Items filtered by date: Thursday, 07 September 2017

Faced with a growing economic crisis, South Africa’s new Finance Minister, Malusi Gigaba, has come up with a 14 point plan to turn the country’s economic fortunes around. Sibonelo Radebe asked Mohammad Amir Anwar to assess the plan.

How do you rate the recovery plan?

It’s still early days but one thing is clear. The plan was put in place as a response to the credit rating downgrades experienced in the second quarter of 2017. It comes with a greater focus on monetary and fiscal frameworks, a slippery area which has served neo-liberal agendas in the post-1994 South Africa.

Instead of focusing on policies that allow redistribution of wealth and creating sociopolitical and economic opportunities for those who were left out of the system, successive ANC governments have been obsessed with neo-liberal dictates which have served to maintain apartheid inspired economic structures.

It’s unfortunate that Gigaba is still toeing the neo-liberal line despite all his political rhetoric, including a call for radical economic transformation.

This neo-liberal approach assumes that economic growth is the sole criterion to put the country back on the right track. This obsession with growth means that the focus is on short-term fiscal and monetary issues to gain the confidence of investors in the economy. Testament to this are the short deadlines of the plan and the accompanying narratives. These include references to reforms that “would support both businesses and consumer confidence, thereby laying the foundation for an economic recovery”.

It would seem that not much thinking has gone into changing the underlying structures of the economy for the long-term.

What are the most positive elements of the plan?

The minister has spoken about including different stakeholders in the recovery plan, which seems to be a good approach. South Africa’s history of segregation needs to be met with inclusive policies. Public consultations with key stakeholders and consensus must be key to any recovery plan.

The plan to tackle non-performing state-owned enterprises is very encouraging. But reckless recapitalisation by injecting public money into non-performing entities will only divert government resources, which could otherwise be used to help poor and marginalised people.

Government should realise that fixing troubled state-owned enterprises requires deep restructuring of the way they are operated and led. Boards that are part of the problem in terms of incompetency and corruption must be dissolved and reconstituted. Corrupt officials must be held accountable. Enhancing public-private partnership in some enterprises can also eliminate inefficiencies.

Another positive is that each of the 14 points and sub-points came with a deadline. This can focus the mind and ensure that work gets done. South Africa has seen many plans in the past come and go with no results.

But some of the dates are far too ambitious. For example, Gigaba speaks of finalising the Minerals and Petroleum Development Act amendment process by December 2017. This deadline is too tight and could result in low levels of participation. This will defeat the objective of getting stakeholder buy-in.

What are the most critical things that are missing from it?

Not enough attention has been given to job creation. The South African economy has for a very long time experienced jobless economic growth. This meant that the country’s jobless rate remained stubbornly high for many years. Recent figures of unemployment touching 27.7% are indeed worrying. Youth unemployment is said to be 52%. Any plan that addresses only economic growth without the creation of job opportunities will be found wanting.

The South African government’s priority should be to boost employment, by focusing on sectors that can easily generate jobs. I welcome the suggestion to boost the small, medium and micro-enterprises sector by giving them a share in public procurement. Small enterprises have been recognised for their potential to aid sustainable economic development and to create jobs.

The plan does not give details of overhauling the most important sectors of the economy: mining and agriculture. These sectors are key to generating growth and employment and can be used to drive economic transformation and empower communities that are at the margins of the economy.

For this to happen, the South African government needs to adopt radical approaches that include new and sustainable ways of doing business and redistribution of land.

There is a strong case for government to ensure that mining companies reinvest in workers and local economies. This can be done through investment in education of workers and forming business linkages with local companies that enable technology and knowledge transfer for a viable industrial transformation. Unemployed mine workers (and farm workers too) should be given new kinds of vocational training and education to help them find work elsewhere.

How do the ANC’s internal power struggles affect the plan?

The ANC’s leadership is in disarray. Intra-party fighting has led to opposing factions being formed, with each propagating its own economic vision. This increases the likelihood that a new crop of ANC leaders will change policy. Constant reshuffling and changes in key government positions can seriously affect policy plans and lead to uncertainty about the future.

A new leader will have to bring cohesion into an already fractured party, encourage all members to unite and work for a better South Africa and, most importantly, tackle corruption both in and outside party circles.


Mohammad Amir Anwar, Post-doctoral Research Fellow, University of Oxford

This article was originally published on The Conversation. Read the original article.

Published in Opinion & Analysis

Agriculture is instrumental in Africa’s poverty: it must also be instrumental in its wealth. Only through agricultural regeneration can growth, diversification and job creation occur for African economies, for no region of the world has ever industrialised without the agricultural sector being first transformed.

In short, the future of Africa depends on agriculture. But Africa cannot develop quickly if farming remains largely a subsistence activity. 60% of the population are involved in farming, yet it accounts for less than one seventh of its GDP, and African agricultural yield is the lowest in the world.

