The COVID-19 pandemic and the current shock to the system from the war in Ukraine have left African economies hanging by a thread.



National debt <a href="https://www.economist.com/middle-east-and-africa/2022/04/30/debt-repayment-costs-are-rising-fast-for-many-african-countries">has reached distressed levels</a> across the continent, with even formerly high-performing economies such as Ghana, Egypt, and Tunisia on the verge of defaults, bailouts, or both. &nbsp;



Next week’s <a href="https://africities.org/about-the-summit/">9th Africities Summit</a>, in Kisumu, Kenya, will therefore be taking place against a particularly gloomy macroeconomic backdrop.



Yet Kisumu itself – a vibrant, upcoming city which has become a hub for international trade – should give delegates real cause for optimism.



Indeed, Kenya has benefited from being an <a href="https://www.kara.or.ke/Kenya%27s%20Popular%20Version%20on%20New%20Urban%20Agenda.pdf">early adherent</a> of the <a href="https://unhabitat.org/the-new-urban-agenda-illustrated#:~:text=The%20New%20Urban%20Agenda%20highlights,or%20renewal%20policy%20and%20strategy.">New Urban Agenda</a>: UN-Habitat’s armoury of solutions for helping states, city planners and communities to manage urban challenges and needs, whether that’s planning, financing, waste management and housing.



These solutions have evidently been of value to Kisumu, and I believe the Agenda could not be more relevant for African policymakers navigating such perilous economic headwinds.



Why? Because while urban areas <a href="https://unhabitat.org/sites/default/files/2020/10/wcr_2020_report.pdf">constitute 55% of the global population</a>, they account for more than 80% of the world’s gross domestic product (GDP).



In other words, our cities are an engine of economic growth – growth that Africa needs badly and needs now.



However, while the most must be made of the undeniable dynamism of our urban areas, choosing to live in a city cannot be a zero-sum game. No African should ever have to expose themselves to environmental and social strife to climb the economic ladder.



Put simply, our mission must be the resilience and the sustainable economic growth of our cities: the key that can unlock a more prosperous, equal and secure future for all Africans.



Our team at UN-Habitat have never underestimated the challenge at hand.



The world’s urban centres are veritable hotspots of vulnerability, with <a href="https://unhabitat.org/programme/rise-up-resilient-settlements-for-the-urban-poor">more than 1 billion people</a> now living in informal settlements, placing themselves at the mercy of extreme weather events.



While new cities are emerging in Africa, we need to learn to ensure challenges are well anticipated with proper planning and provision of basic services. The best approach might be by finding a balance between big city and secondary cities. Secondary cities are under less pressure and can develop sustainable urban solutions faster.



Quick fix and often exclusionary solutions like slum clearance and community relocation have proven redundant in the face of such a challenge.



UN-Habitat’s advocates an inclusive and participatory approach, with our staff getting out into the field to assist stakeholders with anything from building the climate resilience of city centres to setting up employment schemes and vocational training.



<a href="https://unhabitat.org/programme/rise-up-resilient-settlements-for-the-urban-poor#:~:text=The%20UN%2DHabitat%20flagship%20programme,spatial%20inequality%20and%20resilient%20settlements.">RISE-UP: Resilient Settlements for the Urban Poor</a> – one of UN-Habitat’s flagship programmes – exemplifies this research-driven, holistic approach to generating sustainable socio-economic progress in African cities.



Since 2019, the RISE-UP team have built up a database of locations under severe threat from extreme weather events, whether that be an informal settlement in West Africa or a coastal city in South-East Asia.



With this data in hand, UN-Habitat has lobbied for and then leveraged large scale investments to build, augment, and reinforce the climate resilience of each vulnerable community. This is an essential step in the cementing their economic viability.



As an example of RISE-UP at its best, UN-Habitatflagged the grave threat of flash floods and strong winds to schools in Mozambique in 2020. Our field operatives then worked day and night to ensure that classrooms from Maputo to Beira could withstand them.



Given the global political and economic upheavals, it is important that we stay firmly on the course of sustainable urban development and ensure support is available for the development of secondary cities in Africa. And this is what I will be focusing on in Kisumu next week.



&#8216;With these communities in mind, it is imperative that organisations operating at the supranational level like UN-Habitat stay the course. While the focus of governments on sustainable economic growth might waver, ours will not and we have the expertise to keep them moving forward, despite the undeniable obstacles they face.

TOPSHOT-NIGERIA-ECONOMY-PLANNING-LAGOS

OP-Ed Africa’s Secondary Cities Can be the Engine of Sustainable Economic Growth

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UN Women and Standard Bank have partnered up to equip female farmers in Africa with the skills and resources needed to grow their businesses, and succeed over the long term. This project is closely aligned to the UN Sustainable Development Goals; particularly when it comes to gender equality, access to decent work, and economic growth. Nidhi Tandon, Socio-economic Advisor for the East &#038; Southern Africa Region, UN Women joins CNBC Africa for more.

UN Women

UN Women, Standard Bank collaborate to empower female farmers in Africa

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It is predicted that Kenya’s borrowing run rate under the Jubilee administration will be at Sh2.5 billion a day up until the next election.

Rising public debt weighs on Kenya’s growth outlook

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The COVID-19 storm has ravaged big corporations across the world and here in South Africa is no different, but is this trend seen across the board with the small caps sector as well? Anthony Clark, Independent Analyst at Small Talk Daily Research joins CNBC Africa for more.

