Although many South Africans view 5G as just a faster way to download videos and rich multimedia to their smartphones, it is enterprises and the industrial sector that have the most to gain from this fast-developing cellular network standard.
So, what is the big fuss? It’s all about latency and the fact that this technology will enable us to make close to instant decisions.
At the time of its global commercial launch last year, at least 20 operators were deploying 5G (fifth-generation wireless technology) networks in almost 300 locations around the world. According to some estimates, 5G will support more than 10% of global mobile connections by 2023. The average speed of these will be 575 megabits per second, 13 times faster than the current average. For their part, South African consumers have been able to access 5G services since November last year. And while coverage is still limited, it will only expand as demand for high-speed mobile access drive operators to continue to grow their networks.
But contrary to popular belief, 5G does not provide compelling benefits for consumers just quite yet. The sort of speeds that sound like science fiction is still years away. Additionally, people are only now starting to tap into the potential of 4G and the experiential improvements it delivers to their digital lifestyles. Moreover, smartphones that support 5G are still prohibitively expensive for the bulk of the consumer market, further limiting its adoption in the short-term. And with data prices coming down, the status quo certainly presents a better value proposition than expensive (and limited) 5G.
Jacques duo Toit
Driving rapid decision-making with real-time data
On the other hand, for businesses and industrial users, 5G represents a potential pathway into highly valuable and emerging new use cases. Importantly, for companies and industry players that have both the infrastructure and the right technology partners, there are numerous value-adding enterprise and industrial applications that can rapidly offset the initial high cost of embracing the technology.
A recent Nokia study, for example, has found that video is the most immediate use case from a corporate perspective. Video monitoring is already extensively used in enterprise and industrial environments. Notably, what 5G does (and can do) is to unlock higher-value opportunities in this sphere. For example, combining video with real-time analytics to recognise faces and identify risks in sensitive environments can mean the difference between life and death. The same study has noted that energy and manufacturing companies are looking to leverage 5G for things such as infrastructure maintenance, remote machine control, and even cloud robotics.
Additionally, another emerging area whereby 5G can deliver significant returns is with IoT devices. These are now able to deliver more sophisticated diagnoses on infrastructure performance in areas that are too dangerous – or laborious - for people to continually monitor. And when it comes to IoT devices that are typically found at the edge of computing, the increased capacity of 5G means data can be analysed in real-time at the point of origin. For instance, machines in a manufacturing environment can be optimised to scale according to the capacity required. This can also enable proactive maintenance to take place by identifying potential breakdowns before they occur.
Looking ahead, 5G can also become instrumental in enabling companies to create multiple virtual networks using just one physical system. This introduces an integrated networking, computing, and storage environment previously impossible to do with 4G. As more countries, including South Africa, push the smart city agenda, 5G can facilitate comprehensive smart grids to manage demand-side electricity requirements. So, even something as routine as managing traffic congestion at peak times through 5G-enabled robots (that automatically adapt to usage patterns) can greatly improve service delivery.
Spectrum: the lifeblood of 5G
For South Africa’s business and industry players to fully embrace and realise the benefits of 5G connectivity, local operators have to gain access to key spectrum bands – a process which is currently shrouded in policy uncertainty. Yet without access to spectrum, SA industry will not get out of the starting blocks when it comes to 5G usage – and will arguably be left behind global competitors who are embracing technological development in the fast-growing digital economy.
Prior to the health crisis, the Independent Communications Authority of South Africa (ICASA) was in the process of planning for the assignment of high-demand spectrum by auction. Yet in March, ICASA turned its attention to a spectrum relief plan to meet the sudden high demand placed on networks during the national lockdown.
More recently, the regulator stated that it will slightly delay the publication of the invitation to apply (ITA) for the wholesale open-access network and International Mobile Telecommunications spectrum (commonly known as high-demand spectrum). Disappointingly, this statement came despite the regulator’s briefing to Parliament’s Portfolio Committee on Communications that the ITAs would be published “very soon”. The ITA is for licences for spectrum in the 700MHz, 800MHz, 2.3GHz, 2.6GHz and 3.5GHz bands, which the regulator has committed to auction by December.
This uncertainty and prolonged delay (resulting in the fact that operators are still not sure which spectrum blocks they will be able to gain access to come the auction process in December) is arguably inhibiting the country’s technological competitiveness and by extension, economic growth.
Given the fact that many of SA’s operators and telecommunications players are both highly innovative and committed to world-class service delivery, unlocking access to spectrum – and access to the transformative benefits of 5G – can propel the country into a new period of economic vitality and dynamic business growth.
In 1992, the phrase, “It’s the economy, stupid” was painted by James Carville, Bill Clinton’s political strategist, on the walls of the presidential campaign office.
With South Africa facing the most challenging economic climate for generations, we need now more than ever to come together and plaster that slogan everywhere to remind every single individual what is at stake if we fail to act.
If you think I am being dramatic, then you have not been listening or looking around you, because right now we as individuals, citizens and elected representatives risk missing out on a route to economic upliftment for all citizens.
The time for self reflection, slow and steady, incremental changes and initiatives is over.
We have gone too slow for too long.
We have wasted valuable time not addressing one of the building blocks of our economy and our individual prosperity, looking for piecemeal solutions, patching a system that is not fit for purpose and hampering our businesses and lifestyles with the constant strain of load-shedding.
Enough is enough.