So Africa is late in developing but even this very fact offers a large scale opportunity for international investors and big-ticket entrepreneurs.

Economic diversification and lasting wealth creation begins with a vibrant agriculture sector. Between $30 and $40 billion a year over the next ten years is needed to transform African agriculture and create the vibrancy. It’s a lot of money, but it is available, even within Africa, if the projects are good enough.

And they ought to be good enough, since such investments will create new markets worth at least $85 billion per year in added revenue by 2025. That’s a potential return of at least 100%. But which producers will own, influence and leverage these markets? Most, surely, should be made in Africa? We must own our development. The commitments of last year’s AGRF gave us a flying start with $30 billion over 10 years.

And with such transformation would come the reduction of Africa’s net trade deficit in food, potentially bringing net savings of up to $100 billion per year. We must bring an end to the costly and damaging anomaly of the net deficit in food. No more should Africa produce what it does not or cannot consume, and no more should it consume what it does not (but could easily) produce.

Other related measures would deliver similarly impressive albeit incalculable financial impacts: fiscal inclusion, tax reform, domestic revenue mobilization, higher remittances, reduced corruption and better governance.

There are also still huge and unexploited growth opportunities in Africa. The continent is endowed with 65% of the world’s uncultivated arable land and huge reserves of water. Sub Saharan Africa also has 10% of the world’s oil reserves, 40% of its gold, and up to 90% of its chromium and platinum. And those are just the known reserves – the whole continent is one of the world’s largest unexplored resource basins. Africa may suffer from poverty but it is an unimaginably rich continent, even after fifty years and more of commodity exploitation.

But how to bring about this transformation? How to close this potential deal of the century? Public and private sector should be acting together. They are needed to provide significant opportunities for Africa’s emerging innovators and entrepreneurs, not to mention its financiers, fund managers and financial advisers.

Over the past few years, the Bank has been able to bring about a comprehensive re-evaluation of the potentially enormous role of agriculture in the transformation of Africa, and the AGRF has been a critical factor in the shared objective with the Bank of bringing about the green revolution in Africa.

The technologies to feed Africa exist already. This is the period of climate change. High yielding drought-tolerant maize can allow farmers to grow a good crop even during droughts. Some cassava varieties can yield 80 tonnes per hectare. High yielding rice varieties that meet or beat international standards of imported rice now exist. Orange-fleshed sweet potatoes allow us to address the problem of vitamin A deficiency. Tropical and drought-tolerant wheat varieties are being grown in Nigeria, Kenya and Sudan.

These technologies need to be scaled up for widespread adoption. This will not happen by itself. It will require specific incentives. In particular, the African Development Bank and the World Bank plan to jointly provide $800 million through “Technologies for African Agricultural Transformation”, a flagship programme for the scaling up of agricultural technologies to reach millions of farmers in Africa over the next ten years

For agricultural transformation more generally, the African Development Bank has committed $24 billion to agriculture over the next 10 years, with a sharp focus on food self-sufficiency and agro-industrialization.

It’s also why we launched the Affirmative Finance Action for Women in Africa (AFAWA), to make an extra $3 billion available for women entrepreneurs, in order to improve food production levels on the basis that women are demonstrably more dependable and bankable than men.

Getting our youth involved in agriculture as a business is crucial. That is why the Bank launched the ENABLE Youth program. This program will provide access to capital and capacity to “Agripreneurs” to create about 300,000 agribusinesses and 1.5 million jobs in 30 countries across Africa, with an estimated investment of $15 billion over the next five years.

With so many entrepreneurs now on the case of farming, an issue to resolve quickly is the current low level of commercial financing for agriculture. Finance and farming have not been easy partners in Africa, and the farming sector receives less than 3% of the overall financing provided by the banking sector.

The African Development Bank is promoting national risk sharing facilities in every country to leverage agricultural finance, similar to the Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL), a facility designed to reduce the risks of lending to Nigerian agriculture value chains. The impact in Nigeria was massive. Over four years, 15 million farmers were reached, 2.5 million of them women. Food production expanded by over 21 million tonnes. Today, several African countries are adopting the approach, as well as others such as Afghanistan.

I predict that the next few years will see agriculture emerge fully from poverty and subsistence to become the next big booming business sector of Africa, with entrepreneurs, financiers, inventors and innovators all gathering round a honey pot of bankable projects, programmes and opportunities. After all, who eats copper? And who drinks oil? Africans need to become producers and creators, and not just consumers, in the fast-moving enterprising business of food.

The African Development Bank will play its active role as a catalyst of this activity, and I am confident that we will soon see Africa’s first tranche of billionaires coming from the farming and food sectors.

Published in Agriculture

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