Outlook for small-caps amid COVID-19 crisis

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Mozambique is seen as a growth potential for investment opportunities, according to the International Monetary Fund its GDP is predicted at 5.5 per cent in 2020 and inflation projected to remain low, increasing slightly to 5 per cent at the end of the year. Ettiene Erasmus, Entrepreneur of Mozambique Property Developments &#038; Investments joins CNBC Africa for more.

Positive economic growth prospects fuelling Mozambique property rush

By Andrew Lapping, Chief Investment Officer at Allan Gray



As South Africans, we want our country to prosper and the quality of life for all those living within our borders to improve. Millions live in total poverty and rely on family or intermittent work to get by: life is tough, and often short, as malnutrition and hardship take their toll. The most effective way to lift people out of poverty and improve quality of life is through education and economic growth.&nbsp;



I am concerned that our government’s lockdown approach and the subsequent economic hardship inflicted on our people will cost more lives than it can save. I realise this is a controversial statement in a context where people are very fearful and understandably concerned about their health and the wellbeing of their families. An effective government must make difficult decisions that involve trade-offs and cost-benefit analysis. I am not saying we should trade lives for economic growth; I am saying we must consider how we can save as many lives as possible and give better lives to as many South Africans as possible with our limited resources.&nbsp;



President Cyril Ramaphosa’s initial lockdown decision was justified to buy time in order to gather our health resources and prepare our hospitals. It was never meant to be a strategy to eliminate the COVID-19 virus – this is an impossibility. The idea behind lockdown is that the same number of people get ill, but the infections are spread over a longer time in an effort not to overwhelm the health system. Our government’s lockdown strategy has morphed into something else entirely.&nbsp;



As new information emerges, it seems the virus mortality rate is substantially less than many feared, and many of the more alarmist predictions that led to lockdowns across the globe have proven to be flawed. The government must absorb this information, particularly given the youthful South African population.



There are two important questions:



<ul><li>How many COVID-19 fatalities can be avoided through the lockdown?</li><li>What is the economic, and therefore human, cost of the lockdown?&nbsp;</li></ul>



I will not go into detail on the potential number of lives saved by the lockdown. There is a great deal of information available* that indicates the lives saved by this strategy will be minimal unless the lockdown means the number of infections can be supressed until a vaccine becomes available. Data indicates the mortality rate for those below 70 years of age is less than 0.2%; only 2.9% of South Africa’s population is older than 70. Furthermore, lockdowns or a lack thereof, seem to make little difference to the total number of cases a country experiences. It sounds tragic and defeatist, but it is not possible to make the virus disappear through lockdown, particularly in a country like South Africa.&nbsp;



Economic and human costs are two sides of the same coin. Studies indicate that mortality rates double with job losses. A smaller economy means fewer resources to allocate to healthcare and education in future. National Treasury thinks up to seven million people could lose their jobs. This could lead to tens of thousands of additional deaths.&nbsp;



The stimulus package outlined by the government is R500bn. SARS thinks tax collection could fall by R250bn this year as a result of the shutdown.&nbsp;Given government reallocations, this means additional debt of&nbsp;approximately R500bn in a single year. The economic damage will linger, tax collections are unlikely to recover to previous levels for years to come. The&nbsp;R50bn interest bill on this additional debt burden means&nbsp;R50bn less to spend on education, healthcare or other services – not just in 2020, but in perpetuity.&nbsp;



An extreme worst-case scenario for South Africa is 150&nbsp;000 COVID-19 deaths (most models indicate worst-case scenarios of 50 000). This is based on 50% of people contracting the virus with a 0.5% fatality rate. (A more likely worst case is a 0.2% mortality rate of 50% of the population, which is 60 000). This is a huge number of deaths and a great tragedy. Let’s assume the lockdown manages to reduce the number of fatalities by 50% by supressing the illness until a vaccine is discovered: This would be an incredible success. 75 000 lives would be saved. The direct cost per life saved in this scenario is R6.6 million; indirect costs will be far greater. I know this puts a price on human life but, unfortunately, this is what government has to do every day when allocating resources. On&nbsp; the other end of the spectrum, if the disease can’t be stopped, and a vaccine is not discovered, then almost no lives will be saved from COVID, but we will have destroyed the economy, increased government debt by R500bn, and lost a great number of lives through higher mortality not related to COVID. South Africa’s 2020 budget called for healthcare spending of R229bn and police expenditure of R221bn: small amounts in comparison.



Sadly, because South Africa is a poor country, we have a very high mortality rate, and therefore low life expectancy. 410 000 South Africans die from natural causes each year, including 37 000 people from TB and 32 000 from diabetes. In addition, 15 000 die in road accidents and 21 000 are murdered. These deaths are equally tragic and perhaps even more so as they are often preventable.&nbsp;



Unlike Europe, South Africa has a limited social security net and an informal economy. Many people have no savings and have lost their livelihood with the lockdown. Hunger is an immediate reality. Malnourished children are disadvantaged for the remainder of their lives due to stunting. The government provides a child grant, but there are millions of immigrant children who have no access to this grant.&nbsp;



Just as economic growth and prosperity save lives, economic destruction and poverty cost lives.&nbsp;



So why am I writing this now? Firstly, every week the lockdown continues, the economic cost compounds. Since the lockdown was enacted six weeks ago, I have urged government to consider the full picture, including the human and economic costs of their decisions, and I have provided them with balanced data. I have detailed how this data indicates the lockdown strategy is tragically flawed. We can no longer afford to blame “the virus”, when the vast majority of the job losses and suffering is the consequence of a strategy that has not fully accounted for the human cost of the lockdown on the economy. I hope that in making this commentary I am contributing to a heightened awareness of the issues, not emotion, underpinning this discourse.