"Wake up, the sun is shining"
Today, South Africa is facing a crisis on three fronts. We face an energy crisis, an economic crisis and an unemployment crisis.
One of these alone would be a hurdle for the government to overcome, but together they present us with unprecedented challenges that will require concerted effort, innovative thinking and speed.
And the answer, my friends, is literally staring us in the face.
We have everything we need to not only work our way out of the recession that is coming, but to actually improve the situation for every individual and elevate our standing internationally as well.
As a priority we must increase energy capacity and diversify our energy forms. We urgently need to move away from our dependence on finite fossil fuels. That is not a question, but how we do so and how we alleviate the impact of the decommissioning of coal mines is up for discussion.
The question on everyone's lips is where the jobs come from to replace the value chain created by the coal sector. We must ensure that the transition is just and that no one gets left behind, and in this renewable energy represents not only a sustainable source, it also creates jobs right across the value chain.
Take for example Solar PV. With some 11GW of coal to be decommissioned by 2030, renewable energy can step into the breach. Not only will the 16GW wind, 6GW solar PV utility and 6GW distributed generation more than compensate for the loss of coal, but will also create the much-needed increase in capacity we need to enable a functioning economy.
More importantly, the jobs created by these energy sources are plentiful. SAPVIA has commissioned a jobs study which we anticipate will report that utility scale solar PV projects can generate between 7-14 jobs per MW capacity, commercial projects between 10-12 jobs, while residential projects could create up to 14 jobs per MW.
These numbers are not to be sniffed at and we could use the current energy crisis as the impetus we need to make a step change and address the fundamental flaws in our infrastructure and economy.
Not least because, as we seek foreign investment to support our under-performing economy our downgraded status, and the lack of functioning infrastructure in place, means that any promises of investment will surely come to nothing.
Why would any investor set up when they cannot rely on a stable electrical supply to enable their business to function? And for us here in South Africa, we are continually hampered by load-shedding that leaves us unable to operate and sustain our own businesses.
And as the economy shrinks our unemployment levels soar. The young are especially affected by joblessness with almost 50% unemployment, but across the board we see too many people out of work and unable to lift themselves out of poverty and improve their circumstances.
As a result of the COVID-19 pandemic, unemployment levels will more than likely double, plunging us into an even deeper crisis.
So where do we go from here?
While it might sound like I am the harbinger of doom, I am not. I firmly believe that South Africa is on the cusp of seizing an unprecedented opportunity. We are sitting on the proverbial pot of gold at the end of the rainbow. A pot filled with natural, mineral and human resources.
I often say there is enough sun in Africa for us all, and when you add in our abundant wind, you can see that when it comes to natural resources our cup over-floweth. Harnessing these natural resources must be a priority if we are to emerge from the crisis.
But that’s not all we have right under our feet. Here in South Africa we have access to the very mineral resources required to create and store the energy created from renewable sources. Platinum and Vanadium are the fundamentals required for battery energy storage systems and we have them in abundance.
Even better, we can actually become not just energy independent but also an energy exporter, able to sell and improve our economic prosperity by shipping green energy abroad.
All of this would mean nothing if we didn’t have the people to set up the organisations to deliver the required renewable projects and maximise on the abundant resources we have available.
South Africa’s diverse population is filled with entrepreneurial, resourceful and multi-skilled individuals who are ready and waiting for the opportunity to drive forward our economy and put money into their own pockets and their families’.
So what’s holding us back?
We have a plan. The IRP has been out since October. But we’ve been on go-slow for too long.
Players in the renewables industry stand ready to sprint ahead, but are being held back by policy decisions and inertia that must be overcome if we are to emerge from this crisis with fewer people materially affected.
Some might ask where will the money for all this investment in infrastructure come from. We have so many options available to us. Local investors are chomping at the bit to play their part in driving the South African economy forward.
Unfortunately, South Africa is also one of the world’s worst CO2 polluters; fortunately this means that there are global investment programmes that we can avail of to finance our transition away from a carbon reliant economy.
So again you might ask, what is holding us back? Why are we missing this opportunity?
Because to me it is a complete no-brainer for us to put the foot down and turn ideas into action.
Energy, energy, energy needs to be the focus.
Without a robust energy infrastructure all will fail, from both a micro and macro perspective. We can only build the foundations of a prosperous economy if the building blocks are energy.
The SAPVIA jobs study has shown that the transition to a low carbon economy could create at a minimum 7 jobs per MW capacity. This is a conservative estimate and renewables has the potential to transform the jobs landscape with employment opportunities across the board, invigorating rural communities and offering access to new skills in localities where opportunity has been scarce.
We can and will address the re-skilling and up-skilling of individuals who are affected by the move away from coal and we can and will create an environment of proactive training and skills sharing that will ensure that every individual who wishes to participate in the new economy can do so.
Moving forward will require concerted effort from government, industry and individuals. We need to all focus on the prize ahead, which will benefit every single individual across South Africa.
At its heart this will be a just transition, where no one is left behind.
But it requires us to act now.
We cannot wait any longer.
South Africa's land reform programme was supposed to ensure that the impoverished get to own and work the land. Now, only the politically connected and economically included are benefitting.
The majority of actual beneficiaries of land reform to date are from the urban middle class, according to the Institute for Poverty, Land and Agrarian Studies (Plaas). The institute says this is "elite capture" of the land and has effectively redirected state resources, originally intended for the impoverished, to the better-off.
