Tag Archive for: World Bank

Andrew Stegmann

World Bank Cuts South African GDP Growth Forecast Due to Eskom’s Load Shedding

The World Bank is the first key institution to cut its economic growth forecast for South Africa to below 1% for 2020 due to electricity supply concerns.

It now expects the economy to expand by 0.9% this year, the Washington-based lender said Wednesday in its Global Economic Prospects report. That compares with an estimate of 1% in its Africa Pulse report released in October and is well below government forecasts. Its outlook for Africa’s most-industrialized economy is “markedly weaker” because it sees electricity supply and infrastructure constraints inhibiting domestic growth with weaker global economic conditions weighing on export demand.

The bank’s revision comes as Eskom which generates about 95% of the country’s electricity, resumes rolling blackouts earlier than expected. The power cuts threaten to drag on an economy stuck in the longest downward cycle since 1945 and that hasn’t expanded by more than 2% annually since 2013.

The debt-laden power utility, described by Goldman Sachs Group as the biggest threat to South Africa’s economy, put the country at risk of a second recession in as many years after it implemented the most severe power cuts to date in December. Gross domestic product growth likely slowed to 0.4% in 2019, the World Bank said.

The World Bank sees GDP growth averaging 1.4% in 2021-22 if President Cyril Ramaphosa’s administration is able to ramp up structural reforms and address policy uncertainty, and if there’s a recovery in public and private sector investment.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Andrew Stegmann

HSEVEN Launches Africa Startup Acceleration Program, With Up To €1.5 Million Investment Per Business

HSEVEN, Africa’s largest accelerator is launching “HSEVEN DISRUPT AFRICA”, an ambitious startup acceleration program designed for entrepreneurs of the Moroccan and African diaspora.

The 6-month program will provide a seed investment of €150,000 plus an eventual investment of €500,000 to €1.5 million.

HSEVEN DISRUPT AFRICA is designed to support exceptional entrepreneurs building high-impact startups, and targets seed and early stage startups with 2 to 5 founders that are eager to impact Africa through innovative services, products and business models.

The program will start with a global call for applications, followed by an international selection roadshow in New York, Montréal, San Francisco, Shanghai, Dubaï, Londres, Amsterdam, Paris, Casablanca.

The selected startups will benefit from a seed investment of €150,000 at the beginning of the program for 5 to 7% equity, then an eventual investment of €500,000 to €1.5 million at the end of the program. These investments will be granted through a partnership with the venture capital firm Azur Partners. The program will also benefit from funding of the Dutch Good Growth Fund (DGGF) and the Innov-Invest program of the Caisse Centrale de Garantie (CCG) with the support of the World Bank.

The startups will be given strategic advice and expertise, access to key networks and capital through our partners Azur Partners, Fabernovel, Strategy&, PricewaterhouseCoopers (PwC), l’École Centrale, Amazon Web Services and the top 50 Venture Capital firms interested by Africa. They will also benefit from tailored mentoring with +350 Moroccan and international mentors. For more information, visit: www.hseven.co

The startups will be located at HSEVEN’s 12,000 ft² campus in the heart of the Marina of Casablanca. The call for applications is now open and 10 startups will be selected to take part in the program.

“We will bring the best Moroccan, African, and African-at-heart entrepreneurs from all over the world to build impactful world-class African startups” said Amine Al-Hazzaz, Founder & CEO of HSEVEN.

To read more about HSEVEN, click here. For applications for the startup program, click here.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Andrew Stegmann

World Bank: Côte d’Ivoire’s Economic Outlook, and Why it’s Time to Produce Cocoa Inclusively and Responsibly

The World Bank ninth economic update for Côte d’Ivoire confirms the positive trends noted in the past year but qualifies this assessment because of several risk factors, in particular the uncertainty linked to the 2020 presidential elections.

The study also proposes approaches to modernize the cocoa sector, which is currently not inclusive or environmentally responsible. Below are the eight takeaways:

1. Overall, the economy is in good shape and is maintaining its lead in the region and on the continent

With a growth rate of 7.4% in 2018 and a projected rate of 7.2% in 2019, placing it slightly behind Ethiopia and ahead of Rwanda and Senegal, Côte d’Ivoire continues to be a leader in economic activity on the continent.

The prudent monetary policy of the Central Bank of West African States is expected to keep inflation in check (at roughly 0.3%). Facilitating this are, in particular, stable food prices, lower telecommunications prices, and a modest increase in fuel prices.

2. The economic landscape has changed, and the private sector is once again the main engine of growth

The private sector regained its momentum following a decline in 2016 and 2017, but did so in a very uneven manner. The agricultural sector slowed significantly, especially cocoa and cashew production, which increased by a mere 4% and 7% respectively in 2018, compared to 24% and 9% in 2017. These figures serve as a reminder of this sector’s vulnerability to climate shocks and terms of trade, which were less favorable in 2018.

Growth was, however, robust in the telecommunications, agribusiness, and construction sectors. Furthermore, enterprise investment was greater in 2018, no doubt as a result of the reforms aimed at improving the business climate and perhaps the desire to make investments ahead of the October 2020 presidential elections.

3. Private sector momentum offset the negative impact of the external sector on growth

Following an exceptionally favorable year in 2017, the current account deficit increased from 2.7% to 4.7% of GDP between 2017 and 2018, with the country’s trade flows, which are relatively undiversified, remaining exposed to price changes in a number of commodities (in particular cocoa and oil).

However, the increase in foreign direct investment (FDI), in particular in agribusiness, and the government issuance in March 2018 of international bonds worth over $2 billion comfortably financed this current account deficit.