Secondly, it is to reiterate how we think about managing your portfolios against this backdrop. We all have our views on what is the right or wrong strategy for government. However, most importantly for us as investors, we must deal with the situation as it is, and invest your funds accordingly to protect capital and maximise long-term returns.



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

COVID-19: South Africa eases lockdown to revive battered economy

Op-Ed: Counting the economic cost of South Africa’s lockdown

In order to help <a href="https://www.cnbcafrica.com/coronavirus/2020/04/25/these-are-the-sectors-sa-is-considering-reopening-in-phase-4/">small and medium enterprises</a>, support the <a href="https://www.cnbcafrica.com/videos/2020/04/24/sa-economy-to-begin-a-gradual-reopening-on-1-may/">economy</a> and save jobs, the South African Reserve Bank (SARB) and the National Treasury are partnering with members of the Banking Association South Africa (BASA) to roll out a <a href="https://www.cnbcafrica.com/videos/2020/04/24/is-r800bn-stimulus-enough-for-markets/">R200 billion Covid-19 loan scheme</a>.



The scheme will allow qualifying <a href="https://www.cnbcafrica.com/article/2020/04/28/how-10000-covid-19-hit-companies-blundered-and-missed-out-on-millions/">businesses</a> to apply for loan funding from their primary bank for three months of operational costs, such as salaries, rent and supplier payments.



The statement below provides more details:



Covid-19 Loan Scheme for Small and Medium Enterprises



The R200 billion Covid-19 loan scheme is the outcome of the South African Reserve Bank (SARB) and the National Treasury partnering with members of the Banking Association South Africa (BASA) to help small and medium enterprises, support the economy and save jobs. The scheme will allow qualifying businesses to apply for loan funding from their primary bank for three months of operational costs, such as salaries, rent and supplier payments. All loans will be subject to bank credit approvals.



The Covid-19 loan scheme is a special credit facility that is being disbursed on behalf of SARB and National Treasury, using the infrastructure of the banking industry. Risk-sharing mechanisms in the scheme balance the need for government to support qualifying businesses, with ensuring the continued safety and soundness of the banking system. Similar schemes have been rolled out in over 50 countries in recent weeks.



Funding for these Covid-19 loans will be provided to banks by the SARB through a special financing mechanism. Any losses on the loans will first be offset against any margins earned on a bank’s portfolio of Covid-19 loans. Losses thereafter will be offset against a guarantee fee payable to the National Treasury by banks. Any further losses thereafter will be shared, with the first six percent being absorbed by the banks and the net balance absorbed by the National Treasury. Each bank will sign a bilateral agreement with the SARB, covering their participation in the scheme. The SARB will in turn contract with the National Treasury.



The scheme – which will start with an initial R100 billion &#8211; will be launched as soon as all the necessary legal agreements are in place. All parties are working around the clock to implement the scheme as quickly as possible after these agreements are finalised. While the finer details of the Covid-19 loan scheme and the related application process are still being finalised, the following principles will apply:



<ul><li>The Covid-19 loan scheme is a commercial arrangement and requires a credit application process, through which banks must evaluate if the business will likely be able to service all its commitments after the pandemic and lockdown. Banks are not obliged to extend Covid-19 loans and business owners may be required to sign surety.</li></ul>



<ul><li>The size of the Covid-19 loan will be calculated on the three-month funding requirement of certain operating expenses of the business, as approved by the bank, to be disbursed in monthly tranches.</li></ul>



<ul><li>Banks will not profit from the provision of the SARB guarantee. However, the administrative cost of facilitating the loans and the cost of capital will be recovered.</li></ul>



<ul><li>In the event of default, the Covid-19 loan would be subordinated to all other creditor claims.</li></ul>



<ul><li>The repayment of shareholder loans or dividends, using these funds, is expressly prohibited.</li></ul>



To qualify for the standardised Covid-19 loan, businesses, including sole proprietors, must inter alia:



<ul><li>Have a turnover under R300 million per annum</li></ul>



<ul><li>Be in good standing with their bank, prior to the onset of the Covid-19 pandemic</li></ul>



<ul><li>Be registered with the tax authority</li></ul>



<ul><li>Have insufficient normal borrowing capacity to fully fund its monthly operating expenses</li></ul>



<ul><li>Be adversely impacted by the lockdown.</li></ul>



Companies that may qualify for a Covid-19 loan, are advised to contact their primary bank. The launch date of the scheme and further details are expected to be announced shortly.



During the initial phases of the scheme, some processing backlogs will be inevitable. Banks undertake to work though these as quickly as possible and ask clients to be understanding of the challenges our staff have operating in the lockdown.



The R800 billion economic relief and stimulus package announced by President Cyril Ramaphosa and the Minister of Finance, Tito Mboweni, is an urgent and necessary part of saving lives and livelihoods, as the country unites to curb the pandemic. It will do much to alleviate poverty, hunger and uncertainty in our communities.



As important as they are, these emergency measures are not a sustainable solution to the devastating social and economic damage caused by the pandemic. We call on the President to urgently implement the ‘third phase’ of his economic recovery strategy: infrastructure development, structural reforms and sustainable transformation, to kickstart inclusive economic growth, create jobs and boost consumer and investor confidence. We need to rebuild a new and better economy for all South Africans. We hope these measures will be reflected in the extraordinary budget, which is yet to be announced. It is essential for both lives and livelihoods that we safely and fully reopen the economy as soon as possible.