Public resources have been targeted at those who can afford to engage in the conventional practice of large-scale farming and the bias has been changed to pursue commercial success instead of land redistribution. The result is that land reform policy has been directed away from small-scale farmers, effectively defeating the aims of land redistribution spelled out in the Constitution. Pro-poor precepts of land reform have increasingly been abandoned in favour of redistributing land to those who have already proved that they have the resources to achieve commercial success in their farming ventures.
At a recent webinar to mark the 25th anniversary of Plaas, its founder, emeritus professor Ben Cousins, and its lead researcher on land reform, Farai Mtero, warned that land reform has become the preserve of the well-off, with 44% of beneficiaries being urban-based "business individuals, taxi or transport operators, former state bureaucrats and local politicians with access to material resources, knowledge and information". Their economic and political influence has enabled them to diversify into farming. And most of them, more than 80%, have been men.
The result is that only 18% of the 66 farms that Plaas studied were allocated to farm workers, many of whom encountered huge obstacles to success and have left their unsuccessful farms to seek employment elsewhere. A significant decline in systematic research on the outcomes of land reform, especially in the wake of the focus on Covid-19, says Plaas, confirms that elite capture in land redistribution has become firmly entrenched in South Africa.
Mtero and his team conducted intensive fieldwork at seven sites in five provinces: Eastern Cape, Free State, KwaZulu-Natal, North West and Western Cape. They found clear evidence pointing to skewed distribution of resources in the land redistribution programme. Plaas says the well-off now often qualify as beneficiaries due to "policy biases which prioritise commercial success as an overriding goal in land reform".
Mtero points out that this comes at a time of significant budget cuts in land reform programmes, alongside "a perennially low land reform budget, which has persistently been below 1% of the national total budget". He says existing land reform legislation, such as the Land Reform, Provision of Land and Assistance Act 126 of 1993, has proven to be "very inadequate when it comes to assuring adequate access to land in South Africa ... there are wide discretionary powers that are afforded to the administrative authorities in determining the allocation of resources. In other words, there is no formula to apportion the distribution of resources."
Mtero points out that the Constitution directs the state to broaden opportunities for people to derive benefits from land, and this should include the right "for people to produce their own food". "The right to land and the right to food [are] integrally linked. They are inseparable. They are interconnected," he says.
Elite capture of land
The Plaas research team gathered data on 66 land reform projects across the country and found that "land reform has shifted from being pro-poor to being pro-elite". The question, then, is: who has benefitted from land redistribution in South Africa? Who are the winners and who are the losers?
Elaborating on the concept of elite capture of the land, Mtero says, "[It] simply refers to the concentration of public resources in the hands of a few individuals, and usually it's the economically powerful and the politically influential individuals. Instead of broadening access to land and reconfiguring the unequal agrarian structure, a select group of black commercial farmers is promoted in land reform."
In the study, Mtero and his colleagues found that a majority of land recipients have basically dropped out of production as a result of a number of constraints on their farms, mainly lack of production support, poor infrastructure and rundown farm houses. These people, Mtero says, fall under the "dropping out category". This is largely on account of "powerful people intercept[ing] resources, so that they don't reach the rightful beneficiaries". In the absence of resources and support, many have abandoned the farms allocated to them and moved elsewhere to seek alternative livelihoods.
About 16% are still hanging on. "These are farmers who are just really maintaining a foothold on the farm," says Mtero. This in spite of the fact that they still lack support and resources, such as machinery and production chemicals.
Fewer than a fifth of farmers who were allocated land are able to reinvest any surplus.
The strategy used by the elite is to move in on new business that have nothing to do with land but which they can use to divert resources into acquiring land. This results in the concentration of resources in the hands of a few powerful individuals.
"There is the imposition of politically connected beneficiaries; there's the bailing out of politically connected elites who have accumulated debt in their farming enterprises; there's the withholding of leases; there's fronting; there's also the exerting of political pressure on lower level officials so that they comply and flout departmental regulations," says Mtero.
He says agribusiness is heavily involved in elite capture and describes how farms, even farm produce, are bought at a very low price and resold to the state at a very high price. Assets are transferred to partners or rented out to other farmers, including what he calls "strategic partners".
Capital is brought in from outside agriculture. "Politicians, civil servants, affluent professionals, have increasingly become more involved in agriculture. Across the continent, the middle class is moving into agriculture, diversifying their sources of income," Mtero says.
Instead of the agrarian structure being equitable, broad and inclusive, a few black commercial farmers now hold the concentration of public resources. What is lacking, he says, are the founding principles of land reform. The process must strive to apportion resources in an equitable manner, so that historically disadvantaged groups, the marginalised, women, the youth, farm workers and dwellers can also benefit from land reform in South Africa. "The accumulation that we see is not based on the inclusion of the smallholder farmers," says Mtero.
Approximately 250 000 small-scale farmers out of the total of 2.5 million small-scale farmers actually produce surplus food. The rest produce only for household consumption.
Job creation potential of land
Cousins' study, commissioned by the European Union's Capacity Building Programme for Employment Promotion (CBPEP) for the government's Technical Advice Committee, focuses on the potential for job creation on the land. It concludes that land set aside for reform would be more effectively utilised if it were further divided into smaller pockets enabling small-scale farming to play a significant role in tackling the challenges of unemployment and food security.
This research was based on a model in which 50% of available agricultural land was redistributed. Focusing on four local municipalities - in Eastern Cape, Limpopo, KwaZulu-Natal and Western Cape - it found that more than 23 000 jobs could be created in these municipalities.
