Economic disruption from uneven currency trading in Nigeria and continued electricity shortages in South Africa are set to hold back overall growth across sub-Saharan Africa this year, a Reuters poll of economists found on Thursday.
Since commodity prices collapsed four years ago, the region has largely missed out on the global economic recovery, with growth failing to return to rates seen in previous years and set to remain subdued.
The survey, taken in the past week, shows Nigeria, Africa’s most populous country and largest economy, is expected to grow 2.4 percent this year and 2.8 percent next year. South Africa, the number two economy on the continent, will grow 1.3 percent this year and 1.7 percent in 2020.
The 2019 forecasts for the two countries, which together drive around half of the wider region’s growth, are both 0.1 percentage points lower compared to the last survey for Nigeria in January and March’s poll for South Africa.
“Tepid growth in South Africa is one reason why we expect that growth across Sub-Saharan Africa will remain disappointing in 2019,” said John Ashbourne, an economist at Capital Economics in London.
Creaking infrastructure at South Africa’s state power utility Eskom is taking longer to fix than economists previously thought. Rolling power cuts as it struggles with capacity shortages threaten to stymie President Cyril Ramaphosa’s efforts to boost investments and economic growth.
In Nigeria, multiple currency exchange rates designed to deal with dollar shortages following a slump in global oil prices in 2015 have undermined its economy.
Ashbourne said that keeping the naira artificially strong in 2015 prevented the economy from adjusting to lower oil prices.
“The foreign exchange system was improved in 2016, when the Bank partially devalued the official rate and launched a new, ‘Nafex’ rate, now used for 70-80 percent of transactions. But it remains complex and open to abuse,” he said.
South Africa’s economy expanded 0.8 percent last year while Nigeria’s economy grew 1.9 percent, its fastest pace since the recession two years earlier.
The economists surveyed expect South Africa’s key interest rate to remain at 6.75 percent until next year while a separate Reuters poll last month suggested Nigeria’s central bank will wait until May 2020 before cutting its main rate by 25 basis points to 13.75 percent.
Ghana is forecast to grow 6.2 percent, faster than January’s survey suggested. Some analysts expect the exporter of cocoa, gold and more recently oil to be the top performer this year.
Growth in East Africa’s biggest economy Kenya is seen slowing to 5.8 percent growth in 2019, compared to a government estimate of 6.1 percent for 2018. The World Bank is more cautious and has warned growth could slow to 5.7 percent due to dry weather patterns.
The International Monetary Fund last week cut its growth projection for sub-Saharan Africa this year to 3.5 percent from 3.8 percent in October. The World Bank is again more pessimistic, with a 2.8 percent forecast.
A separate survey this month showed yield-hungry investors will trade risky emerging market currencies cautiously against the dollar this year despite the Federal Reserve’s recent dovish stance, though there is still demand for them.
Standard Chartered Africa research head Razia Khan expects the Fed’s more dovish tilt to have a positive impact on sub-Saharan African economies in the months to June, allowing stronger domestic recoveries. However, she was cautious about the likelihood of new easing cycles.
Zimbabwe's government has reacted swiftly and ordered bread-makers to reverse a 50% bread price hike that had been effected.
Information, Minister Monica Mutsvangwa told journalists at a post-Cabinet press briefing that government had frowned at the increase that she said suggested a sinister agenda to "dampen the mood of the nation" ahead of independence celebrations.
"The Minister of Industry and Commerce presented to Cabinet a letter by the Bakers Association of Zimbabwe, stating their intention to immediately hike the price of bread without any recourse to consultations with the Government as is the normal procedure," Mutsvangwa said.
Bakers increased the price of a loaf of bread from RTGS$2 to RTGS$3 early Tuesday following a decision by government to increase the price of grains by 70 percent last week.
Cabinet according to Mutsvangwa believed the increase had ulterior motives.
"Of particular concern to Cabinet also is the timing of the planned price increase, which is coming exactly two days before the national Independence celebrations. Such a move, whether by design or otherwise, certainly has the effect of dampening the mood of the nation.
"Furthermore, the unilateral action does not bode well to ongoing efforts by Government to engage in dialogue with all stakeholders, business included, with a view to creating a stable environment where businesses can compete and thrive," the government spokesperson said.
President Emmerson Mnangagwa according to Mutsvangwa remained open to discussions on a possible solution to the crisis.
"It can be recalled that on 29 October 2018, His Excellency President Emmerson Mnangagwa met with business leaders at State House where he stated that Government has an open door policy and stands ready for any engagement and consultations in order to ensure that the economy stabilises.
"As such, unilateral price hikes, particularly on basic commodities that our people cannot do without is not in consonance with the spirit of mutual engagement that Government is encouraging," she said.
