<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="523" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271-820x523.jpg" alt="" class="wp-image-425171" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271-820x523.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271-300x192.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271-141x90.jpg 141w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271-768x490.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/south-africa-russia-e1685444414271.jpg 860w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">President Cyril Ramaphosa of South Africa meets President Vladimir Putin of Russia at the Russia-Africa Summit in Sochi in 2019. Credit: GovernmentZA.</figcaption></figure>



Stagnation at home and fence-sitting abroad are costing the country dearly, and the costs are only rising.



<a href="https://africanarguments.org/category/african-arguments/country/southern/south-africa/">South Africa</a> is facing two fundamental challenges, one internal, the other external. Its response to both – or failure to respond to either – will define its future prosperity and position in the world. A policy of indecisive drift will not resolve either.



Internally, the government must tackle the incompetence and graft that have undermined the delivery of vital services – above all, energy and transport – and that are doing serious damage to the prospects for economic growth.



Externally, South Africa’s efforts to sit on the fence between East and West – as it sees them – is being made increasingly uncomfortable by the war in Ukraine. Economically, its fortunes lie overwhelmingly with the liberal world economy. Politically, the old alliances with Russia and China still carry weight. The recent row with the US, threatening trade, and the invitation to&nbsp; President Vladimir Putin for the BRICS Summit suggest a crunch is coming.



It is the internal challenges that preoccupy most South Africans most of the time. “Load-shedding”, the euphemism for power cuts, is getting heavier, more costly, and more disruptive. As South Africa heads into winter, there is even talk of a potentially catastrophic grid loss. The government has resorted to hiring Karpower generator ships (at great expense), and the private sector is increasingly taking its own steps to reinforce generation capacity, including through growing investment in renewable power generation. Sales of solar panels are reportedly going through the roof. But they would rather have a grid that worked.



Former CEO André de Ruyter’s&nbsp;<a href="https://businesstech.co.za/news/energy/687775/de-ruyter-goes-for-round-2-on-eskom-corruption-in-explosive-tell-all-book/">exposé</a>&nbsp;of the incompetence and corruption at state energy supplier ESKOM has made it harder for the government to shuffle off responsibility for the woeful collapse in generation. State capture may have been exposed and contained, but it is still far from being rolled back. So hopeless has the government been that&nbsp;<a href="https://www.afrobarometer.org/articles/majority-of-south-africans-say-eskom-should-be-privatised-new-afrobarometer-study-shows/">Afrobarometer</a>&nbsp;reports nearly 60% of South Africans would prefer ESKOM to be privatised as the only way to get a reliable power supply.



This crisis illustrates that the ruling African National Congress (ANC) has become less a coalition of constituencies and more a patchwork of self-interested cliques who are reaping benefits from the state and passing them on exclusively to their loyal clients. Rent-seeking rather than service delivery has become the order of the day, and a reason to hang on to power. Buying off those cliques to keep himself in the presidency seems to be all Cyril Ramaphosa can manage. The ANC has rusted in power: the façade of the state remains, but behind it is decay that will bring the façade down if left unaddressed.



The last serious plan to reform the economy was Trevor Manuel’s&nbsp;<a href="https://www.gov.za/issues/national-development-plan-2030">National Development Plan</a>, launched in 2012. More than half-way to its 2030 target, little has been achieved. Of course, Covid and the Ukraine war interrupted all plans; but they have equally underlined the urgency of reform. South Africa ought to be bouncing back, with mineral prices high, surplus labour and – at least once upon a time – the best infrastructure in Africa. Instead, it is bumping along the bottom.



There is plenty of entrepreneurial and economic potential in the country. In the recent Financial Times survey of the&nbsp;<a href="https://www.ft.com/reports/africas-fastest-growing-companies">Fastest Growing Companies in Africa</a>, one third of the top 100 companies were based in South Africa, in sectors as diverse as fintech, IT, healthcare, energy, education, and agriculture as well as mining. But many of these companies lack access to the right kind of funding and feel that government is more an obstacle than a support to their efforts. Yet it is still the private sector that is going to create the jobs needed to employ the 50-70% of young people currently unemployed.



The lack of international investment and governmental reform will cost the economy dear in a few years’ time. Sweating assets will keep production up for a while, but a future decline in output is unavoidable unless investment increases now.



And that is where the second challenge becomes relevant domestically as well as globally.



Since 1994, the ANC has tried to balance South Africa’s economic engagement with Western markets – in 2022, 36% of its&nbsp;<a href="https://www.sars.gov.za/customs-and-excise/trade-statistics/">exports</a>&nbsp;went to the EU, US and UK, against 25% to Africa and 10% to China – with a political commitment to non-alignment and close party contacts with Russia, China, and liberation movements across the world. The Ukraine war and now the BRICS Summit in August are testing that balance.



Though initially quick to condemn the invasion, the South African government subsequently rowed back. And, in March this year, President Ramaphosa blamed&nbsp;<a href="https://www.aljazeera.com/news/2022/3/18/update-1-s-africas-ramaphosa-blames-nato-for-russias-war-in-ukraine">NATO expansion</a>&nbsp;for the outbreak of hostilities, echoing Russia’s own justification for the war. That, together with the alleged loading of weapons onto a Russian vessel in South Africa last December, provoked a rare public criticism from&nbsp;<a href="https://www.reuters.com/world/us-unlikely-sanction-south-africa-russia-weapons-dispute-bloomberg-news-2023-05-14/">US Ambassador Reuben Brigety</a>. Though the row has been defused, the implication that South Africa’s privileged access to US markets under the AGOA trade deal (worth&nbsp;<a href="https://www.tralac.org/blog/article/15522-update-on-the-african-growth-and-opportunity-act-agoa-and-related-developments.html#:~:text=South%20Africa%20continues%20to%20be,the%20most%20diversified%20export%20range.">$2.7 billion in 2021</a>) might not survive Congressional scrutiny when renewed in 2024, has been firmly registered. No Russian, Chinese, or African markets could compensate for that.



