Tuesday, 04 September 2018

Madagascar is gearing up for presidential elections in November this year. The Conversation Africa spoke to Adrien Ratsimbaharison about how the elections might unfold and what challenges Madagascar’s new president will face.

How many presidents has Madagascar had since the coup in 2009 and have these transitions been peaceful?

Since independence in 1960, Madagascar has experienced a handful of political crises. Most presidential elections have been rigged by the incumbent and rejected by the opposition. The most disputed election was in 2001 when Marc Ravalomanana ran against the long-time dictatorial president, Didier Ratsiraka, and won. The post-electoral conflict between the two men quickly escalated to a tense political crisis and a low-level civil war in early 2002.

Since Ravalomanana was controversially removed from office in 2009 the country has had two presidents. While many considered it a coup, he himself signed the ordinance of his resignation and the “coup” leader —- opposition figure Andry Rajeolina —- was allowed to stay in power and negotiate a peace agreement.

A series of peace negotiations between the major political parties were held over the next couple of years to prevent escalating unrest.

Rajoelina led the country until the next presidential election four years later. Neither Ravalomanana nor Rajoelina were allowed to run, but one of Rajoelina’s allies, Hery Rajaonarimampianina, was democratically elected. This political transition was peaceful, even though Rajoelina kept pushing back the election dates and despite staunch opposition by supporters of Marc Ravalomanana.

Rajonarimampianina’s first term in office was a rocky one, but generally peaceful. During his tenure, there were two attempts to have him impeached and he fell out with Rajoelina.

What are the prospects for peaceful elections?

Many observers fear that the next presidential election will be accompanied, if not followed, by violence. Mainly because the former three leaders —- Ravalomanana, Rajoelina and Rajaonarimampianina —- are the main contenders.

The stakes are really high for all three.

Rajaonarimampianina’s government has tried to engineer some controversial electoral laws over the last two years. But these backfired and he was almost impeached.

In fact, the latest impeachment attempt led to the High Constitutional Court’s decision that an election must take place in November.

Nevertheless, I believe that following years of political fatigue, the general will is to have free, fair and peaceful elections.

Who are the other candidates in the upcoming elections?

There are 36 candidates running for president in this years’ elections. This number is about the same as the last presidential election five years ago, but a lot more than previous presidential elections.

But the main contenders come down to Ravalomanana, Rajoelina and Rajaonarimampianina —- the only candidates who can mobilise significant financial and human resources to win. The other candidates really don’t stand a chance. They include former President Didier Ratsiraka, former prime ministers, university professors, business people, lawyers and artists.

Some of these candidates will just run for the fame of being a former presidential candidate —- a title they will always have. Others will also run in the hope that they could demonstrate popular support and negotiate a position in future governments.

What are the challenges Madagascar’s new president will face?

The newly elected president will have a huge job on his shoulders. The main challenges include public safety, job creation and raising more money for the government budget.

Over the last few years, there’s been a rise in violence and violent acts. In urban areas the number of armed robberies and kidnappings – particularly of Indian and Pakistani business people – has increased. Between 2010 and 2017 there were more than 100 kidnappings, and these are on the rise with 15 taking place last year alone.

In rural areas, the number of attacks by cattle raiders and other bandits has also increased. Hundreds of people die and thousands of cattle are stolen every year in the country.

Though most complain about this increasing insecurity, the government has not been able to mitigate it. This is because it’s caused by poverty and high unemployment levels.

Largely owing to the political instability that Madagascar has experienced, it is now ranked among the five poorest countries in the world, with a population of 25 million and a gross national income per capita of USD$400.

It has a dysfunctional economy. The industrial sector is very weak, contributing on 16% to GDP. The bulk of the population – more than 80% – live in rural areas but only contribute to 26% of the GDP.

The service sector is deceptively large (with 58% of the GDP), but much of it is in the informal sector. The majority of people are poor – 70% live on less than $1.90 a day. Officially, the unemployment rate is low (1.8%), but this doesn’t take into account the insecurity of the informal economy and underemployment in the rural areas.

A major challenge for the new president will be to create jobs, especially in the industrial and service sectors.

Finally, Madagascar relies on a great deal of foreign aid to function, particularly when it comes to health care and education. According to some reports, foreign aid accounts for up to 70% of its annual budget. Consequently, the future president must be able to raise funds from the private sector of the economy through different schemes such as special economic zones to attract foreign investment.The Conversation


Adrien Ratsimbaharison, Professor of Political Science, Benedict College

This article was originally published on The Conversation. Read the original article.

Published in Economy

The TransUnion (NYSE: TRU) Consumer Credit Index (CCI) declined sharply in Q2 2018, marking a decisive change in its upward trend since early 2016, according to a report published by TransUnion South Africa.

The decline in the CCI occurred amid ongoing difficult macroeconomic conditions in South Africa. Following a rise in consumer and business confidence indicators after significant political changes in Q4 2017 and Q1 2018, the report noted that economic indicators turned less positive in Q2. Various business confidence surveys also reflected lingering uncertainty about business conditions, the report said.

