Tuesday, 16 June 2020

The unfolding US-China power rivalry bears a striking resemblance to the tensions between the US and the Soviet bloc during the Cold War years. Back then, African countries were positioned like pawns on a grand chessboard.

Their social and economic progress was hampered because they expended energy aligning themselves with either of the superpowers in the battle for world supremacy between communism and capitalism.

With notable exceptions, African states generally failed to exercise positive agency for their own development. They also eroded the institutional and governance foundations vital for economic success.

In the current context of rising geopolitical tensions between the US and China, African countries may find themselves repeating the same mistakes unless they proactively shape their own destinies.

The tensions between the two great powers, characterised by a vicious trade war, are deepening at a time when the world economy is under enormous strain due to COVID-19. At the same time African countries are facing their worst economic crises since independence.

Africa is institutionally under-prepared to weather the combined effects of the health pandemic and severe economic recession. Its leaders will need to consciously design strategies of engagement that will help them to manage the ongoing superpower tensions to their advantage. They should do so without taking sides. This requires that they deal with each of these great powers based on pragmatic – rather than ideological – choices.

Despite their institutional under-preparedness, African countries can – and indeed must – be highly strategic and tactical in how they respond to the US-China tensions. Failure to do so will inevitably mean sacrificing their own interests.

There are three arenas of challenges and opportunities for the African continent in the current geopolitical climate. The first involves technological frontiers, the second is global supply chains, and the third is trade integration and economic cooperation.

New technological frontiers

There is overwhelming evidence that technological innovation is the key driver of economic growth. Therefore, access to and exploitation of new technologies such as 5G is vital to Africa’s development. Fifth generation technologies are important options for a continent like Africa where mobile technology has leap-frogged more traditional technologies.

Access to technologies like 5G offers access to universal broadband, which is critical for the continent’s advance to a digital economy.

In May last year the US government put the Chinese firm Huawei, the world’s leading supplier of 5G network infrastructure, on its list of entities deemed to pose a significant risk to national security and foreign policy interests.

Huawei was effectively banned from importing and incorporating key US technologies into its products and services. This included both hardware, such as high-tech semiconductor components, and software, like Google Mobile Services (GMS). The ban was later extended to key technologies from non-US firms. These included the Taiwan Semiconductor Manufacturing Company, a major Huawei supplier.

In the month following the initial ban, the CEOs of four major South African telecommunications operators – Telkom, Vodacom, MTN and Cell C – wrote a joint letter to South African president Cyril Ramaphosa requesting his urgent intervention on the US action against Huawei. Their aim would have been to lend diplomatic weight to prevent damage to South Africa’s telecommunications sector.

In July last year Ramaphosa came out in support of the four operators as well as Huawei. He said the ban was:

an example of protectionism that will affect our own telecommunications sector, particularly the efforts to roll out the 5G network, causing a setback on other networks as well.

This was an example of pragmatism on the part of the South African government.

African policymakers should strenuously safeguard their right to choose from the widest possible range of technology options that suit their countries’ development needs. And they should insist on acquiring and developing new technologies like 5G based on pragmatism.

Global supply chains

The second theatre of struggle for African countries is in global supply chains.

The COVID-19 reality, combined with the ratcheting up of US-China tensions over trade, technology and supply chains, has opened up opportunities that African countries should exploit.

Combined, they have exposed serious problems in supply networks across various sectors. These include digital products, food, pharmaceutical and medical supply chains.

These sectors represent opportunities for African countries to develop new products, services and capabilities. They could, for example, provide answers to safeguarding Africa’s food security needs, local production of essential drugs and medicines, low-cost medical tests and equipment, and logistics.

A mural of presidents Donald Trump and Xi Jinping in Berlin. EFE-EPA/Omer Messinger

But African countries will need to work more collaboratively to develop thriving economic sectors and cross-border industrial linkages. Trade will, in our view, be a critical enabler for this.

This leads us to the third domain, namely the need for African countries to deepen trade integration and economic cooperation. This will provide a basis for diversifying from over-reliance on export markets such as China and the US, and to build internal resilience.

Intra-Africa trade

Intra-African trade accounts for just 16% of total African trade. This compares with 52% in Asia and 73% in Europe. African trade is highly concentrated on a few economic hubs: China and Europe together account for 54% of total African trade, with China being Africa’s single largest trading partner. It accounts for over 14% of total African trade.

