“I make a commitment that with your support, the Bank will remain well capitalised throughout my term of office and beyond. We will continue our efforts to diversify sources of equity to include the markets while ensuring that the Bank’s development focus remains unchanged,” President Oramah assured the Bank’s Shareholders.

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Economy

COVID-19: Now is the time for Africa to grow food

Land Bank default forces S.Africa’s central bank into $200 mln bailout of state investment arm

How Zimbabwe farmers will be trained how to farm with a scheme from Belarus with love

South African rand opens stronger after positive data

Pandemic costs Africa travel, tourism almost $55 billion

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Africa lost almost $55 billion in travel and tourism due to pandemic -AU

Elon Musk’s Tesla becomes most valuable automaker in latest stock rally

A train bound for Africa’s future to emerge from the continent’s COVID-19 gloom.

South Africa unlikely to sort out its debt in four years – Fitch.

THE WEEKEND READ: Analysis– a budget long on words but short on detail.

“Broad is the road that leads to destruction,” bleak words in a bleak budget from Tito Mboweni.

COVID-19: “This Hippo is eating our children’s inheritance”Tito Mboweni on debt in the emergency budget

COMMENT: Why it may be easier for Tito Mboweni to wrestle a hippo rather than close its mouth.

COVID-19 -Coronavirus slowdown squeezes Ivory Coast cotton sector – Reuters

Youth Day 2020: OPINION: Why a changing world means more trouble for South Africa’s youth.

Benedict Oramah reappointed as President of African Export-Import Bank

News Tips

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