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S’Africa Overtakes Nigeria as Africa’s Biggest Economy

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In dollar terms, South Africa is once again the biggest economy on the African continent, a position it reclaimed from Nigeria.

This was attributed to the appreciation of the rand, South Africa’s currency, and the devaluation of the Nigerian naira following the introduction of a flexible foreign exchange regime.

Using the Gross Domestic Product (GDP) at the end of 2015 published by the International Monetary Fund, Bloomberg reported that the size of South Africa’s economy was $301 billion at the rand’s current exchange rate, while Nigeria’s GDP was put at $296 billion.

Bloomberg noted that the rand has gained more than 16 per cent against the US currency since the start of 2016, while in contrast, Nigeria’s naira has lost more than a third of its value.

In afternoon trade wednesday, the rand firmed by more than a per cent against the dollar, to R13.29.

Despite the switch, Nigeria and South Africa both face the risk of recession, having contracted in the first quarter of the year, according to Bloomberg.

Nigeria’s economy shrank by 0.4 per cent, while South Africa’s GDP contracted by 0.2 per cent.
Nigeria has suffered amid low oil prices, while South Africa is sensitive to shifts in the commodity cycle.

“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” an economist at Exotix Partners LLP, Alan Cameron said.

He said although Nigeria was unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone”.

Also, the Head of Research, SCM Capital Limited, Mr. Sewa Wusu, told THISDAY that the challenge of naira devaluation has caused a lot of economic challenges to the country, particularly with respect to the GDP.

“This should give policy makers the drive to rectify the forex challenges. Of course they have done their best by introducing a flexible exchange rate, but the issue is beyond that. The issue currently is about our forex earning potential.

“But I think the government is up to the challenge. I think we need a quick fix on the economy. That would help to support the naira and strengthen the currency,” Wusu added.

But the CEO, Cowry Asset Management Limited, Johnson Chukwu, said the priority of the government should be to restore economic growth, saying that if growth is not restored, the naira would continue to depreciate.

“When the economy begins to grow, the currency would adjust appropriately. So the focus of the government should be on whatever it intends to do to restore growth. We are heading into a recession and we should take steps to avoid depression.

“If growth is restored, eventually the economy would grow. There is no magic we can do for the naira to regain strength unless we restore growth,” Chukwu said in a phone interview with THISDAY.
The South African Reserve Bank forecasts zero growth for 2016, while unemployment still remains above 26 per cent. In July, South Africa stepped past Egypt as the continents’ second largest economy in dollar terms, having dropped behind the North African country earlier in the year.

Meanwhile, the naira dipped to N317 to the dollar on the interbank forex market yesterday, lower than the N312.50 from the previous day. On the parallel market, however, the naira firmed up slightly to N394 to the dollar, higher than the N395 on Tuesday.

The Central Bank of Nigeria intervened in the interbank forex market on Tuesday to help support the naira after it hit an all-time low of N350 to the dollar in thin trading on that day, traders had said.

The naira has been under pressure since the central bank floated the currency in June to allow it trade freely on the interbank market. The currency has been hit by a plunge in oil prices, Nigeria’s economic mainstay, which caused foreign investors to flee bond and equities markets.

The central bank last month told international money transfer operators to pay dollar proceeds from customer transfers into local commercial banks in naira, while selling the dollars themselves to bureau de change (BDC) outlets.

On Tuesday the central bank pegged the dollar transactions which banks can carry out with BDCs at $30,000 per week and set a margin for banks to sell dollar to currency outlets at not more than 1.5 per cent over the rate at which they bought.

The CBN hopes the move will help narrow the gulf between the official and black market rates and boost dollar liquidity, traders said.

The central bank set a margin of two per cent over the rate at which BDCs sourced dollars from banks as resale premium to customers and pegged BDC disbursement at $5,000 per transaction to cover travel allowance, medical bills and school fees.

The naira hit N400 against the dollar on the black market last week, weakened partly by dollar demand from individuals travelling abroad for their summer holidays, Reuters reported.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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British Petrol Stations Run Dry as Truck Driver Shortage Disrupts Supply Chain

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Gas station pumps ran dry in major British cities on Monday and vendors rationed sales as a shortage of truckers strained supply chains to breaking point in the world’s fifth-largest economy.

A dire post-Brexit shortage of lorry drivers revealed as the COVID-19 pandemic eases has sown chaos through British supply chains in everything from food to fuel, raising the spectre of disruptions and price rises in the run up to Christmas.

Drivers queued for hours to fill their cars at gas stations that were still serving fuel, albeit often rationed, and there were calls for National Health Service (NHS) workers to be given priority, to keep hospitals open as the pandemic continues.

“As pumps run dry there is a real risk that NHS staff won’t be able to do their jobs, and provide vital services and care to people who urgently need it,” said Dr Chaand Nagpaul, the British Medical Association’s council chair.

Pumps across British cities were either closed or had signs saying fuel was unavailable on Monday, Reuters reporters said, with some limiting the amount of fuel each customer could buy.

The Petrol Retailers Association (PRA), which represents independent fuel retailers which now account for 65% of all UK forecourts, said members had reported that 50% to 90% of pumps were dry in some areas.

“We need some calm,” Gordon Balmer, executive director of the PRA, who worked for BP (BP.L) for 30 years, told Reuters. “Please don’t panic buy: if people drain the network then it becomes a self-fulfilling prophecy.”

Royal Dutch Shell (RDSa.L) said it had seen higher than usual demand for fuel across its British network and that some sites were running low on some grades of fuel.

Environment Secretary George Eustice said there was no shortage of fuel, urged people to stop panic buying and said there were no plans to get the army to drive trucks, though the Ministry of Defence would help with trucker testing.

