Fostering international development has long been viewed as central to the moral, humanitarian, strategic and security interests of the United States.
In particular, there is one area where the United States has been a leader in development assistance — providing trade preferences to African countries, most of which are low-income countries.
This has been achieved through the African Growth and Opportunity Act (AGOA), which was initially passed by U.S. Congress in 2000 and signed into law by President Bill Clinton. The legislation was deliberately renewed by both Presidents George W. Bush and Barack Obama.
AGOA demonstrates the power of U.S. trade policy to bring about significant change in Africa through measures that, while trivial from the American perspective, can have a sizeable impact in Africa. Specifically, AGOA allows for eligible African countries to export a long list of goods to the United States without paying the import tariffs that most countries must pay and without being subject to import quota restrictions.
The beauty of AGOA lies in the fact that it costs the U.S. very little to implement in terms of lost tariff revenue and lost market share. In fact, it’s fair to say that the implementation of AGOA has had zero impact on the U.S. economy, and close to zero in terms of American tariff revenues.
At the same time, however, AGOA has resulted in an increase in exports in some key products that have been massive when measured by African standards.
For example, apparel exports, which have historically been an important stepping stone in the process of development for virtually all countries, increased on average by 42 per cent under AGOA.
As soon as one considers the short-term and long-term good will, as well as trading relationships, that AGOA has nurtured between the U.S. and Africa, it has undoubtedly been an example of a win-win scenario for both the United States and Africa.
Shift away from human rights concerns
Importantly, not all African countries have been eligible for AGOA trade preferences. Practically speaking, countries found lacking in basic protection of human rights and countries that have moved away from democracy have either not been granted AGOA eligibility or have been removed from AGOA eligibility.
Specifically, five countries have been removed, either temporarily or as of now, after military coups or coups d’état: Mauritania, Guinea, Madagascar, Mali and Guinea-Bissau.
Côte d’Ivoire was once removed following the failure to reach a peace agreement and the failure to hold elections. Other countries, none of which are paragons of good government, have been removed for different periods related to human rights abuses of varying kinds (Democratic Republic of the Congo, The Gambia, South Sudan, Swaziland and Burundi).
These actions have been consistent with the promotion of U.S. values of human rights and democracy worldwide, and consistent with historic aspirations of American foreign policy. In a single exception to the above pattern, suspension of agricultural benefits — not removal — was threatened for South Africa in 2015 in a dispute over chickens, but this suspension wasn’t implemented.
Under the current U.S. administration of President Donald Trump, however, this philosophy and approach has shifted.
The United States is currently in the process of suspending Rwanda from its current status under AGOA not because of military coups, but because Rwanda wants to restrict the importation of second-hand clothes that come from the United States.
Cheap clothes for African consumers
Currently, a significant fraction of the used clothing disposed of by Americans through their donations to thrift shops and parking lot boxes are not sold in the U.S., but are shipped to Africa. Since these clothes are sourced for free, they serve as incredibly cheap sources of clothing in these countries.
This serves to benefit African consumers, although it historically had a negative impact on African apparel production that was serving the domestic market.
Some countries, such as South Africa, have implemented near bans on used-clothing imports as a result. Whether restriction of used-clothing imports is a good policy for African countries, therefore, is open to debate. The reduced used-clothing imports may well be replaced in the future by new clothing imports from Asia.
However, what is deeply concerning is that when the members of the East African Community (EAC), a regional trade agreement similar to NAFTA, decided to increase the restrictions on used-clothing imports, the current U.S. administration responded by threatening to remove AGOA access for them.
As a result of this threat, Kenya quickly reversed its decision. Then, in February, Rwanda, Uganda and Tanzania decided to end their proposed ban on used-clothing imports too. However, because Rwanda is maintaining significant tariffs on used-clothing imports, the U.S. has decided to suspend Rwanda’s AGOA access for apparel exports.
Used-clothing exports from the U.S. to all EAC countries combined had an all-time peak of US$43 million in 2012, which is 0.003 per cent of American exports. This is a truly negligible industry from the American perspective. Its trifling economic value is not surprising as this industry essentially takes items that might otherwise go to the garbage and ships them to Africa.
However, the United States is indicating that a major foreign policy goal on the African continent is the defence of its ability to dispose of second-hand clothing there.
The top U.S. foreign policy goals in Africa apparently no longer relate to human rights or democratic freedoms, but to protecting tiny, marginal American industries.