As the Covid-19 pandemic rapidly corrodes employment, Cousins' project findings may suggest ways to get South Africans working towards self-sufficiency.
"Successful land reform and rural development could dramatically improve the quality of life of the many rural residents who make up one-third of South Africa's population, by boosting jobs, fostering economic opportunities and opening up access to markets," says Cousins.
By carefully selecting beneficiaries and strategically pairing them with the right farming opportunities, jobs would be created.
He found, for example, that KwaZulu-Natal's Inkosi Langalibalele Local Municipality, which focuses on livestock production, could increase employment by about 2 200 by farming mainly goats. Rearing goats is more labour-intensive than other forms of livestock farming. This would come at a cost of an estimated R325 000 per job, which includes the price of procuring the land.
In Limpopo, where high-value subtropical fruits and nuts are grown in a labour-intensive process, Cousins says, "We estimated the total new jobs which could be created through redistributing 50% of farms, commercial farms, would be around 17 000, at an overall cost per job of R418 000." These estimates include the cost of the land.
In the Western Cape's irrigated lands along the Oliphant's River where high-value crops such as grapes and vegetables are grown, Cousins estimated that about 3 198 new jobs could be created. The relatively high cost of R680 000 per job is due to the higher price of land in the area.
"The selection of beneficiaries and matching them with opportunities is absolutely key ... What is key here is to move away from the relatively wealthy and elite to those smallholder-based farmers, using mostly family labour and the small-scale commercial farmers who are going to invest in farming itself."
Source: New Frame
This article was first published by New Frame.
The Russian Direct Investment Fund (RDIF) and the ChemRar Group of companies have begun supplying the Avifavir anti-coronavirus drug to South Africa, RDIF announced in a press release.
According to the press release, Chromis, a joint venture established by RDIF, Russia’s sovereign wealth fund, and ChemRar Group, announced the signing of a distribution agreement with South Africa’s 3Sixty Biopharmaceuticals, a subsidiary of 3Sixty Global Solutions Group, to deliver Avifavir, the first Russian anti-COVID drug, to South Africa.
The RDIF stressed in the statement that South Africa has recently seen a rapid increase in the number of patients with coronavirus infection and in terms of infections, South Africa currently ranks 5th globally.
Earlier, 3Sixty Biopharmaceuticals signed an agreement to import Remdesivir to South Africa, which is injected intravenously in hospitals. However, because South Africa has a shortage of hospitals it needs other effective ways to treat patients with COVID-19, the RDIF said.
"Avifavir is effective in the early and middle stages of infection. Treatment of outpatients with Avifavir can help decrease the number of hospital admissions and reduce the burden on the healthcare system," the RDIF said.
"South Africa is the second BRICS state after Brazil to which RDIF and ChemRar have agreed to supply Avifavir. Thanks to the agreement with 3Sixty Biopharmaceuticals, doctors in South Africa will obtain an effective tool to treat patients at an early stage, preventing the progression of the disease and risk to the lives of patients," Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said as quoted by the press release.
Avifavir is produced by a joint venture of RDIF and ChemRar Group. It is one of the two registered COVID-19 drugs in the world. Avifavir has also become the first Favipiravir-based drug in the world approved for treatment of COVID-19. It has shown high efficacy in clinical trials, disrupting the reproduction mechanisms of coronavirus.
On May 29, Avifavir received a registration certificate from Russia’s Ministry of Health and became the first Russian drug approved for treatment of COVID-19 patients. On June 3, the Ministry of Health included Avifavir in the seventh edition of the guidelines for the prevention, diagnosis and treatment of the novel coronavirus infection.
The International Monetary Fund (IMF) has approved a R70 billion (US$4.3 billion) loan for South Africa to help the country manage the immediate consequences of the fallout from COVID-19. The Conversation Africa’s editor, Caroline Southey, asked Danny Bradlow to shed some light on what South Africans should expect.
What conditions has the IMF attached to the disbursement?
The IMF has provided the funding through its Rapid Financing Instrument. This is designed to support countries facing an urgent need for financing due to a crisis such as the COVID-19 pandemic. The goal is to help the country face the immediate financial consequences of the crisis. As a result the IMF provides the financing quickly and without strict conditions. The country merely needs to show the IMF that it is facing a crisis, that it will use the funds to deal with the crisis, that it will cooperate with the IMF to solve the balance of payments problems caused by the crisis and to describe the economic policies that it proposes to follow.
In some cases, the IMF may require the country to undertake certain policy actions before it can access the funds.
In South Africa’s case, the country’s payments problem relates to the fact that the economy is expected to contract by about 7% this year and the budget deficit to increase to about 15% of GDP. This means that the government will need to increase the amount it has to borrow. Given that it has been downgraded by credit rating agencies, and that the economy is in bad shape, there is a substantial risk that both local and foreign investors will have a limited appetite for South African debt. This will complicate the government’s efforts to finance the deficit.
The IMF loan helps resolve this problem.
South Africa provided the requisite information to the IMF in the form of a letter of intent signed by the minister of finance and the governor of the Reserve Bank. The letter has not yet been made public. But, according to the IMF press release, South Africa seems to have informed the IMF that it intends to take certain steps to stabilise the country’s finances. This means that the government will cut government spending to reduce its need to borrow. The current disputes over public sector wages and funding for state owned enterprises are examples of steps it could take. The government has also said it will improve the governance of state owned enterprises, and introduce reforms to stimulate a growing and inclusive economy. These reforms could include measures to improve competition in different sectors of the economy.