Hauliers, gas stations and retailers warned that there were no quick fixes, however, as the shortfall of truck drivers – estimated to be around 100,000 – was so acute, and because transporting fuel demands additional training and licensing.

BREXIT CRUNCH?

For months, supermarkets, processors and farmers have warned that a shortage of heavy goods vehicle (HGV) drivers was straining supply chains to breaking point – making it harder to get goods onto shelves.

Amid warnings of a dire winter ahead, some politicians in the European Union linked the supply chain stress to the 2016 Brexit referendum and Britain’s subsequent decision to seek a distant relationship with the bloc.

“The free movement of labour is part of the European Union, and we tried very hard to convince the British not to leave the Union,” said Olaf Scholz, the Social Democrat candidate to succeed Angela Merkel as German chancellor.

“They decided differently. I hope they will manage the problems coming from that,” Scholz said.

British ministers have insisted that Brexit is nothing to do with the current trucker shortage, though around 25,000 truckers returned to Europe before Brexit. Britain was also unable to test 40,000 drivers during COVID-19 lockdowns.

The government on Sunday announced a plan to issue temporary visas for 5,000 foreign truck drivers.

Edwin Atema, the head of research and enforcement at the Netherlands-based FNV union, told the BBC that EU drivers were unlikely to flock to Britain given the conditions on offer.

“The EU workers we speak to will not go to the UK for a short-term visa to help UK out of the shit they created themselves,” Atema said.

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Africa Needs $2 Trillion for Green Manufacturing, McKinsey Says

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Africa’s lack of industrial development puts it in a strong position to develop low-carbon manufacturing without the costs of transitioning from fossil fuel-based factories, McKinsey & Co. said.

In the process of striving toward net-zero emissions by 2050, the continent could create a net 3.8 million jobs, McKinsey said in its Africa’s Green Manufacturing Crossroads report, which was partially funded by the U.K. government and released Monday. However, to hit that level would require investment of $2 trillion in manufacturing and power.

“Africa has an opportunity to leapfrog high emitting manufacturing technologies and build a low-carbon manufacturing sector from the ground up,” Kartik Jayaram, a senior partner in McKinsey’s Nairobi office, said in a statement accompanying the report. “Africa could avoid future costs by sidestepping the expensive transition from fossil fuels to renewables.”

Still, without any commitments to decarbonize emissions from manufacturing, Africa could almost double to 830 megatons of carbon dioxide equivalent by 2050, McKinsey said.

“To change this trajectory, decisive action would be needed,” McKinsey said.

Of the 440 megatons of carbon dioxide equivalent currently produced by African manufacturing, almost a third comes from cement and 13% is emitted by coal-to-fuel plants, which are operated by Sasol Ltd. in South Africa, the consultancy said.

To fund the development, African countries would need to tap green finance instruments such as carbon credits, green bonds, green insurance and payment for performance linked to green outcomes, Mckinsey said.  To decarbonize existing industries, $600 billion would be needed while $1.4 trillion is needed for new green businesses, the consultancy said.

Carbon capture and storage and the production of green hydrogen are two technologies that could help the continent attain the target, it said.

New industries that could be developed range from bioethanol and cross-laminated timber to electric vehicles and green hydrogen, McKinsey said.

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UNGA 2021: The World has the Resources to End Hunger, African Development Bank Head tells UN Food Systems Summit

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“The world has the resources to end hunger,” African Development Bank President Dr. Akinwumi A. Adesina said in a message on the first day of the United Nations Food Systems Summit.

Convened by UN Secretary General António Guterres, the event is billed by its organisers as “a historic opportunity to empower all people to leverage the power of food systems to drive our recovery from the COVID-19 pandemic and get us back on track to achieve all 17 Sustainable Development Goals (SDGs) by 2030.”

The summit brings together thousands of youths, food producers, members of civil society, researchers, the private sector, women and indigenous people, all of whom are participating both physically and virtually in the summit. It is taking place on the sidelines of the 76th UN General Assembly in New York.

In his opening address, Guterres said the participants represented “energy, ideas and the willingness to create new partnerships,” and was a time to celebrate the dignity of those who produce and create the world’s food.

Decrying the 246 million people in Africa who go to bed daily without food and the continent’s 59 million stunted children as “morally and socially unacceptable,” Adesina said that delivering food security for Africa at greater scale called for prioritising technologies, climate and financing.

“The $33 billion per year required to free the world of hunger, is just 0.12% of $27 trillion that the world has deployed as stimulus to address the Covid-19 pandemic. I am confident that zero hunger can be achieved in Africa by 2030,“ Adesina said.

The African Development Bank’s Feed Africa Strategy, through its Technologies for African Agricultural Transformation program – widely known as TAAT – has provided 11 million farmers across 29 African countries with proven agricultural technologies for food security. Food production has expanded by 12 million metric tons while saving $814 million worth of food imports.

“We are well on our way to achieving our target of reaching 40 million farmers with modern and climate-resilient technologies in the next five years,” the African Development Bank chief added.

At a meeting on food security in Africa organized by the Bank and the International Fund for Agricultural Development (IFAD) earlier this year, 19 African heads of state called for the establishment of a facility for financing food security and nutrition in Africa.

“The Facility for Financing Food Security and Nutrition in Africa should be capitalized with at least $ 1 billion per year,” Adesina said.

The welfare of the 70% of Africa’s population working in agriculture and agribusiness is a barometer of the state of the continent’s health.  “If they aren’t doing well, then Africa isn’t doing well,” Rwandan president Paul Kagame said in a message at the official opening.

The many other heads of state and government who spoke on Thursday included, Prime Minister Mario Draghi of Italy, President Felix Antoine Tshisekedi of the Democratic Republic of Congo, Prime Minister Sheikh Hasina of Bangladesh and Prime Minister Jacinda Arden of New Zealand.

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