The CCI fell by four points to 51 in Q2 2018, now signalling only marginally improving credit health. The fall in the index was mainly due to rising default rates and more constrained household cash flow due to higher inflation and continued weak income growth in the second quarter. On the zero to 100 scale, an index level of 50 is considered the ‘break-even’ point, meaning scores above 50 reflect improving credit health.

Stephen de Blanche, Regional Vice President, Financial Services for TransUnion Africa, explained that the risk of sharp declines in the CCI was a feature of the current economic climate of slow, and at times erratic, growth. “Economic indicators and business confidence surveys appear to have turned less positive in Q2, reflecting lingering uncertainty about business conditions. The more positive economic and sentiment signals in Q4 2017 and Q1 2018 have not continued upward as the year has progressed.”

The biggest contributor to the fall in the CCI in the second quarter was the reversal in the positive trend of loan repayments as measured by the proportion of 3-month arrear accounts. According to TransUnion, the number of accounts in early default (3-months in arrears) rose from around 906,000 to 919,000 between Q2 2017 and Q2 2018, a rise of 1.4%. “This might not sound like a big rise, and it isn’t, but it does represent a marked change from a strongly falling trend in defaults,” explained de Blanche. “The lack of further improvement in the defaults trend constrained the index from staying meaningfully above 50.”

The proportion of 3-month arrears increased by 1.9% y/y in Q2, a marked difference after falling by 5.8% y/y in Q1.

The report also highlighted the trends in distressed borrowing, as measured by the proportion of credit used to total credit limits on household credit and store cards. According to the report, distressed borrowing moderated in Q2 2018, and remained below its highs in 2015/16. De Blanche explained that while this indicated no immediate household financial or budgetary risks, distressed borrowing was still significantly higher than in 2010 and would need to fall considerably further to indicate meaningful restoration of financial health. “The drop in credit utilisation in Q2 was almost entirely the result of rising credit card limits, rather than falling card debt levels. This probably reflects a somewhat higher degree of confidence among lenders over the past year, while households either don't need or are reluctant to take up this available credit”, said de Blanche.

De Blanche added that TransUnion had been cautious about the consumer credit environment and the overall economy for some time, and that the drop in the CCI in the second quarter was a reflection of underlying economic challenges. “Our words of caution to credit providers and borrowers in recent quarters remain in place. It’s important to retain operational and budgetary vigilance.”

TransUnion said it continues to monitor the effects of a recent decision by the High Court that it is no longer necessary to use payslips as the only form of documentation proving income when applying for credit. While this judgement may be welcome for some unbanked, yet credit-worthy people who were perhaps unfairly frustrated in their efforts to obtain credit, it also contains risks pertaining to the potential abuse of the regulation or potential lulling of credit providers into complacency or a lowering of standards.

De Blanche believes that while retailers might see this as a victory enabling them to offer more credit, it actually meant they would need to be even more vigilant when granting credit. “Traditional credit scoring models may not suffice as they only provide a limited view of a consumer at a specific point in time. In time this could lead to less prudent lending, something which could be reflected in a falling CCI. Apart from a significant increase in risk predictability according to our modelling, credit scoring using trended and alternative data also enables the industry to expand the universe that is actually eligible for credit, but for one or another reason is not able to access it.”

The CCI measures borrowing and repayment activity across over 20 million individual borrowers and nearly 53 million credit accounts. The index also incorporates key macroeconomic data compiled in partnership with ETM Analytics, a macroeconomic advisory firm.

Published in Economy

China has pledge a total of $60 billion financial support for projects in Africa, Chinese President, Xi Jinping, announced on Monday.

The President, who made the announcement while speaking at the opening ceremony of the 2018 Beijing Summit of the Forum on China-Africa Cooperation (FOCAC) in China, said the funds are not for “vanity projects” but for building infrastructure that can remove development bottlenecks.

The President said the financing would be provided in the form of governance assistance as well as investment and financing by financial institutions and companies.

“China does not interfere in Africa’s internal affairs and does not impose its own will on Africa.

“What we value is the sharing of development experience and the support we can offer to Africa’s national development and prosperity,” Xi said.

He stated that government debt from China’s interest free loans due by the end of 2018 would be written off for indebted poor African countries as well as for developing nations in the continent’s interior and small island nations.

According to a data from China-Africa Research Initiative at Washington’s Johns Hopkins University School of Advanced International Studies, the Asian nation has extended about $136 billion in loans to Africa between 2000 and 2017.

With the new $60 billion financing, the total loans extended to the nation in the last eighteen years is now $196 billion.

The new financing will include $15 billion of aid, interest-free loans and concessional loans, a credit line of $20 billion, a $10 billion special fund for China-Africa development, and a $5 billion special fund for imports from Africa, according to Xi.

He further noted that Chinese companies would be encouraged to invest $10 billion in the continent in the next three years.

International organisations have expressed worry over the latest pledge by China for Africa, noting such loans would further sink nations within the continent under massive debt.

However, the country denied it engagement in “debt trap” diplomacy, adding that the continent still needs debt-funded infrastructure development.

“I also hope you will do more in staff training and bettering lives for the local people and will put more emphasis on the environment and resources,” he added.


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Published in Business
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