Issued on behalf of The Banking Association South Africa



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

ArcelorMittal South Africa fined R3.64 million over hydrogen sulfide emissions

How SA’s R200bn Covid-19 loan scheme for small businesses works

As households and businesses in South Africa struggle to cope with the current economic turmoil and uncertainty brought upon by the COVID-19 pandemic, the Prudential Authority (PA) has welcomed the measures taken by banks to support their customers financially.



In addition to the South African Reserve Bank’s (SARB) deployment of monetary policy tools to alleviate the impact of COVID-19, the PA announced it will support the banking system by providing regulatory relief measures and guidance to banks to help manage the crisis.



The following is a statement by the Prudential Authority:



06 April 2020



Press release on regulatory relief measures and guidance to the banking sector in response to COVID-19



The impact of the coronavirus disease 2019 (COVID-19) is likely to have a lasting and detrimental effect on the economy. While the depth and length of the economic downturn remain uncertain, there is already evidence of stress at both the household and business levels, with small businesses of particular concern.



South Africa has a strong and resilient banking system with adequate levels of capital and significant liquidity buffers to manage this stress. The Basel framework, around which bank regulations are structured, has built-in buffers on both the capital and liquidity elements of the regulation for banks to draw on during times of financial stress.



The Prudential Authority (PA) welcomes the measures taken by banks to support their customers during this period of economic turmoil and uncertainty. A safe, sound and robust banking system is a key part of South Africa’s shock absorbers during these times.



In addition to the actions taken by the South African Reserve Bank (SARB) on deploying monetary policy tools to mitigate the impact of COVID-19, the PA has decided to support the banking system in response to the needs of banking customers. The PA will provide for regulatory relief measures as well as guidance to banks in managing the crisis. The regulatory relief measures are provided for in three areas, namely capital relief on restructured loans that were in good standing before the COVID-19 crisis, a lower liquidity coverage ratio (LCR) and lower capital requirements.



The PA is temporarily amending Directive 7 of 2015 on Restructured Exposures, which means that for the duration of the crisis, loans restructured as a result of the impact of COVID-19 will not attract a higher capital charge. This amendment covers loans to households, small- and medium-sized businesses and corporates, and for specialised lending.



For the duration of the crisis, the LCR, a ratio setting out the liquid assets a bank has to maintain in relation to its anticipated outflows, is being lowered from 100% to 80%.



In relation to capital relief, the Pillar 2A capital buffer, which is set at 1% of risk-weighted assets, is now set at zero. The PA has also provided clear criteria that provide for banks to dip into their capital conservation buffer, which is set at 2.5% of risk-weighted assets.



The PA plans to announce a timetable according to which banks can restore these buffers once the COVID-19 crisis has abated. This timetable will be sensitive to the need to balance the rebuilding of buffers to ensure a resilient banking system, with the negative effect that such measures could have on credit extension and economic growth.



While it should be noted that the PA is not the accounting standards regulator, it has provided guidance to the banking industry on how International Financial Reporting Standard (IFRS) 9 could be implemented during this period of volatility and stress. IFRS 9 is an important accounting standard applicable on expected credit losses in the banking sector and calculates expected credit losses over a business cycle.



The Basel framework, which provides clear rules on when discretionary dividend and bonus payments can be limited, is likely to be impacted. These constraints generally kick in when a bank breaches or is about to breach its capital buffer, which could become progressively tighter, leading it to dip into its capital buffers. With the high probability that the impact of COVID-19 will result in heightened stress in the banking system, the PA is issuing a guidance note advising banks not to distribute discretionary ordinary dividends during this period. Similarly, bonuses for senior executives should also be put on hold during this period.



The measures taken by the PA complement the steps taken by the SARB. These measures are being taken to mitigate the impact of COVID-19, while at the same time pointing out that South Africa’s banking system is robust and well-capitalised.



Today, the PA issued the following two Directives and one Guidance Note, which can be accessed on the website:



·&nbsp;&nbsp;&nbsp;&nbsp; D2/2020 &#8211; Matters related to temporary capital relief to alleviate risks posed by the Covid 19 pandemic;



·&nbsp;&nbsp;&nbsp;&nbsp; D3/2020 &#8211; Matters related to the treatment of restructured credit exposures due to the Coronavirus (Covid-19) pandemic;&nbsp; and



·&nbsp;&nbsp;&nbsp;&nbsp; G4/2020 &#8211; Recommendations on the distribution of dividends on ordinary shares and payment of cash bonuses to executive officers and material risk takers, in light of the negative economic impact of the Coronavirus Disease&nbsp; (Covid-19) pandemic and the temporary regulatory capital relief provided by the Prudential Authority.



For further information, contact Unathi Kamlana at <a href="mailto:Unathi.Kamlana@resbank.co.za">Unathi.Kamlana@resbank.co.za</a> or Ziyanda Mtshali at <a href="mailto:Ziyanda.Mtshali@resbank.co.za">Ziyanda.Mtshali@resbank.co.za</a>.



Issued by the Prudential Authority



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

Clarification on COVID-19 “hotspots” as SA moves to level 3 lockdown

Prudential Authority offers relief measures, guidance to South African banks amid COVID-19 crisis

By Irmgard Erasmus – Senior Financial Economist



Acutely aware of Ethiopia’s vulnerability to the health and
economic repercussions of the Covid-19 pandemic, Prime Minister Abiy Ahmed
urged “collective leadership and coordinated responses” to overcome the
challenges posed by the unprecedented shock. 