The African Continental Free Trade Area creates the institutional and infrastructural framework for Africa to strengthen intra-African trade, diversify its trading partners and implement long-overdue trade policy reforms.

COVID-19 has induced significant delays in the implementation of this trading arrangement. It should, in fact, have magnified a sense of urgency. But instead of showing adaptability, African leaders pressed a pause button. As a result, the continent could miss an opportunity to accelerate development of cross-border value chains in medical supplies and equipment and other areas.

Imagination and courage

African countries should seize the opportunities presented by deepening tensions between China and the US to realise positive agency and chart their own future. They will need to be more proactive and adaptive under the fluid and uncertain global environment. This will require a great deal of imagination and courage.

African countries face a daunting set of challenges and constraints. But policymakers always have options.The Conversation

 

Mzukisi Qobo, Head: Wits School of Governance, University of the Witwatersrand and Mjumo Mzyece, Associate Professor of Technology and Operations Management, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in World

South African banks and the government are looking for ways to boost take up of an up to 200 billion rand ($11.58 billion) loan scheme to help coronavirus-hit businesses, two bank executives and a source close to the discussions told Reuters.

Possible amendments being discussed include encouraging banks to ease their lending conditions, the source close to the discussions said.

"There are minor issues around the design," the source continued, including wording in the terms that has led to banks applying their standard credit procedures and rejecting more applications than anticipated.

The scheme, launched in May, was meant to encourage banks to lend more, on more favourable terms, to small businesses struggling with the effects of the pandemic.

But concerns arose that the money -- 40% of President Cyril Ramaphosa's 500 billion rand economic stimulus package -- was not being fully used after big banks approved only a few billion rand of loans in the first few weeks.

Lenders, the treasury and the central bank are in regular talks on the issue, the source said, with finance minister Tito Mboweni keen to announce changes to the scheme in his emergency budget on June 24.

Goolam Kader, business banking managing executive at Nedbank (NEDJ.J), said the lender is working closely with the Banking Association South Africa (BASA) to identify potential improvements.

He added that Nedbank did not apply credit criteria that are different from usual when assessing loan requests made under the scheme, but that various factors affected take up, including its other efforts to help customers.

Standard Bank referred Reuters to BASA, which declined to comment. FirstRand and South Africa's treasury did not provide comment by a deadline.

Jaco le Roux, chief risk officer of relationship banking at Absa's retail and business bank, said it did apply different criteria as well as imposing requirements like a bond over property less often.

Other features being discussed include raising the turnover threshold for eligible companies from 300 million rand, expanding the list of things businesses can spend the money on and the type of loans banks can extend, and lengthening the term of payment holidays, le Roux and the source said.

Take up has already accelerated to around 7 billion rand and could double within days, the source continued. There may have been a lag as businesses considered their options.

Stuart Theobald, chairman of Intellidex, which presented to government on how to design a scheme, said it did not seem to be working as intended, citing issues like the banks often requiring personal guarantees for the loans, as is standard in South Africa.

"This is not meant to be banking as usual," he said. "You want banks to behave as if they are in the best of times ... but the design of it is such that they can't actually do that."

 

Reuters

Published in Bank & Finance

To reaffirm its status as the biggest cement producer in Africa, Dangote Cement has set the pace with the exportation of 27,800 metric tonnes of clinker to a neighbouring African country.

With this historic maiden voyage from its Export Terminal located in Apapa Port, Lagos weekend, Dangote has gradually made Nigeria, which until recently was one of the world's largest bulk importers of cement, first self-sufficient in cement production, and now an exporter of cement clinker to other countries.

The exportation of clinker from the Dangote Cement Export Terminal will also place Nigeria as one of the leading clinker exporters in the world. The company is expected to increase the quantity of clinker export to other African countries within the next few weeks, it was further learnt.

It said this development would enable Dangote Cement take advantage of the African Continental Free Trade Area, and by so doing contribute to the improvement of intra-regional trade within the ECOWAS region.

The Manufacturing Association of Nigeria (MAN) has therefore commended Dangote Cement for leading the way for Nigeria to become one of the biggest cement and clinker exporter in the world.

Speaking during the departure of the ship conveying clinker from the Export Terminal at the weekend, Group Executive Director, Dangote Group, Alhaji Sada Ladan-Baki said the increased exportation of clinker and cement to other African countries would not only place Dangote Cement among top clinker exporters in the world, but would also boost Nigeria’s foreign exchange earnings and reduce unemployment in the country.

Published in Business
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