In contrast, China is building its influence on the African continent. While the Chinese are not promoting human rights or democratic freedoms, they’re also not punishing African countries for their trade policies for the purpose of defending tiny Chinese industries.
It is absolutely clear which superpower is willing to allow African countries to make their own policy decisions. It will be interesting to see which superpower is dominant in Africa in the long term.
There are not many people in the world who are able to change the name of a nation. But King Mswati can - he is one of the world's few absolute monarchs.
King Mswati III of Swaziland announced on Wednesday that he was renaming the country "the Kingdom of eSwatini". The monarch announced the official change in a stadium during celebrations for the 50th anniversary of Swazi independence.
The celebrations also marked the king's 50th birthday.
The new name, eSwatini, means "land of the Swazis". The change was unexpected, but King Mswati has been referring to Swaziland for years as eSwatini. It was the name the king used when he addressed the UN general assembly in 2017 and at the state opening of the country's parliament in 2014.
He explained that the name had caused some confusion, saying: "Whenever we go abroad, people refer to us as Switzerland." The BBC's Nomsa Maseko in Swaziland says the announcement of the name change has angered some in the country, who believe the king should focus more on the nation's sluggish economy.
Swaziland's leadership has been criticised by human rights activists for banning political parties and discriminating against women.
More about the country
The son of Sobhuza II, who reigned for 82 years, King Mswati currently has 15 wives. According to official biographers, his father took 125 wives during his reign.
The king, known as Ngwenyama or "the lion", is known for his many wives and for his adherence to traditional dress.
Africa has long been considered an attractive alternative asset class for South African institutional investors, offering powerful, risk-adjusted returns over the long term, along with excellent diversification benefits.
In a low growth, low return local environment, including an alternative asset class such as Africa into retirement fund portfolios has the potential to significantly enhance the risk and return profiles of these portfolios.
It is in this context that we consider former finance minister Malusi Gigaba’s important announcement that the limit on offshore investment for institutional investors would be increased from 25% to 30%. Even more importantly, Treasury determined that the additional foreign allowance for investments into the rest of Africa should be doubled from 5% to 10%.
When approached to comment on this increased prudential limit, acting head of Sanlam Africa Investments, Brett Mallen, commented that after having spent the past three years establishing the Sanlam Africa Investments business with his business partner, StJohn Bungey, it was rewarding to see the short-term cycle turn upwards again. It was even more encouraging to see Treasury’s affirmation of the rest of Africa as an investment destination for local pension funds.
Africa’s growth trajectory
“We have always held the view that Africa is on an upward long-term secular trajectory that investors can benefit from. This longer-term trend merely experienced a temporary downward cycle after oil and a number of other commodities collapsed in late 2014. Africa has since disproved its naysayers who believed it was only a commodities play that was short-lived, following the flush of easy money looking for an outlet after the global financial crisis in 2008. I am certain that the increased allocation bears sound testament to the longer term view into which our team have vested their careers”.
There appears to be consensus among economists that there is little risk in increasing the prudential limit on foreign investments within South African institutional portfolios, given the strong flows into emerging markets over the past year. Treasury appears to have expressed a view that they expect this trend to continue into at least the medium term, particularly in the context of a new political landscape in South Africa. Therefore, allowing local pension funds to diversify at a time that rand strength could perhaps be mitigated a little, does make good sense.
However, Mallen believes that there is a further important message which Treasury intends to send with its specific increase of the African allowance from five to ten percent: “For the South African economy to recover to its previous levels, it is non-negotiable for us to co-exist amongst stronger African economies, with deeper capital markets that are more financially inclusive. This will require further investment from South African – and other international – investors.”
The greater Sanlam Group for which Mallen works has identified the strategic imperative of investing into the African economies in which it so actively participates. This can be seen through its significant operations in 34 countries and the recent announcement of the $1bn follow-on investment to acquire the remaining equity stake in Saham Finance.
“There are excellent opportunities to realise the remarkable growth prospects across a number of African economies – across all investment classes – and in so doing, supporting and contributing to the strength and resilience of the rest of the continent”, says Mallen.
Of course there are risks to investing into Africa but diversification across geographies and asset classes, and investing alongside African investment veterans with carefully selected local partners with whom deep relationships of trust have been built, can largely mitigate that risk so that the promised returns can be realised.