Putin’s indictment by the International Criminal Court (ICC) for child abduction poses a particular challenge for South Africa as host of the 2023 BRICS Summit. ICC indictments of incumbent heads of state are particularly problematic. In the case of both Presidents Uhuru Kenyatta of Kenya and Omar al-Bashir of Sudan, the indictments drew attention to their crimes but also inhibited diplomatic efforts to address the underlying problems. This made it difficult for others to discuss with and pressure them.



South Africa, which still belongs to the ICC, has been here before. When al-Bashir attended the African Union Summit in Durban in 2015, civil society groups took the government to court to arrest him while he was in the country, as required for ICC members. The&nbsp;<a href="https://www.theguardian.com/world/2016/mar/16/south-african-court-rules-failure-to-detain-omar-al-bashir-was-disgraceful">courts supported the case</a>&nbsp;and the government had to swiftly and surreptitiously smuggle al-Bashir out of the country, embarrassing everyone. If Putin shows up in August, this will happen again. Some in the ANC have urged the government to withdraw from the ICC as an interfering “Western” institution (though most African states are members), but this cannot be done before August.



Sitting on the global fence is becoming increasingly uncomfortable for South Africa. It will not dismount, but the pain is now economic as well as political, and the cost is rising.



Overall, the ANC appears to have become so introspective that it is losing touch with both its own citizens and the outside world. With a fragmented opposition, its chances of retaining power in next year’s elections, even if forced into a coalition, are strong. But as one observer told me, the only political party that was growing fast was the Apathy Party – and that itself poses problems for the country as a whole. To save its skin, the ANC needs to reform itself and the country, and fast.

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The two defining challenges facing South Africa

London, 24th&nbsp;May, 2023&nbsp;&#8211; Published by African Export-Import Bank (Afreximbank) the&nbsp;Africa’s 2023 Growth Prospects: Securing growth resilience in a ‘polycrisis’ world&nbsp;report highlights the various factors that are currently plaguing the global economy: stubbornly high inflation, U.S. and Chinese trade and tech wars, &nbsp;geopolitical tensions and supply chain problems. Following a strong economic recovery from the height of the Covid-19 pandemic, global growth of 3.4% in 2022 was far lower than the IMF forecast of 4.9%, in part reflecting the extremely difficult global economic environment and a dramatic shift towards price stability in the inflation and growth trade-off.



Efforts by key global central banks to rein in inflation must take priority but this is having a negative effect on Africa, with higher external debt servicing costs and a collapse in African sovereign debt issuance. Only three African nations, Angola, Nigeria and South Africa, successfully accessed capital markets in 2022, collectively raising US$6bn, down from the nine that raised almost US$20bn in 2021.



Inflation is proving difficult to tame, while the opening up of the Chinese economy from Covid lockdown measures could further fuel global inflation by releasing pent-up domestic demand. However, “heightened geopolitical tensions, besides preventing opportunities for international cooperation on global issues such as security, climate change and trade, have raised the risk of fragmentation”, the report says.



The Afreximbank report forecasts 4.1% GDP growth for Africa this year, above the global average, with growth shared around the continent, although power shortages and other infrastructural shortcomings will see South African growth slow. The continent has the potential to accelerate its economic prospects, including via increasing infrastructural investment; ongoing structural transformation; improving the macroeconomic environment; digitalisation; and the implementation of the African Continental Free Trade Agreement (AfCFTA).



Dr Hippolyte Fofack, Afreximbank chief economist and director of research and international cooperation, commented: “Inflation, which hit multi-decade highs and is raising the spectre of stagflation, is likely to emerge as the dominant macroeconomic story, eclipsing the short-lived globalisation of growth resilience post-pandemic&#8230;In the immediate term, restraining inflation in the most affected leading economies without provoking a hard landing or a full-blown financial crisis remains the most urgent challenge and risk to both global and African growth.” The Afreximbank Africa’s 2023 Growth Prospects: Securing growth resilience in a ‘polycrisis’ world is available at here:&nbsp;<a href="https://www.afreximbank.com/reports/africas-2023-growth-prospects-securing-growth-resilience-in-a-polycrisis-world/">https://www.afreximbank.com/reports/africas-2023-growth-prospects-securing-growth-resilience-in-a-polycrisis-world/</a>

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African growth potential in a polycrisis world

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="800" height="532" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/fl8560351828-image-ku56w7bc.jpg" alt="" class="wp-image-424911" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/fl8560351828-image-ku56w7bc.jpg 800w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/fl8560351828-image-ku56w7bc-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/fl8560351828-image-ku56w7bc-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/fl8560351828-image-ku56w7bc-768x511.jpg 768w" sizes="(max-width: 800px) 100vw, 800px" /><figcaption class="wp-element-caption">Antarctica&#8217;s Ross Sea. Original public domain image from Flickr</figcaption></figure>



When it comes to the impacts of climate change, Africa is bearing the brunt. Although the continent <a href="https://www.afdb.org/en/news-and-events/climate-finance-africa-african-development-bank-spearheading-innovative-mechanisms-and-instruments-61174">contributes the least</a> to global warming, Africa is the most vulnerable to climate risks.