4. The government deficit was reduced; the trade-off was major budget cuts and a decline in public investment

Between 2017 and 2018, the government deficit fell from 4.5% to 4% of GDP, a path on which the Government would like to continue in order to bring this figure to 3% in 2019, thus meeting the targets set by the West African Economic and Monetary Union (WAEMU). However, this adjustment was based solely on a reduction in public expenditure, in particular government investment, which has not supported the Ivorian economy as much as it did in the past.

Going forward, the Government intends to be more selective in terms of the quality of the projects in which it invests and to make the development of private sector partnerships a priority. It will also have to ensure that government debt is controlled, in particular commercial borrowing, including borrowing by public enterprises and government agencies.

5. The Government is not increasing its tax revenue

Tax revenue declined by 0.7% of GDP between 2012 and 2018, contrary to the trend seen in other countries of the region such as Senegal and Togo, which have the same taxation system. This decline is a consequence of the slowdown in the extractive sector, a tax policy aimed at counteracting the effect of international price changes in cocoa and oil on the local economy, and low VAT revenue.

Although several tax administration reforms to facilitate tax procedures and tax collection such as the introduction of digital platforms and the streamlining of certain procedures should ultimately boost tax revenue, the Government will have to increase VAT collection, as this revenue from domestic transactions is among the lowest in the world. If the authorities managed to collect as much VAT as Cameroon or Cabo Verde, Côte d’Ivoire would be able to increase its tax revenue by two percentage points of GDP.

6. Côte d’Ivoire is changing but its agricultural sector remains under-productive and insufficiently diversified

While agricultural activity is declining in Côte d’Ivoire, more than half of its residents continue to depend on a primary activity for their livelihood. However, agriculture has contributed a mere 1.2 percentage points of GDP growth (or 14%) since the country’s improved economic situation starting in 2012. While many factors account for this, they are rooted in the low yield of most food and cash crops and the failure to diversify and move toward higher value-added activities.

To address this, the Government has made the modernization of the agricultural sector a priority in its new national development strategy, in particular the cocoa sector, which mobilizes more than five million persons and is by far the country’s biggest foreign exchange earner.

7. The cocoa sector in Côte d’Ivoire faces social and environmental challenges

Côte d’Ivoire supplies 40% of the world’s cocoa but only receives between 5% and 7% of the profit generated by this sector globally. This profit is essentially concentrated in the processing and distribution phases. As a result, although this sector employs close to one million producers and provides income to one-fifth of the Ivorian population, it has not contributed much to the country’s wealth.

It is estimated that 54.9% of Ivorian cocoa producers and their families currently live below the poverty line. Added to this is the fact that in the past two decades, consumers have gained awareness of environmental and social issues and have become more demanding, following numerous investigations that have shed light on the negative role played by cocoa production in terms of deforestation as well as child labor, which is often performed under extremely difficult working conditions on the cocoa plantations.

8. Three approaches to make the cocoa sector in Côte d’Ivoire more inclusive and responsible

To transform its cocoa sector, Côte d’Ivoire would first have to carry out a technological revolution to increase yield in order to promote reforestation and boost producer income. Traceability systems would then have to be instituted to offer consumers a guarantee of responsible cocoa production. Lastly, the sector would have to develop the local cocoa processing industry to meet local demand, design a label of origin that is more attractive to consumers, and take advantage of demand growth in Asia for intermediate products.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: Clem Onojeghuo [1], [2].

Andrew Stegmann
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United States Tells African Countries Not To Expect Debt Relief

African countries running up debt they won’t be able to pay back, including to China, should not expect to be bailed out by western-sponsored debt relief, the United States’ top Africa diplomat warned.

The International Monetary Fund and World Bank began the Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to help the world’s poorest countries clear billions of dollars worth of unsustainable debt.

But Africa is facing another potential debt crisis today, with around 40 percent of low-income countries in the region now in debt distress or at high risk of it, according to an IMF report released a year ago.

“We went through, just in the last 20 years, this big debt forgiveness for a lot of African countries,” said U.S. Assistant Secretary of State for African Affairs Tibor Nagy, referring to the HIPC programme.

“Now all of a sudden are we going to go through another cycle of that? … I certainly would not be sympathetic, and I don’t think my administration would be sympathetic to that kind of situation,” he told reporters in Pretoria, South Africa, recently.

Under Donald Trump’s administration, the United States has criticised China for pushing poor countries into debt, mainly through lending for large-scale infrastructure projects. It has warned those nations risk losing control of strategic assets if they can’t repay the Chinese loans.

Sri Lanka formally handed over commercial activities in its main southern port in the town of Hambantota to a Chinese company in 2017 as part of a plan to convert $6 billion (£4.7 billion) of loans that Sri Lanka owes China into equity.

U.S. officials have warned that a strategic port in the tiny Horn of Africa nation of Djibouti could be next, a prospect the government there has denied.

From 2000 to 2016, China loaned around $125 billion to the continent, according to data from the China-Africa Research Initiative at Washington’s Johns Hopkins University School of Advanced International Studies.

And a number of African countries form part of China’s $126 billion Belt and Road Initiative to link China by sea and land through an infrastructure network with southeast and central Asia, the Middle East, Europe and Africa.

China has rejected criticism of its lending in Africa. And debt campaigners point to the fact that much of Africa’s current debt load consists of commercial debt to western financial institutions or Eurobonds, which are more expensive to service than Chinese loans.

“All of these countries are sovereign states, so it’s for them to decide who they want to trade with,” Nagy said. “We feel we have an obligation to point out to them when we believe they are getting into severe economic difficulties.”

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].