Now may be the right time to invest
“It is again exciting to be investing into Africa as it is clear that this is the right time in the cycle to be making at least some allocation to African markets. In no way is this more apparent than from the remarkable performance of the African public equities markets over 2017, delivering a market beta of around 22%. Our portfolio managers are convinced that there is still attractive beta to be realised in the short and medium term (AND that they can repeat the exceptional alpha which they generated in 2017).”
Despite the attractive investment case, Africa as an investment destination has recently been overlooked by South African retirement funds and allocators of capital. Blindsided by the temporary poor performance between 2014 - 2016, few recognised the greater opportunity in utilising their previous 5% allocation to Africa and the associated rand hedge benefits if invested into offshore US dollar denominated African funds.
Now that this allocation has doubled to 10%, it may be a good time to take a fresh look at asset allocation and understand all the levers available to maximise these outcomes.
All activities pursued by a company are inherently risky, although to varying degrees. Decisions made at present will show their full consequences only in the future and are affected not only by the behaviour of competitors, customers, suppliers or regulators, but also by the state of nature. Even the best-evaluated decisions can lead to losses in unforeseen circumstances (Alfon and Andrews, 1999).
Risk is at the core of corporate activities, and that is why insurance companies have to ensure that they can bear the risks they are facing. With capital, a company is only forced into financial bankruptcy if the losses exceed the capital held. As losses are related to the risk of a company, it becomes apparent that capital and risks are closely related with each other.
In 2016, the Bank of Ghana announced a new capital requirement of 400 million cedis for banks in Ghana. That represented an increase of 233.3 percent from the previous 120 million cedis. The new capital requirement is expected to protect depositors from unforeseen circumstances that may result in a loss of funds for banks.
With the same idea of protecting depositors of banks, policyholders of insurance should also be protected. Since 1989, a series of adjustments have been made to strengthen balance sheets of insurance companies. The idea is to make the insurance companies go beyond just adjusting capital, and also look for more sophisticated ways of approaching stability and soundness in order to withstand heavy shocks. Upward revision of capital requirement will have a sound influence on the economy and also help insurance companies to absorb industry risks.
The most important questions we have to consider are: How much capital does an insurance company need for a given risk or, equivalent? How much risk can it take with a given capital? Why the need to increase capital requirement? This is why capital adequacy has become increasingly important, primarily in the regulation of financial activities of insurers.
Insurance companies are required to exhaust all available local capacity before recourse to overseas reinsurance. Nevertheless, insurance businesses still end up overseas due to the lack of capital. The capital inadequacy in the insurance industry has resulted in low premium retentions and high demand for overseas reinsurance, leading to excessive premium flight which runs into millions of Ghana cedis every year.
In 2013, out of total non-life premiums of GH¢583million, only GH¢204 million was reinsured, and less than that number was reinsured locally. With revision of capital requirement, insurance companies will have the capacity to cover major risks. Local insurance companies can co-insure major risks without recourse to overseas reinsurance.
The more capital insurance companies have, the stronger they will be. And that will make international companies do businesses with them. The more overseas reinsurance is reduced, the more money will be retained in the country. The more capital a company has, the stronger the company is – and the more willing international companies are ready to do business with it. An insurance company cannot be effective or go international when it has small capacity to insure higher risks.
Risk adequate premiums
Insurance companies need to sustain higher revenue than expenses in order to stay viable. Insurers make money from the premiums customers pay, but also lose money when they fulfil their obligation to pay for their customer’s losses and damages. They also have a host of operating expenses to pay, including agents and brokers’ commissions.
Unfortunately, many insurance companies undercut premiums. There are standard calculations that insurers are to follow to arrive at the right premiums and quotations for the various insurance policies. Because of competition and the struggle for business, some companies undercharge premiums so they can win business to underwrite.
Revising the capital requirement will compel insurers to uphold best practices and charge risk-adequate premiums. Companies will not undercut quotations and premiums in order to underwrite high risks with low premiums. Revised capital requirement for insurers will help bring sanity into the insurance industry, and also create healthy competition wherein risk-adequate premiums will be charged by insurers in order to sustain their capital and meet financial obligations.
A very effective way to increase insurance penetration is through inclusive insurance promotions. There is a need for the insurance to commit time and money to research and create useful, affordable insurance products aimed at other markets in the economy where insurance coverage is very low. Insurers can provide insurance to the agricultural sector and promote access to insurance for the under-served and low-income earners. Increasing capital requirement for insurers will make them discontented with the few businesses they are underwriting, and rather delve into other markets where insurance is under-served. The contribution of insurance to the country’s GDP is still below 2%.