Climate change is also a multiplier threat in Africa exacerbating social and economic issues. From <a href="https://www.theguardian.com/environment/2023/apr/27/human-driven-climate-crisis-fuelling-horn-of-africa-drought-study">droughts</a> to storms and tropical cyclones, extreme weather-related events are increasing in Africa. And the continent is facing increased threats of more frequent and severe climate change-induced disasters.



As African nations remain vulnerable to the growing risks of climate change, building the continent’s resilience should be of top importance to policymakers across the continent. Innovative financing mechanisms can help the continent better prepare for and respond to natural disasters.



<h2 class="wp-block-heading" id="h-using-innovative-finance-to-address-climate-shocks">Using innovative finance to address climate shocks</h2>



Africa’s current climate finance levels are falling short and the climate financing gap is getting bigger. Between now and 2030, it’s estimated that Africa will need up to <a href="https://www.climatepolicyinitiative.org/publication/landscape-of-climate-finance-in-africa/#:~:text=Africa%2520requires%2520USD%25202.8%2520trillion,biggest%2520impacts%2520of%2520climate%2520change.">$2.8 trillion</a> to fulfil its National Determined Contributions under the Paris Agreement.



To close the growing climate finance gap, Africa should explore the use of innovative disaster risk financing mechanisms such as parametric insurance.



Parametric insurance, also called index-based insurance, <a href="https://corporatesolutions.swissre.com/insights/knowledge/what_is_parametric_insurance.html">differs from traditional insurance</a> as it’s based on the probability of a pre-defined event occurring rather than indemnifying for actual loss incurred. It offers pre-determined coverage for extreme weather-related events such as cyclones, droughts or floods.



A parametric insurance plan is <a href="https://scholarship.law.unc.edu/ncjolt/vol20/iss5/3/">based on two elements</a> first, a triggering event and second, a payout mechanism that’s pre-determined and custom created in order to ensure that there’s equity between the cost and payout.



In principle, parametric insurance is <a href="https://eprints.lancs.ac.uk/id/eprint/167588/">based on the analysis</a> of loss events. Insurers are able to be innovative in designing novel <a href="https://eprints.lancs.ac.uk/id/eprint/167588/">types of protections</a> against risks that wouldn’t meet the criteria for the indemnity insurance sector. And compared to traditional insurance mechanisms, parametric insurance differs as payouts are not based on an assessment ex-post instead, payouts are triggered when certain pre-defined parameters are met.



In the event of an extreme weather-related, governments are usually forced to reallocate funds from their national budgets in order to respond to a disaster. And for most developing countries, by the time relief reaches those that are impacted by the disaster, it’s often too late.



The biggest advantage of parametric insurance is that after a natural disaster occurs, it enables a rapid payment. This in turn can help governments react to climate shocks more swiftly.



Take Madagascar. It was the first country to adopt the African Risk Capacity’s (ARC) <a href="https://www.reinsurancene.ws/arc-launches-parametric-cyclone-product-in-africa/">parametric cyclone insurance policy</a>. After the extreme weather-related event that was tropical cyclone Batsirai hit Madagascar in 2022, it triggered the country’s parametric tropical cyclone insurance policy and the ARC paid out <a href="https://www.afdb.org/en/news-and-events/press-releases/madagascar-african-risk-capacity-group-african-development-bank-partnership-issues-15-million-insurance-pay-out-tropical-cyclone-freddy-recovery-efforts-60802#:~:text=In%202022%2C%20ARC%20Grou">$10.7 million</a> to the Government of Madagascar. In turn, Madagascar was able to use the funds to direct emergency aid to the most critical areas in a quick and efficient manner.



Malawi is another case in point. When Malawi was experiencing a drought during the 2021/2022 agricultural season, the government received a payout of <a href="https://www.arc.int/news/african-risk-capacity-group-and-african-development-bank-make-142-million-drought-recovery">$14.2 million</a> to help the country recover from the impact of the drought.



<h2 class="wp-block-heading">Mitigating Africa’s climate change risks</h2>



The recent <a href="https://report.ipcc.ch/ar6syr/pdf/IPCC_AR6_SYR_LongerReport.pdf">Intergovernmental Panel on Climate Change (IPCC) report</a> has revealed a disturbing forecast for Africa in regards to the increased frequency of severe extreme weather-related events such as droughts, floods and heatwaves. The report states that “with every increment of global warming, regional changes in mean climate and extremes become more widespread and pronounced”.



Innovative disaster risk financing instruments such as parametric insurance are in no way a panacea to Africa’s climate finance woes. But they offer the continent an opportunity to help mitigate it’s growing climate change risks and can help build resilience against future climate change shocks.

Antarctica’s Ross Sea. Original public domain image from Flickr

How to tackle Africa’s growing climate change-induced risks through innovative disaster risk financing

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="234" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-820x234.jpg" alt="" class="wp-image-424829" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-1536x439.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/blog-2099x600-afr-currencies-esther-ruth-mbabazi-imf-photos-51674780576-a6850dcc5f-o-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



Weaker currencies make the fight to curb inflation harder given the region’s dependence on imports



Most sub-Saharan African currencies have weakened against the US dollar, fanning inflationary pressures across the continent as import prices surge. This, together with a&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">growth slowdown</a>, leaves policymakers with difficult choices as they balance keeping inflation in check with a still-fragile recovery.



As the&nbsp;<a href="https://www.imf.org/en/Blogs/chart-of-the-week">Chart of the Week</a>&nbsp;shows, the average depreciation for the region since January 2022 is about 8 percent. The extent varies by country, however. Ghana’s cedi and Sierra Leone’s leone depreciated by more than 45 percent.



The&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023#Managing-Exchange-Rate-Pressures-in-Sub-Saharan-Africa%E2%80%94Adapting-to-New-Realities">depreciations</a>&nbsp;across the region were mostly driven by external factors. Lower risk appetite in global markets and interest rate hikes in the United States pushed investors away from the region towards safer and higher paying US treasury bonds.