The Ethiopian leader has taken a dominant position in the campaign
for comprehensive stimulus packages and debt relief for the African continent,
stressing that “we are not prepared to overcome the virus on our health systems
and the long-term impact on our economies”. 



Echoing this concern, a consortium of African ministers of finance
emphasised in a communique dated April 1 that “urgent need” exists “for fiscal
stimulus to contain the crisis”.



On April 1, G20 leaders indicated that they are preparing a
response package for Africa that will include debt relief and financial aid.
The response package will incorporate “recent demands from President Cyril
Ramaphosa of South Africa and Prime Minister Abiy Ahmed of Ethiopia”, according
to Politico. 



This also came after the United Nations Economic Commission for
Africa (UNECA) again requested the “urgent and immediate release” of a $100bn
support package to aid domestic response actions in the fight against the
health and economic implications of the Covid-19 pandemic. 



While the ministers welcomed the IMF and World Bank’s call for
official bilateral creditors to “provide breathing space” to African countries,
the consortium believes that “such relief should be extended to countries
across the region and by other creditors during this exceptional period”. 



A comprehensive $100bn support package for Africa will be
formalised for discussion and presentation at the World Bank and IMF’s
stakeholders’ initiatives on April 15.



For the public sector, disbursements will be utilised for the
servicing of public sector debt and interest payments, including on sovereign
bonds, in order to create “immediate fiscal space and liquidity” for
governments to focus their attention on domestic fiscal stimulus needs amid the
crisis. 



The consortium proposes that the $44bn disbursement be pooled into
a global special purpose vehicle (SPV) to be used for external debt service
“for effective management purposes till economic recovery takes hold and
agreement can be reached with creditors”. The ministers stressed that this
measure would guard against default by countries. 



The ministers requested the IMF to raise Special Drawing Rights
(SDRs) availability over the next two to three years. The consortium believes
that it would service the debt relief SPV facility and provide crucial
liquidity support.



Ethiopia has already rescheduled debt servicing agreements with
“some major creditors”, which will alleviate hard currency liquidity demands.
By September 2019, public external debt stock stood at $26.8bn, or half of
total outstanding public debt. 



Public external debt comprised a 60:40 split between central
government and state-owned enterprises, according to official records. 



Public external debt servicing costs amounted to $548.4m during Q1
FY 2019/20 (the fiscal year commences on July 8), of which $457.2m was due to
SOE debt servicing. 



Ethiopia has been among the most vocal of African nations to
request debt waivers or debt relief – while African finance ministers called
for a $100bn stimulus package, Prime Minister Abiy Ahmed urged G20 members to
provide $150bn under a proposed three-point action plan. The disbursal should
take the form of supplementary budgetary support, debt relief, and private
sector financing, according to the proposal. 



The prime minister furthermore urged G20 nations to support the
World Health Organisation (WHO) and Africa Centres for Disease Control and
Prevention (CDC) in strengthening public health delivery and emergency
preparedness.



Cognisant of the fragility of the private sector, especially as
small- and medium-sized enterprises account for over 70% of the private sector
in Africa, the consortium stressed that liquidity relief should be extended in
particular to service and tourism sectors. 



African finance ministers requested support from the G20, EU, and
all Development Finance institutions to support a proposal aimed at the
refinancing, rescheduling, and implementation of guarantee schemes and
liquidity facilities for the private sector. 



In particular, African airline companies require preservation and
protection “given their significant contribution to the GDP of Africa”.
Ethiopian Airlines suspended flights to 80 destinations in light of the
pandemic. 



Demand for local flights, which are ongoing, dropped by at least
50% already. The airline estimates that it will lose at least $190m due to the
pandemic. 



The Ethiopian government has ordered the central bank to release
Etb15bn ($460m) to private banks as it ramped up its fight against the economic
spillover effects of the Covid-19 pandemic. The liquidity injection will enable
the banking sector to extend debt relief and additional loan facilities to
customers. 



This came in addition to instructions to avail foreign currency to
importers, with priority given to importers of essential goods or the
manufacturing of essential goods. 



In March, the World Bank granted a $500m grant and loan facility
(split evenly) to Ethiopia in support of its reform programme. 



The prime minister voiced his gratitude to “the generosity of the
Ethiopian people” as local stakeholders contributed generously to the National
Resource Mobilisation Committee initiative.



NKC African Economics’ preliminary GDP forecast suggests that
Ethiopia will be hit particularly hard by coronavirus-related disruptions. 



Absent comprehensive external support, a sharp slump in private
sector demand and investment momentum threatens an unprecedented plunge in
economic growth this year to 1.1% – down from a pre-virus forecast of 7.1%. 



Crucially, the pandemic threatens to disrupt progress made under
the reform agenda towards policy overhaul, broad-based privatisation of state
assets, financial liberalisation, and the launch of a domestic bourse. 



An uncomfortable reliance on grant relief amid strained domestic
fiscal capacity threatens to bloom into full-blown crisis in the absence of
comprehensive external financial support.

Lion_of_Judah,_Addis_Ababa,_Ethiopia

Op-Ed: Ethiopia – Abiy leads African appeal for relief actions

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Small and Medium Enterprises are important drivers of Africa’s economic growth, accounting for up to 90 per cent of all businesses in these markets. Now with almost everything put to a halt due to COVID-19 outbreak, this sector is expected to be hit hard. EFI Hub CEO, Anu Shah joins CNBC Africa to discuss measures to minimize the loss.