As part of the measures to boost confidence in the insurance sector, adequate capital will strengthen insurance companies in the area of claim payment. The major reason many Ghanaians are not motivated to purchase insurance products is the failure to honour claims by insurers. Delays and non-payment of claims have been a major problem between insurers and policyholders.
However, adequate capital for insurers will give companies the financial strength to pay valid claims promptly. This will even give the regulator enhanced tools so that it is better placed to protect policyholders and ensure insurance companies are also safe.
In the latter part of 2017, Regency Alliance and NEM insurance merged to become RegencyNem Insurance. This was because one company was struggling with the current minimum capital requirement, which is GH¢15million. With upward revision, more insurance companies will be expected to merge. It is time for some insurance companies to merge, since there are even too many insurance companies with low capacity in the country. Nigeria’s GDP is US$405.10billion, but it has twenty-eight licenced general insurance companies. Ghana’s GDP is US$47.81billion, with twenty-seven general insurance companies. On the other side, when two or more companies merge their resources are increased and they are able to compete effectively.
The Insurance industry plays a significant role in the economy, in terms of providing indemnification of risks faced by both individuals and companies – in addition to being an institutional investor. Recapitalisation will ensure that insurance companies have sufficient capacity to undertake the intermediation function necessary for the economy’s development. Also, well-capitalised insurance companies are able to undertake greater business expansion and allocate resources in order to develop capacity to compete more effectively in this more liberalised environment in the country.
The writer is with Tri-Star Insurance Services Gh. Ltd.
Source : thebftonline.com
South Africa’s headline consumer inflation slowed to 3.8 percent year-on-year in March from 4.0 percent in February, the lowest figure since January 2011, data from Statistics South Africa showed on Tuesday.
Economists polled by Reuters had expected prices to quicken to 4.1 percent on a year-on-year basis.
On a month-on-month basis inflation slowed to 0.4 percent in March from 0.8 percent in February.
Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, was flat at 4.1 percent year-on-year, while on a month-on-month basis it slowed to 0.7 percent from 1.1 percent previously.
Reporting by Mfuneko Toyana; Editing by Joe Brock (Reuters)
Africa is often imagined to be a place in which presidents can do whatever they want, unencumbered by constitutional or democratic constraints. A large body of literature has developed around the idea that the law can be flouted at will, leading to a situation in which what really matters is the personality of the president, not the rules of the game.
The implications of this way of understanding the continent are profound not just for how we think about Africa, but also for how we study it. If democratic institutions don’t constrain leaders, there is no point in researching them. Instead we should spend all of our time looking at informal processes such as ethnicity and patrimonialism.
But, although this image is often repeated within policy circles and the media, it is wrong. A new book I edited, Democracy and Institutions in Africa, argues that approaching the continent in this way creates a deeply misleading picture of politics that underestimates the potential for democratisation.
In other words, if we want to understand democracy in Africa, we need to take the official rules of the game more seriously.
The book covers a wide range of institutions, including political parties, legislatures, constitutions and judiciaries. As a taster, here are three important ways in which democratic rules constrain African leaders more than you might think.
Holding elections promotes democracy
It’s often said that Africa features elections without change. But repeatedly holding elections not only creates opportunities for the opposition to compete for power. It also promotes democratic consolidation.
Looking at all elections held in Africa since the early 1990s, Carolien van Ham and Staffan Lindberg find that as long as a minimum threshold of quality is met, holding elections increases the quality of civil liberties. This in turn creates greater opportunities for opposition parties to mobilise.
That’s because elections have a number of democratising effects. These include training voters in democratic arts, encouraging coordination between opposition parties and increasing the pressure on ruling parties to reform the political process. This last happens for example by allowing for a more independent electoral commission.
Repeatedly holding elections fosters new democratic openings that tend to make it more difficult for leaders to hold on to power in the long-run.
Legislatures are tougher to manage than before
The common depiction of African legislatures is that they are weak and feeble. They’re portrayed as “rubber stamp” institutions that can do little to hold governments to account. But this is not an accurate depiction of what happens in a number of countries where conflict between parliaments and presidents is becoming a more common.
As Michaela Collord highlights, in recent years the Ugandan legislature has threatened a government shutdown over an unsatisfactory health budget. Tanzania’s parliament has also forced seven Cabinet reshuffles. South African MPs from the radical Economic Freedom Fighters party captivated TV audiences nationwide by repeatedly calling President Jacob Zuma a thief because he was accused of corruption.