Foreign exchange earnings took a hit in many countries as demand for the region’s exports dropped because of the economic slowdown in major economies. At the same time, high oil and food prices, partly due to Russia’s war in Ukraine, pushed up import costs in 2022.



Large budget deficits have compounded the effects of these external shocks by increasing the demand for foreign exchange. About half of the countries in the region had deficits exceeding 5 percent of gross domestic product in 2022, putting pressure on their exchange rates.



<h2 class="wp-block-heading" id="h-implications">Implications</h2>



When currencies weaken against the US dollar, local prices rise, as much of what people buy, including essential items like food, are imported. More than two-thirds of imports are priced in US dollars for most countries in the region.



A 1&nbsp;percentage point increase in the rate of depreciation against the US dollar leads, on average, to an increase in inflation of 0.22&nbsp;percentage points within the first year in the region. There is also evidence that inflationary pressures do not come down quickly when local currencies strengthen against the US dollar.



Weaker currencies also push up public debt. About 40 percent of public debt is external in sub-Saharan Africa and over 60 percent of that debt is in US dollars for most countries. Since the beginning of the pandemic, exchange rate depreciations have contributed to the region&#8217;s rise in public debt by about 10 percentage points of GDP on average by end-2022, holding all else equal. Growth and inflation (which reduces the real value of existing debts) helped to contain the public debt increase to about&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023#Managing-Exchange-Rate-Pressures-in-Sub-Saharan-Africa%E2%80%94Adapting-to-New-Realities">6 percent of GDP</a>&nbsp;during the same period.



Many central banks in the region have tried to prop up their currencies by supplying foreign exchange to importers from their reserves. But with reserve buffers running low in many countries, there is little room to continue intervening in foreign exchange markets.



Countries have also applied administrative measures such as foreign exchange rationing or banning foreign currency transactions. These measures can be highly distortive and create opportunities for corruption.&nbsp;



Given that the external shocks are expected to persist, countries where exchange rates are not pegged (fixed) to a currency have little choice but to let the exchange rate adjust and tighten monetary policy to fight inflation. Countries with pegged exchange rates will need to adjust monetary policy in line with the country of the peg. In both country groups, fiscal consolidation can help to rein in external imbalances and limit the increase in debt related to currency depreciation. Structural reforms can help to boost growth.



This blog is based on an analytical note from the&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">IMF’s Regional Economic Outlook</a>&nbsp;for sub-Saharan Africa.

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African Currencies Are Under Pressure Amid Higher-for-Longer US Interest Rates

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="234" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-820x234.jpg" alt="" class="wp-image-424698" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-1536x439.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/BLOG-2099x600-Gender-blog-Sylisia-iStock-by-Getty-Images-1387456778-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



Less than half of workers employed in advanced economy central banks are women, but on average only a third of women are economists or managers, according to an I<a href="https://www.imf.org/en/Publications/WP/Issues/2023/05/05/Who-are-Central-Banks-Gender-Human-Resources-and-Central-Banking-533096?cid=cow-com-WPIEA2023091&amp;utm_medium=email&amp;utm_source=govdelivery">MF Survey</a>. Instead, women occupy 80 percent of administrative and HR roles, which shows that occupational segregation is quite pervasive.&nbsp;&nbsp;



This is the first survey of its kind that we know of, with studies having so far focused&nbsp;<a href="https://www.aeaweb.org/articles?id=10.1257%2Fjep.33.1.3&amp;utm_medium=email&amp;utm_source=govdelivery">on academia</a>&nbsp;and the&nbsp;<a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/obes.12509?utm_medium=email&amp;utm_source=govdelivery">private</a>&nbsp;and&nbsp;<a href="https://www.brookings.edu/research/former-fed-chair-janet-yellen-on-gender-and-racial-diversity-of-the-federal-governments-economists/?utm_medium=email&amp;utm_source=govdelivery">public sectors</a>&nbsp;more broadly. Central banks can set high gender standards for other economic institutions and this work sheds light on how monetary authorities can improve their own performance.



National central banks in the Group of Seven (G7) participated, as well as the European Central Bank. The topics covered include diversity policies, employment practices, earnings, leave and work arrangements, and childcare and other benefits.



Using data from the survey, we designed a new index, the Human Resources Gender Index (HRGI), which uses a scoring from 0 to 1, with 1 being maximum equality. As our latest <a href="https://www.imf.org/en/Blogs/chart-of-the-week?utm_medium=email&amp;utm_source=govdelivery">Chart of the Week</a> shows, policies to eliminate gender gaps have been only partially successful. The ranges and wide variation in scores suggest that participating central banks could do more to reduce the gender gap.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="538" height="399" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/gender-equality-at-central-banks-static-chart_crop.png" alt="" class="wp-image-424697" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/gender-equality-at-central-banks-static-chart_crop.png 538w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/gender-equality-at-central-banks-static-chart_crop-300x222.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/gender-equality-at-central-banks-static-chart_crop-121x90.png 121w" sizes="(max-width: 538px) 100vw, 538px" /></figure>



On average, central banks score highly on diversity policies, such as hiring targets or mentoring programs and guaranteed interview schemes. However, these are rarely enforced by law and are often limited to people with disabilities.



Where central banks lag is the type of employment offered and pay—65 percent of the overall number of employees on part-time contracts are women. In some central banks, this percentage rises to as much as 80 percent. While these contracts offer flexibility, they can limit women’s career progression, contributing to the small number of women in managerial positions.



The gender gap is even more staggering when it comes to pay—just 27 percent of women make the top 20 percent of annual earnings.