This suggests that the IMF is merely expecting the country to implement the policies already announced by the government.
How will the money be disbursed?
This kind of financing is provided in one payment. The IMF press statement doesn’t say when the funds will be disbursed but the goal is to make the funds available “rapidly”. That could be as early as August.
Once the funds are disbursed, the government will be free to spend them. According to the national treasury’s statement, it plans to use the money to support health and frontline services, to protect the vulnerable, drive job creation, support economic reform and stabilise public debt.
These are all consistent with the purpose of the Rapid Financing Instrument and the government’s stated intentions.
But these purposes are very general and we will need to see more detail about what exactly the government will spend the funds on.
What restrictions are there on the government’s ability to use the money?
The IMF loan does not impose any conditions over and above what is in South African law on how the funds can be used. Consequently, the funds will be subject to the same procurement and accounting requirements as all other budgetary expenditure.
In addition, the government will have to account in its future budget statements and reports to parliament on how the funds have been used. South Africans will also be able to demand that the government demonstrate that the funds have been spent consistently with the requirements of the constitution and bill of rights. This means the government should show that it is using the maximum available resources, from whatever source, to help realise all the rights that the constitution and South Africa’s international commitments grant to South Africans.
The IMF requires that South Africa repay the funds to the IMF over 20 months beginning 40 months after the loan is disbursed. This means that South Africans will need to ensure that the funds to repay the IMF are properly budgeted for.
What are the upsides of the loan?
The most important benefit is that South Africa is getting $4.2 billion at about 1.1% interest. This is a very cheap source of funds. If the government tried to raise the same amount either on domestic markets or from other international sources it would pay a considerably higher interest rate – the current rate for government bonds of comparable maturity is about 7%.
The second potential benefit is that the IMF loan will catalyse other funds for the country. In other words investors in South Africa and abroad will interpret the IMF’s action as an expression of support for South Africa and this will give them the confidence to invest in South African debt. Given that foreign investors hold about 30% of South African government’s rand denominated debt this boost to confidence could be important. It will both reduce the incentive of these investors to sell their government bonds, potentially pushing up interest rates, and enable the government to issue new debt if needed.
The third benefit is that by helping to stabilise South Africa’s situation, it will limit the damage that may be inflicted on the neighbouring countries. This, in turn, could help South African exports and thus help preserve jobs and income in South Africa.
What are the downsides?
The most significant downside is that the loan is denominated in foreign exchange. Thus South Africa has to bear the risk that if the rand depreciates, the loan and the interest on it will become more expensive. Given the state of the South African economy, this is not an insignificant risk.
But it’s important to keep in mind that the IMF denominates the loan and the repayment obligations in Special Drawing Rights. These are the IMF’s special form of money and its value is made up of a composite of a basket of currencies. These include the US dollar, the euro, the Japanese yen, the Chinese renminbi and the pound sterling. The values of these currencies tend to fluctuate against each other so that some appreciate while others depreciate. This helps mitigate the foreign exchange risk that South Africa must bear.
The second risk is that if South Africa does not use the funds from the IMF wisely, the country’s economic situation will deteriorate and it will struggle to pay back the debt.
If this happens or the pandemic lasts longer than anticipated, the country could be forced to seek additional support. In either case South Africa’s negotiating position would be significantly weaker.
The South African government has asked the International Monetary Fund (IMF) for $4.2 billion. The money would come from a facility that provides financing to countries
facing an urgent balance of payments need, without the need to have a full-fledged program in place.
According to the IMF managing director this means that the recipient can spend the money freely but should keep the receipts. Nevertheless, reports that South Africa has been negotiating a letter of intent with the IMF suggests that at least part of the financing will be linked to tougher IMF conditionalities.
The letter of intent is a letter from the government to the IMF in which it sets out the policies that it intends to implement to correct the macro-economic problems that caused it to seek IMF support. The IMF board decides to provide a country with financing on the basis of this letter. Its contents are the core of the conditionalities attached to IMF financing.
South Africans will learn the actual terms of the IMF financing at the end of July when its board of directors considers the country’s request for financial assistance.
But many have already made up their minds about this transaction. Some see it as a humiliating defeat in which the country will be forced to surrender its sovereignty and accept demeaning and immiserating economic policies. Others see it as the first step back from the abyss. They expect the IMF to force the country to take its medicine, as bitter as it may be, and regain economic health.
Both these views are overwrought and ultimately misleading. South Africa has more bargaining power in its relationship with the IMF than either view suggests. In the end, the terms of the IMF arrangement will depend on how effective the government was in its negotiations with the IMF.
To understand this, we need to answer three questions: Will South Africa have to surrender part of its sovereignty to the IMF? Is the IMF a particularly unreasonable negotiating partner? What responsibilities does the IMF have in negotiating the conditions?
The three questions
Will South Africa have to surrender part of its sovereignty to the IMF?
Sovereignty is a complicated and sensitive issue. It raises concerns about a state’s autonomy and ability to control its own destiny. One manifestation of sovereignty is a state’s decision to sign an international agreement. It shows that it is an actor on the international stage capable of reaching binding agreements with other subjects of international law – states and international organisations like the IMF.
Nevertheless, most international agreements restrict the sovereign’s freedom of action.