How COVID-19 is impacting SMEs in Africa

By <a href="https://theconversation.com/profiles/muazu-ibrahim-966673">Muazu Ibrahim</a>, <a href="https://theconversation.com/institutions/university-for-development-studies-3706">University for Development Studies</a>

Economic growth is driven by a number of factors. These include foreign direct investment, national savings, household spending, fiscal and monetary policies. Since the late 1980s African governments have fully embraced foreign direct investment as a major driver of growth. 

One of the avenues through which countries have sought to attract more foreign direct investment has been investment summits. These are hosted jointly with developed countries. They include the <a href="https://www.odi.org/blogs/10674-focac-2018-what-expect-next-weeks-china-africa-summit">Africa-China Investment Summit</a>, <a href="https://www.un.org/africarenewal/news/first-uk-africa-investment-summit-signals-post-brexit-plans-continent">Africa-UK Investment Summit</a> and the <a href="https://www.businessghana.com/site/news/business/199915/2020-U-S-Africa-Business-Summit-to-be-Hosted-in-Morocco">Africa-US Investment Summit</a>.

Despite these efforts, <a href="https://unctad.org/en/PublicationsLibrary/wir2019_en.pdf">data</a> shows that Africa has not been a major <a href="https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=ZG">recipient</a> of these flows. In fact, it attracts a lot less than other developing countries. 

There’s a bigger problem too – the impact on economic growth of the foreign direct investment the continent attracts is lower than other comparable parts of the world. In <a href="https://www.tandfonline.com/doi/full/10.1080/20430795.2019.1683504">our research</a> we set out to understand why. To do this, we looked at the financial services sector which is underdeveloped in most African countries.

<h2>The search</h2>

We examined <a href="https://www.tandfonline.com/doi/full/10.1080/20430795.2019.1683504">data</a> from 45 countries between 1980 and 2016. The variables we looked at included economic growth, foreign direct investment, financial sector development, human capital, government expenditure and gross fixed capital formation. 

The countries were selected based on data availability. They comprised several countries from all the regional blocs, including six countries from Northern Africa.

Overall, the countinent’s financial sector is under-developed compared to other emerging economies, with the exception of South Africa which is relatively well-developed. The countries’ financial sectors are bank-based, thus providing limited space for the equity (capital) markets. 

We sought to examine the relationship among three factors: foreign direct investment, economic growth, and financial sector development. Financial sector development measures a country’s financial institutions to make financial services available to citizens. It also includes the provision of finance to businesses.

There has been a lot of economic literature on the impact of foreign direct investment on economic growth. And there have been many <a href="https://www.researchgate.net/publication/266079304_FOREIGN_DIRECT_INVESTMENT_FINANCIAL_SECTOR_DEVELOPMENT_ECONOMIC_GROWTH_EMPIRICAL_EVIDENCE_ON_LINKS_FROM_GHANA_INTRODUCTION">studies</a> on the linkages between foreign direct investment, financial sectors and economic growth. But less has been done on the extent to which Africa’s financial sector is a conduit through which foreign direct investment drives economic growth.

<a href="https://www.mdpi.com/1911-8074/12/4/176/pdf">Research</a> findings on the impact of foreign direct investment on a country’s economic growth are mixed. This implies that the extent of the impact is determined by other <a href="https://www.researchgate.net/publication/325657823_The_Impact_of_Foreign_Direct_Investment_on_Economic_Growth_a_Causal_Study_in_the_United_States">factors</a> and characteristics of a country’s economy. 

That’s why we chose to look at how the financial sector, in particular its stage of development, can moderate the impact of foreign direct investment on economic growth.

<h2>What attracts foreign direct investment</h2>

For the most part, foreign direct investment inflows to Africa have generally been attributed to five factors. These are regulations (ease of doing business), the general investment climate, broader economic reforms, information communication and technology development, and improvements in infrastructure.

Foreign direct investment plays an important role in economic development. It provides financial resources, technological spillovers and improvement in human capital. These are all critical factors that can spur Africa’s economic development by addressing infrastructural deficits and reducing unemployment. 

The effect of foreign direct investment on economic growth is well documented globally. Funds from foreign investors are channelled through a country’s financial system before being allocated to the targeted beneficiary of the investment. 

In Africa’s case we <a href="https://www.tandfonline.com/doi/full/10.1080/20430795.2019.1683504">found</a> that the continent’s underdeveloped financial sector has dampened the impact of foreign direct investment on economic growth. 

To measure financial sector development we calculated credit provided by the financial sector to the private sector as a percentage of GDP. On this measure, Africa’s financial sector fails to allocate financial resources effectively and efficiently to the productive sectors of the economy. 

When the financial sector does allocate resources, it invests in risky projects. The net effect is that it hurts economic growth and therefore fails to support foreign direct investment.

<h2>What’s to be done</h2>

Foreign direct investment inflows to Africa are increasing, albeit marginally. What our study shows is that African governments need to spend more effort on maximising the impact of foreign direct investment on economic growth. This is over and above current efforts to gain a bigger share of global foreign direct investment flows. Failure to raise the impact of foreign direct investment on economic growth will mean that African countries will not fully benefit from higher inflows.