Childcare and related subsidies are also limited, though parental leave and flexible work arrangements are widely offered.



We plan to extend the coverage of this survey to more central banks in both advanced and developing economies, in line with the&nbsp;<a href="https://www.imf.org/en/Topics/Gender?utm_medium=email&amp;utm_source=govdelivery">IMF’s strategy on gender</a>, and numerous studies that show the economic benefits of diversity and equality.



—This blog is based on a recent IMF working paper, titled “Who are Central Banks: Gender, Human Resources and Central Banking.” The authors are Mariarosaria Comunale, Petra de Bruxelles, Kalpana Kochhar, Juliette Raskauskas, and D. Filiz Unsal. Filiz Unsal is currently with the OECD, on leave from the IMF. Kalpana Kochhar is now Development Policy and Finance Director at the Gates Foundation. The authors thank the UK’s Foreign, Commonwealth and Development Office (FCDO) for the financial support for the study.

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Women Struggle for Equal Pay and Progression at Central Banks

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-820x547.jpg" alt="" class="wp-image-424689" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/GettyImages-1235136882-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">NEW YORK, NY &#8211; SEPTEMBER 8: Motumisi Tawana attends Destinee Ross-Sutton x FREVO x Khari Turner on September 8, 2021 at Frevo in New York City. (Photo by Patrick McMullan/PMC via Getty Images)</figcaption></figure>



You expect consuls to be busy, earnest people.



This holds true for the South African Consul General in New York, Dr Motumisi Tawana. &nbsp;



Taking up his position as South Africa’s Consul General based in New York in January 2020, he moved quickly to consolidate institutional relations with America’s large and authoritative universities, formalize berthing rights and arrangements with airport and ports authorities, and initiate networking into mayors’ offices and city council executive committees.



Importantly, too, he has extended the country’s consular reach: fifteen U.S. east coast states are now covered from South Africa’s New York consul base, with further spread – Kentucky, Tennessee and the Carolinas, among others – in the process of rolling out. &nbsp;



Facilitating trade is a major responsibility of consulates, and Dr Tawana has engaged purposefully with the regions’ many commerce chambers as well as the highest echelons of Wall Street. He also instituted and chairs the New York-based South African Business Advisory Council.



Beyond the political and social responsibilities of his office, Dr Tawana is also an expert in navigating the complexities of international trade between Africa and the U.S., and is a sought-after speaker on diplomatic and trade relations, and doing business on the African continent.



As a 24-year veteran of South Africa’s Department of International Relations and Cooperation, few can match his knowledge of how bureaucracies function and how to pinpoint the right people to get things done.



New frontiers



Now three years into his role, Dr Tawana has also been busy on an unusual front: he has founded, and is immersed in running the country’s first mission-abroad South African Cultural Center.



Opened to coincide with South Africa’s important national holiday, Heritage Day, in September 2021, the Center’s inaugural exhibition was <a href="https://podcasts.apple.com/ie/podcast/zakes-mdas-washboards-and-mirrors-at-the-south/id1441895671?i=1000539042151">Washboards and Mirrors, the Collages of Zakes Mda</a>, a stunning collection of artworks by a polymath creative mind perhaps better known for his literary works.



Culture as a catalyst for diplomacy



The mission of the Cultural Center is to ensure South Africa’s story is told in a positive, favourable light through arts and culture.



Of course, to an extent this is an adoption of soft power, part of the realpolitik game, in the same way that, many centuries ago, the great European powers exported their cultural ideas as a forerunner or complement to deep diplomacy and geostrategic manoeuvring. And in recent decades, the concept of cultural centers has worked positively for early adopters such as Japan.



“I like to think about how we can build bridges, and culture is the key to connections,” he says. “Of course the creative industries must be developed. They represent employment, jobs and economic activity. ‘’



Currently, visitors seeking consular assistance are often wowed by the permanent exhibition of some 2000 records in all eleven of South Africa’s official languages, and going back as far as 1901. Collated and arranged by well-known <a href="https://www.siemonallen.org/about.html">South African installation artist Siemon Allen</a>, ‘From Pretoria to Tshwane’ is a comprehensive tribute to South Africa’s musicians.



Dr Tawana clearly relishes the extra role and responsibility of unofficial cultural affairs attaché. “I’m now proud to be called ‘Consul General and Cultural Worker’!”



However, as yet the center doesn’t have a full-time cultural affairs officer or staff, and – although there is space to exhibit – the expertise and logistics of curatorship can be a strain on the consulate’s resources. This contrasts with the likes of Mexico, The Philippines, Germany, among other consulates in New York, which have dedicated personnel for their own Cultural Centers or to handle cultural issues.



“And we are decades behind South Korea, and Japan in particular, who have established magnificent, drawcard culture centers,” Dr Tawana adds, with an eye on the future.



The future vision for the Cultural Center



Dr Tawana says the feedback has been enormously positive, confirming that the Cultural Center has been long overdue. New York is the first, but Dr Tawana’s vision includes a spread across the world – a dynamic cultural outreach to buffer the work of embassies and to reinforce the image of South Africa as a progressive and opportunity infested land. Institutionalizing the centre will liberate fundraising opportunities and make it less dependent on consular resources, thereby allowing for more frequent exhibitions and activities – always, though, with the core mission of showcasing the arts and culture of South Africa and its investment opportunities.