Consider, for example, the African Continental Free Trade Agreement. This agreement obliges South Africa to open – and keep open – its economy to trade with the rest of Africa. Before agreeing to this limitation on its freedom of action, South Africa negotiated with its co-signatories to minimise the cost of its commitments and maximise the benefits it expects from the arrangement.
South Africa’s arrangement with the IMF is similar. It is exercising its sovereign prerogatives when it decides to enter into an arrangement with the IMF. Before doing so, the country should negotiate for the best possible deal with the IMF.
Is the IMF a particularly unreasonable negotiating partner?
No bank, charitable foundation or international financial institution provides large amounts of financing without attaching conditions designed to ensure that the recipient uses the funds responsibly and pays them back as agreed. These conditions can range from demanding collateral to requiring promises that restrict the recipient’s future conduct in some way, such as limiting the ways in which it can use the funds.
The IMF conditions its financing on policy measures rather than on collateral or promises about the use of the funds. Historically, these conditions were ideologically driven and controversial. They included reducing the economic role of the state, making economies more market friendly and more globalised.
More recently the IMF leadership has incorporated issues such as inclusiveness, sustainability, social safety nets and gender parity.
It is not easy to predict what the exact mix of conditions will be in any particular case. The experience of other countries suggests that the actual mix is a negotiated outcome. Consequently, the conditions’ content and wording will depend on the country’s economic situation, its willingness to engage in tough negotiations with the IMF and on how effective it is in convincing the IMF of the validity of its positions.
What responsibilities does the IMF have in negotiating the conditions?
The IMF’s Articles of Agreement states that it should help countries
correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.
Thus, the IMF should demonstrate that whatever conditions it attaches to its funding are consistent with the recipient’s prosperity over the medium term. It must also show that it is not helping one IMF member state at the expense of its responsibilities to other member states.
In addition, the IMF, like any international organisation, should comply with applicable customary international law principles.
First, it must respect the sovereignty of its member states, including their laws. Second, it must respect their international legal obligations and not undermine their ability to meet these obligations. Third, the IMF, which is a specialised UN agency, should, pursuant to the Universal Declaration of Human Rights, [contribute to securing the
universal and effective recognition and observance" of human rights.
Based on these principles, the IMF has three responsibilities in regard to its arrangement with South Africa. First, it must ensure that the conditions attached to its financing are consistent with the South African constitution. In particular this means that the IMF must ensure that its conditionalities are consistent with the bill of rights in the constitution.
Second, the IMF must make sure that it does not require anything that is inconsistent with South Africa’s treaty commitments. These includes the state’s international human rights and environmental obligations. Out of respect for South African sovereignty, the IMF must defer to South Africa’s interpretation of these commitments, provided they are not inconsistent with international law.
Third, the IMF should explain how it has determined that the effect of its conditionalities is consistent with the applicable international legal principles. It is important to note that this requirement does not mean the IMF cannot require the state to take such actions as cutting its budget. But it does mean that the IMF has a responsibility to show that these cuts are the least cost way of achieving its objectives.
South Africans should not view the IMF either as the protagonist in its nightmares, or as its saviour. Instead the country should treat it as it would any other financial institution. It should demand that it live up to its own international responsibilities and demonstrate why it thinks its agreement with the government will benefit all South Africans.
When it comes to public transport, there is a responsibility both on operators and on commuters to make the required changes to their travel and commuting behaviour. This is the only way in which we can hope to keep coronavirus infection rates under control.
The comment comes from a manufacturer and distributor of cleaning products INDUSTROCLEAN, following an announcement made by President Ramaphosa on Sunday night on the regulations and limitations for long and short distance taxi journeys.
Emma Corder, Managing Director of INDUSTROCLEAN, says the reality is that public transport is a high-risk environment because of the number of people in a confined space with limited ventilation. There is also little if any access control to identify potentially sick commuters as well as a variety of common surfaces to touch such as handrails and doorknobs.
“All parties involved in public transport – taxi operators, bus companies, train operators and commuters – have to take the necessary precautions,” she says.
It starts with the wearing of a mask, explains Corder.
“This is a critical way to protect yourself and others, and it is equally important to wear it correctly. Masks block droplets from your sneezes and coughs and minimizes the likelihood of you touching your face and either spreading or coming into contact with the virus from other people.”
Eating requires removing the mask in a high-risk situation, so change habits and eat and drink before or after the ride. It will benefit others just as much as it helps you stay safe and virus free, she adds.
Secondly, it’s important that commuters sanitize their hands before and after each trip. Most transport operators provide hand sanitizers but having your own on hand is always advised.
“Carrying your own hand sanitizer will not only keep you safe but also provide peace of mind during your commute,” commented Corder. It is important that the sanitizers contain 70% alcohol.
Other tips include:
“We all have to remain vigilant as the number of coronavirus infections continue to rise. By following these simple daily guidelines we can all work together to keep the infection number as low as possible,” says Corder.
South African banks are looking at options ranging from debt consolidation to new ways of leveraging equity to avoid defaults when coronavirus-related debt relief measures end, industry officials said.
The banks gave customers in good standing relief on loans during the pandemic, including payment holidays of up to three months. But some consumers are still in trouble.
Some banks have offered extensions, while others like Capitec offered to refund interest accumulated during payment holidays.
Jacques Celliers, CEO of FirstRand’s retail division, said the lender was worried about the impact of job losses and wanted to avoid a wave of property evictions that would affect prices.