Then the order: "Cabinet, therefore, calls on the Bakers Association of Zimbabwe to defer the planned hike in the price of bread in order to allow the normal mutual consultations to take place.
"The consultations are aimed at facilitating a clearer understanding of the issues of concern and to explore solutions thereto."
According to Mutsvangwa government also released 20 million litres of fuel into the market to ease crippling shortages that have seen the continuation of queues.
Source: New Zimbabwe
An illegal timber trade supply chain stretching from Chinese companies operating out of two countries in West Africa to major hardware stores located throughout the U.S. has been uncovered.
A four-year investigation by the Washington, D.C.-based Environmental Investigation Agency (EIA) uncovered claims of evidence of illegal behavior by the Chinese-owned Dejia Group (DG). They include concessions obtained through bribery, over-harvesting of trees, and tax evasion.
One exchange related in the report between EIA undercover investigators and a DG representative explains how suitcases filled with about $172,000 was handed to a minister for the Republic of Congo’s government on more than one occasion.
Records obtained by the EIA also suggest that, in Gabon, DG affiliate SICOFOR overharvested an estimated 15,000 trees between 2013 and 2016, of which more than one-third were species listed as either vulnerable or endangered by the IUCN.
The trade highlighted by the EIA is based around a timber called okoumé (Aucoumea klaineana), derived from a hardwood tree that grows only in Gabon, the Republic of Congo (ROC), Equatorial Guinea and a very small area of Cameroon. It is used as a veneer, the hard outer layer of plywood, and for panels or sidings used in home construction and renovation.
In its report into what it terms a “toxic trade,” the EIA identifies companies affiliated to DG as the primary players in the illegal activity.
It also names Evergreen Hardwoods and Cornerstone Forest Products, which imported okoumé into the U.S., and Roseburg, which processed the plywood, as being complicit in the illegality by allegedly failing to properly research the origin of the wood as they are required to under the U.S. Lacey Act. The wood siding products ended up in retailers such Home Depot and Menard’s, and were marketed as being environmentally friendly.
“The buyer [for both Evergreen and Cornerstone], Jim Green, positioned himself as the key interface between the U.S. and Africa,” EIA director of forest campaigns Lisa Handy told Mongabay. “All the okoumé was funneled through him, and he knew very well — that’s what he told us — from whom he was buying and what their practices were, and how he too played a role in the corruption as an accessory.”
Mongabay contacted Evergreen Hardwoods multiple times but did not receive a response. Menard’s also did not provide any response to the EIA investigation when requested. Green told Oregon Public Broadcasting in an email, “I have not been to Africa in 15 years and have never visited Republic of Congo.”
U.S. Immigration and Customs Enforcement (ICE) is now conducting an investigation into the allegations contained in the EIA’s report. Roseburg told Mongabay in a statement that it was a “cooperating witness” in the investigation, that it had had no knowledge of any illegal activity by the importing companies, and that it had carried out due diligence on the legality of the timber.
“Roseburg did take proactive steps to confirm that the okoumé supply chain complied with the Lacey Act,” corporate communications director Rebecca Taylor said in a statement. “[We] engaged third-party experts DoubleHelix Tracking Technologies to evaluate the importers’ compliance and to perform on-site, in-person audits of their supply chains.”
But Handy said they had not been sufficiently thorough in their checks.
“Roseburg knew they were high-risk countries — Congo is perceived as the 15th most corrupt country on Earth — and they told us, ‘Well, that’s the reason why we keep Evergreen between [us and the suppliers in Africa], because if anything happens, that’s going to be on them,’” Handy said.
Since the allegations surfaced, Roseburg has suspended the sale and manufacturing of its Breckenridge siding as well as its relationship with both Evergreen and Cornerstone.
In addition to the investigation in the U.S., which Handy said she was hopeful would result in prosecutions, the EIA is also waiting to see what happens in Gabon and the ROC as a result of its revelations.
“We feel something may happen in Gabon,” Handy said. “Last year, Gabon had a major crackdown on illegal logging, and it resulted in 13 companies paying fines of some $14 million. This had never been done in the Congo Basin before. An NGO we collaborate with over there has brought the report to the attention of the Ministry of Forestry, so perhaps the same level of action may happen again.”
The ROC does not have the same record of addressing illegal logging as Gabon, but given that it has a Voluntary Partnership Agreement with the EU to address it, Handy said she was hopeful that some pressure could be applied on the government to clean up the industry. The EIA has also handed its report to major donors to West Africa, including the World Bank, USAID and the U.K.’s Department for International Development.
Simon Counsell, director of the Rainforest Foundation, told Mongabay that the EIA report reflected how much of the process of obtaining and operating logging concessions across the Congo Basin was “opaque and corrupt.”