Significantly, parliaments are also beginning to play a role in some of the most important decisions. In both Nigeria and Zambia, it was the legislature that ultimately rejected efforts by sitting presidents to extend their time in office beyond constitutionally mandated limits.
Term-limits are starting to bite
On the theme of term limits, pretty much the only time you will read about this particular institution in the media is when an African leader has changed the constitution to remove them. In the last 20 years this has happened in a number of countries including Burundi, Chad, Uganda and Rwanda.
By contrast, when a president respects term limits and stands down, it goes largely unnoticed. This has created the misleading impression that African leaders can break the rules at will. The reality is that in most cases they can’t.
Reviewing every country in Africa from 1990 to the present, Daniel Young and Daniel Posner find that term limits are twice as likely to be respected as broken. This is especially true for states that lack natural resources.
Significantly, they also demonstrate that when one president respects term limits it creates a powerful precedent that subsequent rulers feel bound to follow. To date, there is not a single country in which a president has tried to outstay their welcome after their predecessor willingly stood down.
The shape of things to come
These examples are part of a broader trend. In 2015, a sitting civilian Nigerian president lost power to another civilian ruler for the first time. In 2016, the same thing happened in Ghana. In 2017, it was Gambia’s turn. Since then, Liberia and Sierra Leone have also seen opposition victories.
From a few isolated examples in the early 1990s, almost half of the continent has now witnessed a transfer of power.
Moreover, it is not only when it comes to elections that things are changing. In 2017 Kenyan became the first country in Africa – and only the third in the world – in which the election of a sitting president was nullified by the judiciary.
In South Africa, President Jacob Zuma never lost a national election and the African National Congress continues to dominate parliament. But he was nonetheless forced to resign and leave power early by a combination of public hostility and the emergence of Cyril Ramaphosa as the party’s new leader.
Of course, this does not mean that all presidents have to follow the rules, or that all of these institutions are starting to perform well. The continent features a remarkable variety of political systems and some of its states are on very different political trajectories. In more authoritarian contexts such as Cameroon, the Democratic Republic of Congo, Uganda, Rwanda and Zimbabwe, the quality of elections remains extremely poor; even when leaders suffer a setback they may be able to bounce back.
But while the process of institutionalisation may be patchy and uneven, one thing is clear: Africa is not without institutions, and we will deeply misunderstand its politics unless we pay careful attention to the rules of the game.
South African President Cyril Ramaphosa appointed a team of business and finance experts on Monday to hunt the globe for 100 billion rand ($8 billion) in investment to boost the ailing economy.
The team of economic envoys includes two former finance ministers - Trevor Manuel and Pravin Gordhan, who now holds the state firms portfolio - as well as a former top banker.
Ramaphosa became president in February after winning the leadership of the ruling African National Congress last year on promises to revive the economy and crack down on corruption.
Monday’s appointments to the team also include economist Trudi Makhaya, who becomes special economic adviser to the president, former Treasury Director General Lungisa Fuzile, ex-Deputy Finance Minister Mcebisi Jonas and former Standard Bank chief executive Jacko Maree.
“These are people with valuable experience in the world of business, investment and finance and they have extensive networks across a number of major markets,” said Ramaphosa before leaving Johannesburg for a Commonwealth Heads of Government Meeting in London.
Ramaphosa said the envoys would travel to Europe, Asia and across Africa to build an “investment book” to help plug a substantial shortfall of foreign and local direct investment.
“We are modest because we want to over-achieve,” Ramaphosa said, explaining why the government was targeting 100 billion rand rather than a much larger sum.
Political and policy uncertainty damaged investment and business confidence during nine-year presidency of Ramaphosa’s predecessor, Jacob Zuma, when South Africa’s credit rating was slashed to junk by two of the top three agencies and economic growth slowed to a crawl.
The tide has begun to turn under Ramaphosa, with Moody’s last month keeping the country at investment grade and changing the outlook to stable from negative.[nL8N1R8111]
The economic outlook has also improved, with the World Bank raising its 2018 growth forecast to 1.4 percent this month from 1.1 percent forecast in September, a touch below the Treasury’s projection of 1.5 percent.[nL8N1RN2AF]
Ramaphosa has sacked or demoted a number of ministers allied to his scandal-ridden predecessor, and reinstated Nhlanhla Nene as finance Minister after Zuma fired him in 2015.