Destinee Ross-Sutton x FREVO x Khari Turner

South Africa’s New York Consul General is promoting trade – through culture

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2-820x461.jpg" alt="" class="wp-image-424729" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/image2.jpg 1200w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



How African countries can join forces with an emerging Global South partner



To maintain resilience as a new multipolar world emerges, countries must adapt their foreign relations strategies to manage political and economic risk. Colombia, a country traditionally focused on its ties with the United States, Europe, and Latin American neighbors, is now turning its attention towards Africa. After a 26-year hiatus, the country has announced that a high-level delegation of some 60 representatives will be visiting South Africa, Kenya, and Ethiopia on Friday. The delegation, representing both public and private sectors, will be led by Colombia’s first Vice President of African descent, Her Excellency Francia Márquez, as part of the country’s 2022-2026 Africa Strategy. The 8-day visit not only reflects a strategic diplomatic shift for Colombia but also an opportunity to leverage the unique contributions of its Afro-Colombian population in fostering stronger relations with African countries.



With an economy similar in size to South Africa, Colombia has emerged from a decades-long armed conflict to becoming a dominant player in trade in the Western Hemisphere. Thanks to its strategic location, the country acts as a bridge between North and South American countries, joining Mexico, Chile, and Peru as part of the <a href="https://alianzapacifico.net/en/what-is-the-pacific-alliance/">Pacific Alliance</a>—a Latin American trade bloc with a combined population of 230 million people that makes up approximately 38 percent of Latin American and the Caribbean’s GDP.



<h2 class="wp-block-heading" id="h-colombia-reimagines-its-foreign-policy-leveraging-the-african-diaspora-as-diplomatic-change-agents">Colombia reimagines its foreign policy, leveraging the African diaspora as diplomatic change agents</h2>



After a historic 2022 election in which Colombia transitioned to a popular government led by President Gustavo Petro and Vice President Márquez, the political will for genuine engagement with Africa has never been more lucid than in Petro’s very own presidential inauguration speech, in which he emphasised:



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“We will seek greater alliances with Africa, where we originate from; we will seek an alliance of Afro-descendant communities in the Americas.”
<cite>&#8211; President Gustavo Petro</cite></blockquote>



During her election campaign, Márquez also expressed the African idea of ubuntu under the banner of “Soy porque somos” (“I am because we are”) to promote solidarity between communities. When the Nigerian economist Ngozi Okonjo-Iweala, Director General of the World Trade Organization (WTO), <a href="https://www.plenglish.com/news/2023/02/20/wto-director-makes-official-visit-to-colombia/">visited Colombia</a> in February on a work agenda to find alternatives to strengthen the economy, she discussed with Márquez a vision of for the country&#8217;s relationship with Africa.



Today, Colombia boasts the second largest population of African descent in Latin America after Brazil. According to the latest census data, Colombians of African descent constitute around 10% of the country’s population—a figure highly contested by <a href="https://www.okayafrica.com/afro-colombians-demand-to-be-counted-in-census/">civil society organizations</a> who believe it to be a vast undercount equivalent to “statistical genocide” in a country where historical estimates put the figure as high as 26% of the population, according to Colombia’s National Plan for the Development of the Afro-Colombian Population. Notwithstanding, this demographic plays a crucial role in bridging the gap between Colombia and Africa; their cultural and historical ties, language skills, and personal exchanges with the African continent make them natural ambassadors for fostering stronger relations. As evidence of this strategy, three renowned Afro-Colombian leaders have already been named as diplomats on the African continent: María del Rosario Mina Rojas, Ambassador to South Africa; Pedro León Cortes Ruiz, in Kenya; and Daniel Garcés Carabalí, in Ghana.



<h2 class="wp-block-heading">Challenges and opportunities for Africa</h2>



Building stronger ties with Colombia will not be without challenges. Colombia lags considerably behind countries like Brazil in trade and political ties with Africa. Colombia&#8217;s trade relationship with Africa in 2022 was still notably small, and no African country <a href="https://wits.worldbank.org/CountrySnapshot/en/COL">ranked</a> among Colombia&#8217;s top 30 trading partners. Linguistic and cultural differences, logistical barriers, as well as a perception issues and unfamiliarity on both sides of the Atlantic may throttle the development of deeper ties in the short term. Moreover, Colombia must balance its relationships with traditional partners while pursuing new alliances, ensuring that it does not alienate its long-standing allies in the process.



Despite these challenges, African countries should maximise the opportunities for cooperation with Colombia as a function of their national interests. For African countries, partnering with Colombia can provide access to Latin American markets, expertise in areas such as infrastructure development, agriculture, tourism, and knowledge transfer. For Colombia, increased trade opportunities, knowledge exchange, and collaboration on global issues like climate change and security can help diversify its economy and reduce dependence on traditional partners.



Countries such as Rwanda, have important experiences to share on improving gender equality and innovative post-conflict economic transformation. Meanwhile, Kenya can build a common voice with Colombia on environmental issues with its recent rise in <a href="https://www.ifaw.org/international/people/opinions/kenya-climate-change-discussions-africa">leading climate change</a> discussions across Africa. Kenya and Colombia are also well-positioned to design and implement innovative solutions to mitigate climate risks that can serve as a model for the rest of the world. At the moment, the only direct flight connections between South America and Africa were via Angola or Ethiopia. Ethiopia’s national carrier, Ethiopian Airlines, could provide a new route to Colombia to help improve connectivity, tourism, and business travel. Beyond increased market access for its products and services, South Africa can share experiences about its reconciliation processes and provide technical assistance in different areas of strength such as: infrastructure, research and development, as well cooperation in areas such as education, culture and the arts.