“It points to the need for much stronger anti-illegality measures within, for example, the EU Timber Regulation and Lacey Act, such that they take into account the logging concession allocation process, not just the trade from it once it’s already operating,” Counsell said.
It is in South Africa's interest to see a thriving and stable Zimbabwe. A collapse of its neighbour's economy would probably see an influx of legal and illegal migrants into South Africa – a situation that could fuel xenophobia and further strain service delivery.
Yet there has been a bewildering contrast between South Africa's messages of solidarity and its inaction where it matters. On the one hand, President Cyril Ramaphosa's government has maintained its support for President Emmerson Mnangagwa's administration. South Africa was the first to congratulate him on his electoral victory in August 2018. This has been followed by spirited calls for the unconditional lifting of sanctions and restrictive measures placed on Zimbabwe nearly two decades ago.
On the other hand, South Africa has come short of providing what Mnangagwa urgently needs: a financial bailout. The just-ended Zimbabwe-South Africa Bi-National Commission session – the third since the inaugural session in 2016 – might have put paid to the many rumours that South Africa would provide Zimbabwe with a much-needed cash injection. Instead, it ended with a joint communiqué that reads more like a political statement of solidarity with little in terms of relief for its cash-strapped neighbour.
Established during the tenure of former presidents Robert Mugabe and Jacob Zuma, the commission has been little more than an annual symbolic gesture of friendship between the two. Ramaphosa's team sent ahead of the Bi-National Commission engaged in robust meetings with key players in the private and public sectors presumably to try to establish how South Africa could help its beleaguered neighbour.
While the decision to not bail Zimbabwe out is probably based on practical economic calculations, the anti-sanctions rhetoric is a different matter. A cursory view of the anti-sanctions call might lead one to the conclusion that lifting sanctions would grant Zimbabwe access to lines of credit from the international market and thereby ameliorate its currency crisis.
However, considerations for South Africa are as much political as they are economic. Sanctions imposed on Zimbabwe by Western countries relate to the blatant human rights abuses of the Mugabe regime. South Africa's anti-sanctions position could also be interpreted as a general stance – shared by the wider Southern African Development Corporation (SADC) region – against sanctions in general.
The ‘sanctions must fall' mantra should be seen as a distraction from the economic mismanagement of the past three decades. Even Mnangagwa has said the ZANU-PF government shouldn't use sanctions as an excuse for the country's economic woes.
So why has South Africa taken up the ‘sanctions must fall' mantra while staying silent on the human rights abuses, killing of protesters and a heavy-handed clampdown on civic space during the January fuel hike protests?
South Africa is wary of being perceived as aligning with the West, especially the United States (US). The US government has been vocal and forthright against the Mnangagwa regime's use of force against protesters to the extent of renewing sanctions for another year.
Offering the Zimbabwe government unqualified support becomes an opportunity for South Africa to demonstrate its international foreign policy independence and to shore up against "invasive" Western neo-colonial tendencies.
At the same time, well aware of the depth of Zimbabwe's economic and currency crises, South Africa knows that giving bilateral aid of $1.2-billion wouldn't necessarily stabilise its neighbour's economy. Without addressing the enduring currency crisis, any bailout would be sucked into an economic black hole just to have Zimbabwe requiring more. The shortage of hard currency only begets more shortages.
The Zimbabwean government needs foreign currency for consumer goods, including for the procurement of fuel and wheat, as well as to service debt, which the finance minister estimates to be around $16bn.
The recently introduced interbank foreign currency trading system has so far not been able to address the foreign currency shortage. The real-time gross settlement (RTGS) dollar continues a steady depreciation against the US dollar from the 1:2.5 at its introduction to 1:3 in six weeks.
Worse, the floating of the RTGS dollar has not engendered confidence in the monetary system. On the black market, the RTGS dollar continues to plummet weekly and inflation is on the rise. Prices of basic commodities such as bread have risen steeply. There is still no guarantee against arbitrage and policy somersaulting from the cornered government.
Further, a bailout would put South Africa in an invidious position. South Africa is itself in the throes of economic stagnation emerging from sluggish growth of 0.8% in 2018. The country's unemployment rate is currently hovering above 25% – one of the highest in the world.
The recent worsening of power cuts only plays into an already volatile domestic situation. Any talk of bailing Zimbabwe out would probably elicit a backlash from the restive population already prone to xenophobic tendencies towards citizens from neighbouring states. The African National Congress can ill afford to antagonise citizens any more in an election year.
Strong parallels can be drawn with the situation in South America where South Africa has been supporting Nicolás Maduro Moros's government in Venezuela against the machinations of the US's Donald Trump administration.
While the matter forming the basis of the Zimbabwe crisis is different from Venezuela, the geopolitical script plays out in the same way. South Africa is choosing the course of solidarity with the "besieged".