Improving the performance of the financial sector should be one of the major preoccupations of African policymakers. This should include regulators improving their supervisory roles. And they should strengthen the financial sector’s ability to allocate resources effectively to the productive sectors of the economy. Improvements in corporate governance and risk management strategies would also help.

This article was co-authored with Abraham Mensah Acquah. He holds BA (Integrated Business Studies) and a Master of Commerce degree in Banking and Finance from the School of Business and Law, University for Development Studies, Wa, Ghana.<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/131856/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important" />

<a href="https://theconversation.com/profiles/muazu-ibrahim-966673">Muazu Ibrahim</a>, Lecturer, Department of Banking and Finance, <a href="https://theconversation.com/institutions/university-for-development-studies-3706">University for Development Studies</a>

This article is republished from <a href="http://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/african-countries-arent-getting-as-much-as-they-should-from-foreign-direct-investment-131856">original article</a>.

Wikimedia Commons_Foreign Direct Investment

Why African countries aren’t getting as much as they should from foreign direct investment

NAIROBI (Reuters) &#8211; Kenya’s finance ministry cut its 2019 economic growth estimate to 5.6%, from an initial estimate of growth of about 6%, saying the move was caused by slower growth in the farming sector.



Economic expansion could bounce back to 6.1% this year, the ministry said.



Reporting by Duncan Miriri; Editing by Catherine Evans

Why Kenya’s Treasury cut 2019 growth estimate to 5.6%

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Today marks one year since the flagging off of the historic Nairobi to New York daily direct flight. During the launch, President Uhuru Kenyatta said the 15 hour flight to US will open up Kenya and the region to the world and boost the continent’s economic growth. To breakdown how much of an impact this flight has had thus far, Sebastian Mikosz, CEO of Kenya Airways joins CNBC Africa.

What impact has Nairobi-New York direct flights had one year on?

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A large number of people remain excluded from the benefits of economic growth which most African countries have registered in the last decade. To discuss the role of cooperatives in inclusive development, Howard Brodsky, Chairman and Chief Executive Officer of CCA Global Partners joins CNBC Africa for more.

Why cooperatives hold the key to inclusive development

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The World Bank says Sub-Sahara Africa’s economy has remained sluggish mainly hampered by persistent uncertainty in the global economy and the slow pace of reforms to enhance domestic resilience. The World Bank projects a 2.6 per cent economic growth for the region this year. This is 0.2 per cent lower than its projections in April. From Washington DC to discuss this, Albert Zeufack, Chief Economist for Africa at the World Bank joins CNBC Africa.

World Bank’s outlook for Sub-Saharan Africa economies

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Africa’s poultry market is experiencing a heighten growth as a result of its rapid population and economic growth. Rwanda hosted the second edition of Poultry Africa that brought together players in poultry industry from North America, Asia and Sub-Saharan Africa (SSA) to discuss the development of the poultry industry in Africa. For more on this, CNBC Africa’s Zwena Bachoo spoke to Event Manager of VIV Worldwide, Diana Toth.

VIV Worldwide’s Diana Toth opens up on expansion plans of Poultry Africa

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By <a href="https://theconversation.com/profiles/agnes-binagwaho-397402">Agnes Binagwaho</a>, <a href="http://theconversation.com/institutions/university-of-global-health-equity-3205">University of Global Health Equity</a> and <a href="https://theconversation.com/profiles/miriam-frisch-843046">Miriam Frisch</a>, <a href="http://theconversation.com/institutions/university-of-global-health-equity-3205">University of Global Health Equity</a>

Seven countries around the world – three of them in Africa – have made faster than expected progress over the past 15 years in reducing <a href="https://data.unicef.org/topic/child-survival/under-five-mortality/">deaths among children younger than five</a>. These seven countries, Bangladesh, Cambodia, Ethiopia, Nepal, Peru, Rwanda and Senegal, were selected because they have all performed unexpectedly well in improving childhood health relative to their <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG">economic growth</a>. 

There are many factors at the root of their achievements, most notably, a strong integrated and coordinated health system built on primary health care. However, one cross-cutting factor stands out that we believe allowed them all to achieve significant health gains but which, so far, tends to be always overlooked: trust.

This is clear from a <a href="https://wellcome.ac.uk/sites/default/files/wellcome-global-monitor-2018.pdf">report</a>, published by the Wellcome Trust and the Gallup Institute earlier this year. It surveyed 140,000 people in 140 countries to find out how they felt about science and health. 

A study on public attitudes to science and health on a global scale, the survey covered topics such as whether people
trust science, scientists, and information about health; the levels of understanding and interest in science and health; the benefits of science;
the compatibility of religion and science; and attitudes to vaccines. 

There’s a remarkable overlap between countries that have achieved progress in health goals such as reducing under-5 mortality, and those that ranked high in the trust survey. All seven were among the highest ranked globally when it came to their populations’ belief in the importance of vaccines while six out of the seven ranked highly in their trust in hospitals and health clinics. 

There’s logic in this. With greater population trust in health systems, health uptake and health outcomes improve. People are more likely to understand the benefits of health services and place a high value in receiving these services. This includes trusting in vaccinations which would lead people to placing a high value on vaccinating their children.

Rwanda in particular has done well in building population trust. According to the survey, the country reports the highest levels of confidence in hospitals and health clinics in the world, and the largest proportion of the population who agree that vaccines are effective. Rwanda also comes out on top in the world in terms of how much of its population believes that vaccines are important for children and in <a href="https://data.unicef.org/resources/immunization-coverage-estimates-data-visualization/">the percentage of children who are vaccinated.</a>

This is the result of the work the Rwandan government has done over the past 25 years to build a strong health system and foster an inclusive approach to health coverage, starting at a community level. These actions can serve as a model for other countries to replicate.