($1 = 12.0525 rand)
Reporting by Mfuneko Toyana; editing by David Stamp (Reuters)
South Africa will host an investment summit later this year to lure 1.2 trillion rand (about $100 billion) over five years, President Cyril Ramaphosa has said.
Ramaphosa on Monday said he will extend an invitation to leading investors and leaders of business to attend the Investment Summit scheduled for August or September this year, Xinhua news agency reported.
“The investment conference, which will involve domestic and international investors in equal measure, is not intended merely as a forum to discuss the investment climate,” said Ramaphosa.
South Africa, he said, would rather expects the conference to report on actual investment deals that have been concluded and to provide a platform for would-be investors to seek out opportunities at the South African market.
“Given the current rates of investment, this is an ambitious but realizable target that will provide a significant boost to our economy,” the president said.
He voiced confidence that the conference will produce results that can be quantified and quickly realised. Ramaphosa was speaking before leaving for London to attend the Commonwealth Heads of Government Meeting (CHOGM 2018).
He said he will utilize the opportunity to engage with major investors and business leaders based in the UK. For South Africa, the CHOGM 2018 is an opportunity for the marketing and promotion of South Africa as an investment destination, Ramaphosa said. The CHOGM 2018 will be held on April 17-18 to discuss common international challenges facing Commonwealth states, including weak global trade and investment flows.
Ramaphosa said his government will dispatch four special envoys on investment to Asia, Middle East, Europe and the Americas to meet with potential investors before the Investment Summit.
A new sense of urgency has entered South Africa’s land reform process after the country’s parliament took a resolution to amend the constitution to effect land expropriation without compensation. But even this will fail if the country doesn’t improve support for small and emerging black farmers who should be allocated a prime role in any reform process.
International experience shows that small and middle-range farmers play a critical role in land reform processes. For example, research on Zimbabwe shows increased productivity on small and medium-sized farms after land reform.
In my research, I found that South Africa has failed to take advantage of the “middle farmer” factor. Support from government is grossly insufficient; banking support is almost non-existent.
Black people who venture into commercial farming are bound to fail. Commercial farming is a capital intensive business. The battle to secure support has forced many struggling black farmers to rent out their land to established white farmers.
The situation is made worse by the fact that what limited state support there is has been hijacked by corrupt elements or a small authoritarian rural elite. A selected few politically connected individuals have begun to dominate the space.
If this is left unchanged, South Africa is likely to see more black commercial farmers being forced out of the space. Some may turn to renting out their land, others may sell their properties back to white farmers. This will render the land acquisition process futile.
The experiences of a young black aspirant commercial farmer named Lonwabo Jwili, who has bought a small piece of land near Johannesburg, are a case in point. He highlighted his challenges in a conversation I had with him.
Would you advise young black South Africans to go into farming?
I would advise them to go into farming only if they have passion for it. Farming is not like most jobs. It’s extraordinarily hard and requires lots of patience which runs out if not accompanied by loads of passion.
Farming will break and bankrupt you. It will test your mental strength.
From your experience, what are the three “make or break” interventions for young black farmers?
Access to information, finance and markets.
Access to information: My experience tells me that young black people who try out farming face a dearth of information about critical aspects. For example, you don’t find readily accessible information on planting practices.
I think this is a function of the fact that the country doesn’t have a very good extension service programme – a worldwide practice of professional agents who help farmers improve productivity by providing advice, information and other critical support services.
The Department of Agriculture is meant to run an extension service programme. But in my experience, it’s very poor to non existent. The only time extension officers have been to my farm was when they came to give me advice on my irrigation system. And it turned out to be very bad advice.
In my case I certainly needed good information to make headway because I ventured into unknown territory. Yes, I grew up on a farm. But my homegrown farming knowledge was on livestock. I’m currently producing vegetables and some grains. A well functioning agricultural extension service would have saved me time and money.
Access to finance: Everywhere you look in South Africa there are claims that the country provides financial support for small and emerging farmers. The banks and state owned development finance institutions make this empty claim.
The Land Bank is a perfect example. It is supposed to develop small black farmers like myself. But it’s almost impossible to get funding from the Land Bank.
When I tried to apply for finance to purchase the farm, the Land Bank sent me a two-page list of requirements. I could satisfy everything on the list except for one thing: they required off-take agreements (that’s a pre-assurance from a business that it will buy my produce).