Mortgages make up 59% of 489 billion rand ($28.88 billion) in loans considered at risk, according to the Banking Association of South Africa (BASA).
“We’ll have to be very clever between all of us as to how do we navigate the property game,” Celliers said.
Options could include leveraging the equity in properties, including family members’ properties, in new ways, using pensions or granting term extensions on mortgages, he said.
Anton de Wet, chief client officer in Nedbank’s retail and business bank, said debt consolidation on home loans was a possibility and that term extensions, as well as other solutions, could be discussed with customers individually.
Standard Bank also said its solutions were based on individual clients’ circumstances. Absa said it would make an announcement on its post-debt relief plans in the near future.
Banks have already warned of rising bad loans: Capitec, for instance, said its credit impairment charge was 145% above expectation and it had increased provisions by 3.3 billion rand since February.
Some banks have applied a less-stringent approach to provisioning for loans granted relief after regulators allowed more flexibility in strict new accounting rules.
BASA managing director Bongiwe Kunene said higher provisions could be triggered if consumers can’t keep up with payments following the relief period.
There isn’t enough clinical research being done in Africa. Less than 2.5% of all clinical trials in the world are done on the continent. This is why South Africa’s involvement in one of the COVID-19 vaccine trials is so important. The country’s effort is being led by Professor Shabir Madhi. The Conversation Africa’s health and medicine editor Ina Skosana spoke to him about the process, and what can be expected. This is an edited version of a podcast, which you can listen to here.
How does the trial work?
The study that we embarked on in South Africa is for a vaccine that was developed by the Jenner Institute at the University of Oxford. It’s what is known as a non-replicating vector base COVID-19 vaccine.
The study came about when I reached out to the principal investigator at the University of Oxford whom I’ve known for over 20 years to find out if there was any interest on their part to include South Africa as part of the clinical development plan of the vaccine. The short answer was yes, provided we conducted the study on our own, including raising the funding to conduct the study.
The agreement with Oxford University preceded a subsequent agreement that they’ve entered into with AstraZeneca, the pharmaceutical company responsible for the further clinical development of the vaccine and future manufacturing. Pre-clinical studies of this vaccine candidate, including in non-human primates, have demonstrated initial evidence of the safety of this vaccine, as well as its ability to protect against COVID-19 disease.
Why South Africa?
The main reason is that the legacy of vaccines shows that they don’t necessarily work similarly across different populations. So if we want to be one of the early adopters, in terms of implementing vaccination against COVID-19 as part of our immunisation programme, we really need to generate data applicable to the local context.
A number of past vaccines have been shown to be highly efficacious in high income settings. But when they’ve gone on to be evaluated in low and middle income settings, they were found to be much less efficacious and, at times, not efficacious at all.
So if we want to make informed decisions at an early stage about whether these vaccines are going to be of benefit to people in South Africa, it’s critical that we undertake the clinical evaluation during the start of the entire programme, rather than at the latter stage. Waiting for results to come in from other studies would just lead to a lag in terms of the timing when vaccines would be introduced in South Africa as well as other low and middle income countries.
This has been the experience for many other life saving vaccines where it has taken between five and 20 years between their availability in high income countries and low middle income countries.
How are participants chosen for the trial?
Participation is completely voluntary.
Participants typically come to inquire about the study at clinics. We sit down with them and explain what the study is all about. What are the criteria for joining, what the expectations are of the volunteers because the study has quite intense expectations in terms of being able to come for regular visits. And they obviously need to be agreeable that when they do participate in the study, if they do develop signs and symptoms suggestive of COVID-19, that they would come forward to be investigated. This is critical for us to be able to determine whether this vaccine protects against COVID-19.
In addition, we would do some blood tests which ensures that they don’t have any sort of medical conditions that we would want to exclude.
If they’re found to be eligible, we randomly allocate them to one of two groups. Half will receive the vaccine, and the other half a control substance, which in our case, is a placebo. This is important for two reasons. The first is that it allows us to provide robust data in terms of the safety profile of the vaccine. And the control group enables us to determine whether the vaccine actually does have any impact in protecting against COVID-19.
Is there any reason people should be sceptical of the trial?
The short answer is no. The narratives that Africans are being used as guinea pigs is fundamentally incorrect. Rather a case of us wanting to generate robust scientific data to be able to make informed decisions about whether those vaccines actually do protect South Africans – and possibly Africans more generally – against developing COVID-19.
What are the next steps?
Right now we busy enrolling into the clinical trial. We’ve just reached the 200 mark out of the 2000 participants that we plan to enrol. We expect to have completed enrollment of all the volunteers over the next three to four weeks.
After that we will keep in touch with all of the participants at least every two weeks, including weekly SMS messages to determine whether or not experiencing any signs or symptoms of COVID-19. And if they are they will be asked to come in to be investigated to determine whether they are infected or not.
The endgame of the study is twofold. One is obviously to evaluate the safety of the vaccine, which is something that is ongoing almost on a daily basis.
The second part is that once we have about 42 individuals that have developed COVID-19 at least about a month after they’ve received the first dose of either the vaccine or the placebo we will then be able to do an analysis to determine whether the vaccine actually does protect against COVID-19. Specifically we will be testing if the vaccine efficacy is at least 60%; that is by being vaccinated your risk for developing COVID-19 will be reduced by at least 60% if not more.