From an African Union perspective, Agenda 2063&#8217;s <a href="https://au.int/en/agenda2063/goals">seven key aspirations</a> align harmoniously with the Colombian administration’s current focus on peace, security, equality, and environmental protection. The AU also recognises the important role of the African diaspora, officially designated as the Sixth Region of Africa, in the development of the continent. This provides an opportunity to mobilise the Spanish-speaking diaspora to actively participate in the development of Africa, by creating platforms for dialogue, exchange, and skills transfer. Engagement with Colombia also provides an opportunity to advocate for the rights of its Afro-Colombian population, by addressing issues such as racism, discrimination, as well as their historical economic and social exclusion.



In these unprecedented times of pandemic, climate change, supply chain, and monetary risks, the need to reinvigorate South-South cooperation has never been more pronounced. As our continent and other Global South countries such Colombia seek to overcome the final remnants of colonialism and exploitation, now is the right time for African leaders to seek genuine partners. It is only by leveraging our joint strengths and aspirations that we can effectively face the challenges of the 21st century.



—



Recognised as the Global Top 100 Most Influential People of African Descent (MIPAD) Under 40 and the African Travel Top 100 Global Tourism Personalities in 2019, Fabien Anthony is an accomplished tech entrepreneur, special advisor on international cooperation, and current Chairman of the Pan-African Council, a global leadership and strategic development organisation dedicated to the advancement of Africa and her Diaspora.

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Colombia’s Pivot to Africa: shifting the paradigm in a multipolar world

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="216" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-820x216.jpg" alt="" class="wp-image-424541" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-820x216.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-300x79.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-160x42.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-768x202.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-1536x405.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/05/ssa-country-focus-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



Countries will need to build resilience to manage the inevitable shifts in trade and foreign direct investment



<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023">Sub-Saharan Africa</a>&nbsp;could stand to lose the most if the world were split into two isolated trading blocs centered around China or the United States and the European Union. In this severe scenario, sub-Saharan African economies could experience a permanent decline of up to 4 percent of real gross domestic product after 10 years&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023#Geoeconomic-Fragmentation:-Sub-Saharan-Africa-Caught-between-the-Fault-Lines">according to our estimates</a>—losses larger than what many countries experienced during the Global Financial Crisis.



Economic and trade alliances with new economic partners, predominantly China, have benefited the region but have also made countries reliant on imports of&nbsp;<a href="https://www.imf.org/en/Blogs/Articles/2023/03/28/volatile-commodity-prices-reduce-growth-and-amplify-swings-in-inflation">food and energy</a>&nbsp;more susceptible to global shocks, including disruptions from the surge in trade restrictions following Russia’s invasion of Ukraine. If geopolitical tensions were to escalate, countries could be hit by higher import prices or even lose access to key export markets—about half of the region’s value of international trade could be impacted.&nbsp;



The losses could be compounded if capital flows between trade blocs were cut off due to geopolitical tensions. The region could lose an estimated $10 billion of foreign direct investment (FDI) and official development assistance inflows, which is about half a percent of GDP a year (based on an average 2017–19 estimate). The reduction in FDI in the long run could also hinder much-needed technology transfer.



For countries looking to restructure their debt, deepening geoeconomic fragmen­tation could also worsen coordination problems among creditors.



<figure class="wp-block-image"><img decoding="async" src="https://www.imf.org/-/media/Images/IMF/News/Country-Focus/2023/Charts/afr-reo-cf-chart2.ashx?w=1300px" alt=""/></figure>



The region would fare better if only the US/EU cut ties with Russia and sub-Saharan African countries continue to trade freely. In this scenario—termed “<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-sub-saharan-africa-april-2023#Geoeconomic-Fragmentation:-Sub-Saharan-Africa-Caught-between-the-Fault-Lines">strategic decoupling</a>”—trade flows would be diverted towards the rest of the world, creating opportunities for new partnerships, and possibly boosting intra-regional trade. Because some African countries benefit from access to new export markets and cheaper imports, the region as a whole would not incur a GDP loss. Oil exporters supplying energy to Europe could even gain.



<figure class="wp-block-image"><img decoding="async" src="https://www.imf.org/-/media/Images/IMF/News/Country-Focus/2023/Charts/afr-reo-cf-chart1.ashx?w=1300px" alt=""/></figure>



Building resilience



To better manage shocks, countries need to build resilience. This can be done by strengthening the ongoing regional trade integration under the&nbsp;<a href="https://au-afcfta.org/">African Continental Free Trade Area</a>, which will require reducing tariff and non-tariff trade barriers, strengthening efficiency in customs, leveraging digitalization, and closing the infrastructure gaps. Deepening domestic financial markets can also broaden sources of financing and lower the volatility associated with relying too much on foreign inflows.



To take advantage of the potential shifts in trade and FDI flows, countries in the region can try to identify and nurture sectors that may benefit from trade diversion, for example, in energy. Commodity exporters in the region could potentially displace much of Russia’s energy market share in Europe.



Countries can also rely on trade promotion agencies to help identify potential opportunities, build the necessary skills and capacity for exports, and eventually re-orient production to take advantage of new trade flows. Improving the business environment, such as by lowering entry, regulatory, and tax barriers could also help.&nbsp;



What the exact outcomes will be from fragmentation and polarization, and whether these trends will continue are uncertain. What is clear, however, is multilateral institutions will need to continue to facilitate dialogue among nations to promote economic integration and cooperation.