Its almost impossible for someone like myself with no commercial farming experience to get off-take agreements from a market dominated by a few mainstream retailers.
Big retailers – and even smaller ones – won’t offer an off-take agreement to someone starting out.
And so the Land Bank wouldn’t dare take a risk on my endeavour. So I took a different route, approaching a bank for a normal loan and bonding my home against the farm property.
But even here I struggled. I think that finance institutions also need to understand that there is a different kind of farmer emerging. One’s like me. I’m not farming full-time because I can’t yet afford to do so. My off-farm job funds my seed, fertiliser and pays my staff. I need to keep my off-farm job while building the farm into a self sustaining operation. The banks I approached didn’t seem to want to grasp my situation.
Access to markets: This is the most critical factor of farming. For example, even when I produced 17 000 cabbages last season I still struggled. That’s because I was only able to find a market for them when it was too late – they’d been in the ground too long.
I’m also disadvantaged by distance. My vegetable and grain producing farm is 70 km outside Johannesburg so it’s difficult to access the big city markets.
But with the assistance of family and friends, I managed to secure another retailer to pick up my produce. In hindsight, I should have tapped these networks first before going for big markets like the Pretoria and Johannesburg fresh produce markets which offered me unacceptably low prices.
What can be done to support young black commercial farmers?
I think the government should review its programmes to see if they are actually working or not.
They might want to reconsider their focus on rural communities. Yes, rural communities need assistance in terms of development. But the government also needs to acknowledge operations like mine which are located within a 100 km radius of a big city.
I am halfway into becoming a sustainable farmer. I’ve purchased the land and am producing the best products possible. I think operations like mine deserve some state support.
Right now I don’t necessarily need financial support from government. But it could help facilitate other types of support for farmers like me. For example, government could facilitate access to markets and to farm production machinery such as advanced tractors, ploughs and other implements.
The private sector could also come to the party. Banks are critical players. They need to realise that there are young black entrepreneurs who want to farm. They need to create financial products – like loans and insurance – that are going to assist emerging farmers. Currently their products are focused on serving established farmers.
After I had bought the farm using my own funds I approached three banks to secure finance for farm production and machinery. I was rejected on the basis that I had no farming experience.
Banks need to look at things differently. I’m not calling for banks to be reckless in their lending. But I have been taken aback by some of the banking practices I’ve seen.
For example, I can qualify for normal credit, but not for an agricultural specific financial product. I could easily apply for finance to buy a Mercedes Benz worth about R200 000 to pay over five years. I could borrow the same amount as a cash loan. But the answer was “no” when trying to secure funding for a tractor worth R 1 million.
Banks need to be more innovative by designing ways of lending, for example, that move away from monthly instalments and towards seasonal instalments in line with agricultural cycles of planting and harvesting.
Dubai-based flydubai’s inaugural flight touched down yesterday at N'djili Airport (Kinshasa International Airport - FIH). flydubai will operate daily flights to N’djili Airport with an enroute stop in Entebbe.
flydubai is the first national carrier for the UAE to create direct air links to the Congolese capital, Kinshasa and with the start of the service sees its comprehensive network in Africa grow to 13 destinations in 10 countries.
With the start of flights to Kinshasa another gateway is opened up for passengers from the GCC, Russia and the Indian Subcontinent into Central Africa. Passengers from Kinshasa have access to more than 90 destinations on the flydubai network and through its codeshare partnership with Emirates can connect easily and conveniently to Emirates’ destinations spanning six continents in over 80 countries.
The inaugural flight touched down at 14:20 (local time) and on board was a delegation led by Sudhir Sreedharan, Senior Vice President, Commercial Operations (UAE, GCC, Indian Subcontinent & Africa) for flydubai. The delegation was met on arrival by Mr. Tshiumba Pmunga Jean, Director General, Civil Aviation Authority, Mr. Kufula Makila Rex, Cabinet Director, Minister of Transport and Mr. Bilenge Abdala – General Director RVA- (Régie des Voies Aériennes).
Ghaith Al Ghaith, Chief Executive Officer of flydubai, said on the launch of flights to Kinshasa: “As one of the largest and most populous cities in Africa, Kinshasa, is a key hub for travel and trade. Africa is one of the UAE’s emerging trade partners and with the opening of this new route to one of the busiest airports in the Democratic Republic of the Congo there will be further opportunities to strengthen commercial ties across a neighbouring continent with vast natural resources.”