We anticipate that we will probably be able to provide an answer as to whether this vaccine works and protects against COVID-19 by the end of November this year. In the worst case scenario it might take us a bit longer probably into the second quarter of next year.
What about managing expectations?
It’s very exciting to be involved in the sort of clinical development of the vaccine. But we need to be guarded in terms of our expectations as to what the result will be.
The fact that we’re embarking on a clinical trial doesn’t mean that we’re going to have a vaccine that’s going to protect against COVID-19.
Only about 10% of vaccines that go into clinical trials are eventually licensed for use. Right now there’ are approximately 200 vaccines that are being developed for COVID-19. It would be a huge accomplishment if, over the next 12 to 18 months, we are successful showing that even one out of every 20 (5%) of the vaccines that go into human studies are safe and provide some protection against COVID-19.
So even though there’s a huge amount of work taking place around vaccines, at least for the next 12 months the only tools that we’ve got available to us to try to protect people is adherence to physical distancing, the wearing of face masks in public spaces, avoiding mass gatherings, and making sure that you’re in adequately ventilated settings when in public spaces.
An analysis of financial inclusion in South Africa shows that affordability limits poor households’ access to formal financial services.
In our study, which looked at people’s use of financial goods and services between 2008 and 2015, we found that there was a general increase in use. But this was severely skewed to households with higher incomes.
Financial inclusion is broadly defined as the ability of people to access a range of affordable financial services. Among these are bank and savings accounts, loans and insurance products. Households that are financially excluded can’t take part in various forms of savings or wealth accumulation. These range from paying bills via direct debit to gaining favourable forms of credit.
The key policy implication of our findings is that more financial services should target low-income households. It should be a priority, given the high rate of exclusion among the poor.
Measuring use based on income
In general, there are four dimensions of financial inclusion: access, usage, quality and welfare. In our study, we focus on usage.
The financial services available in South Africa range from the well-known ones such as bank accounts and credit cards to the less well known ones such as hire purchase agreements and loans with “mashonisa” (loan sharks). In the South African context, a bank account remains the most used financial service. The number of unbanked adult individuals decreased from 17 million to 14 million between 2003 and 2017.
Our study is the first to thoroughly investigate the data from the National Income Dynamics Study. This study interviews the same households (if possible) every two years to track the changes in their income and non-income welfare over time.
One standout feature of the study is that it asks household heads about their usage of 14 financial services.
With the aid of some statistical techniques, we developed an aggregate financial usage index to investigate the profile of people who were comprehensively financially included.
What we found
The study found that the increased use of financial products and services was mostly associated with higher income households. The other characteristics of individuals and households that showed higher usage of financial services were: middle-aged, male, white, more educated, urban residents in Western Cape and Gauteng provinces. They came from bigger households with more employed members.
The likelihood of complete financial exclusion was more prevalent in poor rural households living in the Eastern Cape, KwaZulu-Natal and Limpopo provinces. Almost invariably, these households were made up of black people. The study also found that households with low real per capita income and fewer employed members were associated with greater likelihood of financial exclusion. Households bigger in size and headed by middle-aged people were associated with significantly higher financial inclusion and lower likelihood of complete financial exclusion.
The table below presents the proportion of households with at least one adult member having some form of the observed financial services. The results indicate that there has been an increase in the use of most financial services between waves 1 (2008) and 4 (2014/2015). In particular, the proportion of households that have at least one member with a bank account increased from almost 57% in wave 1 (2008) to over 78% by wave 4 (2014/2015), while those with a personal loan from a bank nearly doubled (8.63% to 16.41%) between the first (2008) and last waves (2014/2015).
We also considered variables from informal financial sources, such as loans from mashonisa (loan sharks), which have increased from 1.69% in wave 1 to 2.97% in wave 4, and loans from a family member, friend or employer, which increased from less than 2.85% to 8.76%. The use of other important services, such as hire purchase agreements, store cards and pension or retirement annuity plans, also increased across the four waves. There is a decrease in the use of some of the major financial services. For example, households where at least one member reported to have a home loan or bond were at 8.63% in wave 1 and gradually declined over the years, ending up at 5.68% by wave 4. There was also a slight decline in study loans and vehicle finance.
One finance source that particularly stands out is the use of credit cards, which decreased from 12.5% (wave 1) to 9.74% (wave 4).
In all four waves, households that were regarded as poor had relatively lower rates of use of each source of finance.
The figure below shows the proportion of households that were completely financially excluded (they didn’t have any of the 14 sources of finance). It more than halved between the first (36.77%) and fourth (16.40%) waves.
Supporting alternative, black finance access and usage is one possibility. This may range from low-cost bank accounts and products to advanced technologies that deliver financial services to the excluded in a swift, affordable and efficient manner.
Other countries can be used as a case study.
For instance, in India, the government and private providers have worked together to grow access to financial products such as insurance at a lower cost. The Indian government founded a social security fund that finances insurance companies to subsidise insurance premium policies offered to poorer households. This initiative has provided over two million poor Indians with access to insurance policies.
The promotion of money pools is also another option. A study conducted from five Caribbean countries showed that money pools, where poor people pool their money and create collective banks, helped people save. In Cameroon, the practice of lending and saving through kinship and financial networks was found to be more trusted than the mainstream.
This clearly calls for a proactive financial system that promotes such channels and one that is trusted by the general public, especially low-income earners.
But financial inclusion initiatives directed at the poor should be closely monitored. This is because they don’t always have a positive impact, particularly on poor people.