<h2>Crucial steps</h2>

It is 25 years since Rwanda was destroyed by the <a href="https://www.un.org/en/ga/search/view_doc.asp?symbol=S/1999/1257">1994 genocide</a> against the Tutsi. Since then, the country of more than <a href="http://www.statistics.gov.rw/statistical-publications/subject/population-size-and-population-characteristics">12 million</a> people has developed a <a href="https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)60574-2/fulltext?rss=yes">strong, decentralised health system</a> and addressed many of the major financial and geographic barriers that vulnerable populations face in accessing healthcare services. 

Some of the steps have included:

Prioritising programmes that leave no one out

Building a decentralised health system: There are 15,000 villages in Rwanda. By 2018, each one had <a href="http://www.rbc.gov.rw/index.php?id=19&amp;tx_ttnews%5Btt_news%5D=447&amp;cHash=c95bbbc0655d12b71c9ccdc675ab2313">four community health workers</a>. These community health workers are elected by their peers and are highly respected, trusted members of their communities who are spending sleepless night to keep their peers healthy. 

The trust that’s been built between community health workers and the people they represent has provided a strong foundation in developing broader trust in health systems and in the government that created the system.

Promoting the uptake of health services and vaccination service delivery: Community health workers, among other tasks, ensure that all pregnant women in their village attend antenatal clinics and deliver in a health facility, that every child gets vaccinated, and that community members are educated about the importance of vaccines and other preventive and curative treatments.

Offering universal access to a range of treatments: For example, HIV prevention care and treatment services, including the use of antiretroviral treatment.

All these measures contributed to growing population trust in the health system. People feel more comfortable in seeking out healthcare at health facilities and trusting the advice given to them by health professionals. 

<h2>More work remains</h2>

There have been <a href="https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)60574-2/fulltext?rss=yes">tangible benefits</a> to this rebuilding. Life expectancy has doubled. Immunisation coverage rates also increased from less than 30% in 1995 (with five kinds of vaccines administered) to 94% in 2015, with <a href="http://www.nitag-resource.org/uploads/media/default/0001/03/ff28cb2c2cb72344d4d7416d8178b25407d57cbb.pdf">10 vaccines administered to boys and 11 administered to girls, including the HPV vaccine</a>.

This is not to say that Rwanda doesn’t have more work to do. That’s also true of that the other six countries that performed well in the Wellcome Global Monitor.

Education remains a critical gap. The Wellcome Global Monitor <a href="https://wellcome.ac.uk/sites/default/files/wellcome-global-monitor-2018.pdf">reported</a> that the seven countries had some of the highest population proportions with little to no knowledge of science, especially among older people.

<hr>

 
 
 Read more:
 <a href="http://theconversation.com/rwanda-university-sets-out-to-teach-doctors-medicine-and-management-110527">Rwanda university sets out to teach doctors medicine and management</a>
 
 

<hr>


A lack of science education is a major barrier to improving health outcomes and achieving and sustaining <a href="https://www.who.int/health_financing/universal_coverage_definition/en/">universal health coverage</a>. Strong education systems that are training our scientists, clinicians and health professionals are crucial to ensuring countries have enough skilled professionals to provide high quality care to everyone. 

This is a gap we are trying to fill at the <a href="https://ughe.org/">University of Global Health Equity</a> in the rural north of Rwanda: to train future clinicians to have the tools to effectively address inequities in healthcare and to build and maintain health systems that leave no one out.<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/124183/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important">

<a href="https://theconversation.com/profiles/agnes-binagwaho-397402">Agnes Binagwaho</a>, Vice Chancellor, <a href="http://theconversation.com/institutions/university-of-global-health-equity-3205">University of Global Health Equity</a> and <a href="https://theconversation.com/profiles/miriam-frisch-843046">Miriam Frisch</a>, Research Associate to the Vice Chancellor, <a href="http://theconversation.com/institutions/university-of-global-health-equity-3205">University of Global Health Equity</a>

This article is republished from <a href="http://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/lessons-from-rwanda-on-how-trust-can-help-repair-a-broken-health-system-124183">original article</a>.

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economic growth

OP-Ed Africa’s Secondary Cities Can be the Engine of Sustainable Economic Growth

UN Women, Standard Bank collaborate to empower female farmers in Africa

Rising public debt weighs on Kenya’s growth outlook

Outlook for small-caps amid COVID-19 crisis

Positive economic growth prospects fuelling Mozambique property rush

Op-Ed: Counting the economic cost of South Africa’s lockdown

How SA’s R200bn Covid-19 loan scheme for small businesses works

Prudential Authority offers relief measures, guidance to South African banks amid COVID-19 crisis

Op-Ed: Ethiopia – Abiy leads African appeal for relief actions

How COVID-19 is impacting SMEs in Africa

Why African countries aren’t getting as much as they should from foreign direct investment

Why Kenya’s Treasury cut 2019 growth estimate to 5.6%

What impact has Nairobi-New York direct flights had one year on?

Why cooperatives hold the key to inclusive development

World Bank’s outlook for Sub-Saharan Africa economies

VIV Worldwide’s Diana Toth opens up on expansion plans of Poultry Africa

Here are lessons from Rwanda on how trust can assist in repairing a broken health system

News Tips

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