As Zimbabwe's economic and political situation continues to teeter on the verge of chaos its southern neighbour seems to be taking a considered approach to the crisis. The dilemma for SA is that without a cash infusion, the economic crisis will worsen, and a worsening economic situation will probably result in more protest and civil unrest. The Mnangagwa administration has already shown itself only too eager to approach protest with force and brutality.
This pushes South Africa further into an unenviable choice between principle, as enshrined in its Constitution, and the realities of geopolitics. It remains to be seen for how long South Africa will give Zimbabwe a palliative response before the wheels come off.
Ringisai Chikohomero is a researcher, Peace Operations and Peace Building Programme, Pretoria
South Africa’s Constitutional Court has delivered a unanimous judgment that certain parts of the country’s drug laws are inconsistent with the right to privacy. Adults are now allowed to use, possess or cultivate cannabis in private for their own personal consumption.
The court gave some broad guidelines about what this would mean in practice. But it has left the details to Parliament.
This is an important victory for human rights and common sense. It also matters to the almost 300 000 people who are arrested for drug-related crimes each year, mostly for possession of small amounts of cannabis.
But there is much more work to be done to design a humane and rational system to regulate cannabis. Some of the key issues that will need to be addressed include how far privacy extends, exactly what products should be regulated, how non-users will be protected, and what to do about the existing criminal market.
The measure of privacy
Significantly, this change came after a legal challenge in support of the right to privacy. It did not result from a popular vote or from a shift in government policy, based on public health principles. This means the new regulatory system will need to look quite different to two of the existing models in the world.
The first is the commercialised system developing in parts of the US, where businesses sell cannabis in much the same way as alcohol. The other is the medicalised model of Uruguay, where cannabis can be bought without prescription at pharmacies.
Other countries can offer more appropriate comparisons. Jamaica has set its limits at possession of 2oz (56.6g) and the cultivation of up to five plants on any premises. Colombia’s limits are 20g or up to 20 plants. Spain’s limits are rather less clear, and must take into account the circumstances of the case, but plants should not be visible from the street.
An important question is whether South Africa will allow cannabis social clubs – structures for the non-profit production and distribution of cannabis among a closed group of adults. This is the “Spanish model”, which is currently in a precarious legal position at home but enjoys significant expert support, either as a permanent position or as a transitional model while more formally regulated production systems are developed. Such clubs should enjoy the same protection on the basis of privacy, although their regulation introduces additional complications.
Parliamentarians will also have to decide on what substances will be included in the law. Will it extend to hashish (a concentrated resin made from cannabis), cannabis oils, or synthetic cannabinoids? And should the court’s reasoning not be extended to other substances that have been judged by experts to present less harm than alcohol?
Preventing harm to others
The prevention of impaired driving is a reasonable concern. Given the difficulty in physiologically measuring cannabis intoxication, there will be a need to formalise rules on field sobriety testing. Parliament will have to keep abreast of emerging evidence. Clear public messaging should be developed to communicate that cannabis-impaired driving is illegal and risky.
Another concern is the protection of minors. Regular cannabis use does seem to pose risks for adolescent brain development, so it is important that the country works out how best to discourage its consumption among or near children.
One criticism of the private cultivation and use model – such as the one in Spain – is that it forgoes the possible benefits of a more open regulated and commercialised system. This includes prospects for purity and potency controls, economic and employment growth, and tax revenues that can be earmarked for programmes to help mitigate cannabis-related risks and harms.
The approach envisioned by the South African Constitutional Court also has the disadvantage that it leaves intact the criminal market that supplies those who don’t meet its restrictions. Not every prospective cannabis user will be willing or reasonably able to grow their own plants or to join a cannabis club. So, there will still be a role for organised criminal groups to reap profits.
And there will still be a need for police enforcement. But it will involve even greater scope for discretion and possible corruption. The country will need to guard against a “net-widening” effect, where policy liberalisation ends up drawing even more people into conflict with the criminal justice system. South Africa will also need to interrogate whether it is still justifiable for people to be jailed for supplying a product that consumers have a right to possess.
Finally, there is the question of the many people who have been criminalised for an activity that is now considered an expression of a basic constitutional right. The court was clear that its judgment was not to be applied retrospectively. However, other jurisdictions – as in the US – have already begun offering pardons on request or discussing whether pardons should happen en masse.
Not a free-for-all, but an excellent start
Those cannabis campaigners and aficionados who were hoping for a Colorado-style boom in consumer options would have been disappointed. On balance, however, this may be a good thing, at least in the interim. Many policy reform experts warn of the dangers of over-commercialisation.
Putting the supply of a risky product in the hands of profit-maximising private interests with little interest in public health is not a recipe for success. In this, the history of alcohol and tobacco control provide a useful lesson.