A woman uses a trolley as she shops at a Pick n Pay store

Economic Growth in Sub-Saharan Africa Could Permanently Decline if Geopolitical Tensions Escalate

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-820x547.jpg" alt="" class="wp-image-424483" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Healthy-and-high-yielding-maize-grown-using-frass-fertilizer-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



Last month,&nbsp;<a href="https://www.theguardian.com/environment/2023/mar/12/scientists-warn-of-phosphogeddon-fertiliser-shortages-loom" target="_blank" rel="noreferrer noopener">scientists warned</a>&nbsp;of a looming “phosphogeddon.” They worry that the world’s misuse of phosphorous may exacerbate the fertilizer crisis, further disrupting global food production and worsening hunger emergencies in Africa and elsewhere.&nbsp;



There is one small insect whose powers could be harnessed to help avoid “phosphogeddon” and address the fertilizer crisis: the&nbsp;<a href="https://www.rockefellerfoundation.org/case-study/black-soldier-flies-inexpensive-and-sustainable-source-for-animal-feed/" target="_blank" rel="noreferrer noopener">black soldier fly</a>.&nbsp;It is not a pest or disease vector—the adults can’t even bite. But the larvae are a different story. Their voracious appetites offer the opportunity to recycle bio-waste into organic, high-quality fertilizer, while also contributing to waste management and animal feed.



This could help solve many of the world’s challenges. Fertilizer supplies tightened and prices skyrocketed in the months following Russia’s invasion of Ukraine—tripling in sub-Saharan Africa. This further squeezes the continent’s farmers, many of whom are already coping with drought, while others contend with flooding, and most struggle to grow food in depleted soil.&nbsp;Meanwhile, higher fertilizer prices also push up the price of food, making regular meals unaffordable for millions of people. Over the last year,&nbsp;60 percent of people in East Africa and 40 percent in West Africa faced chronic hunger.



Chemical fertilizers cannot meet the continent’s needs.&nbsp;They have always been too expensive and inappropriately formulated to serve the legions of smallholder farmers in African countries. Today, Africa only accounts&nbsp;<a href="https://www.wto.org/english/news_e/news22_e/igo_14nov22_e.pdf" target="_blank" rel="noreferrer noopener">for 3-4 percent</a>&nbsp;of global fertilizer use. In addition, synthetic fertilizer use is carbon intensive, contributing significantly to climate change, the biggest threat to African agriculture. Production of ammonia alone—the world’s most-used nitrogen fertilizer—accounts for as much as&nbsp;<a href="https://climate.mit.edu/explainers/fertilizer-and-climate-change" target="_blank" rel="noreferrer noopener">1-2 percent of global carbon dioxide emissions</a>.



Africa needs local solutions that can regenerate soil health in the face of climate change—while helping abate it.&nbsp;The black soldier fly could be one such solution. When its larvae feed on waste, they produce a byproduct called frass. It consists of whatever original waste is left over, insect feces, and the larvae’s cast-off skins.&nbsp;While it certainly doesn’t sound appealing to human ears, this organic material is akin to&nbsp;<a href="https://www.frontiersin.org/articles/10.3389/fpls.2021.680312/full" target="_blank" rel="noreferrer noopener">a wonder drug</a>&nbsp;for soil.



It can be further treated to give a high-quality, nutrient-rich fertilizer with the ability to improve soil health, boost crop yield and nutritional quality, suppress pests and diseases, and increase farmer profit margins.



Saprophytic insects—those feeding on nonliving organic matter—such as black solder flies take only five weeks to recycle organic waste into high-quality organic fertilizer that has more nutrients than most existing commercial organic and synthetic fertilizers. Studies by the&nbsp;<a href="http://www.icipe.org/" target="_blank" rel="noreferrer noopener">International Centre for Insect Physiology and Ecology</a>&nbsp;have shown that frass fertilizer can increase the yields of key crops, including maize (7 – 27 percent), tomatoes (22 – 135 percent), and French beans (38 – 50 percent) compared to existing commercial fertilizers.



Frass fertilizer is also less expensive than synthetic fertilizers. It costs US$854 per hectare every season to fertilize with synthetics, but only US$390 per season using frass fertilizer over the same area.&nbsp;Furthermore, frass fertilizer has been found effective in suppressing devastating crop pests such as potato cyst nematodes, root knot nematode, and cabbage and onion root maggots, as well as tomato bacterial wilt disease.



And there is another upside to frass fertilizer: it puts abundant waste to good use. Africa’s bio-waste generation capacity of 125 million tons annually provides sufficient grist for insect farming and frass fertilizer production. Currently, only&nbsp;<a href="https://www.intechopen.com/chapters/68270" target="_blank" rel="noreferrer noopener">4 percent of waste</a>&nbsp;in Africa is recycled, compared to 35 percent for Europe.



The time is ripe for private capital investments in African agribusinesses that can increase the production of frass fertilizers.&nbsp;Cutting-edge research is critical to fine tune production and optimization, build capacity, and generate the information necessary for commercialization.



The world needs to embrace the urgency of the fertilizer crisis and think beyond outdated or expensive technologies that are unaffordable to many farmers. Such investments, and enabling government policies, are essential for solutions such as frass fertilizer to take hold, helping producers ensure consistent supply to meet the growing demand.



The world has the tools—and the bugs—to develop sustainable, local solutions that improve soil health and human health, as well as food security and nutrition. When farmers can use these tools in their fields, we can solve many challenges at once, improving African lives and livelihoods in the process.



Dr. Chrysantus Mbi Tanga is a Senior Scientist and the Head of Insects for Food, Feed and Other Uses (INSEFF) Programme at icipe. Betty Kibaara is a Director, Food Initiative at The Rockefeller Foundation, Africa Regional Office.

Healthy-and-high-yielding-maize-grown-using-frass-fertilizer

New insect-composted organic fertilizer could help solve Africa’s soil health and crop yield crises

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="648" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-820x648.jpg" alt="" class="wp-image-424261" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-820x648.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-300x237.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-114x90.jpg 114w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-768x607.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k-1536x1214.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/9363412183_a97bfcd52e_k.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via Flickr</figcaption></figure>



In recent decades, the Horn of Africa has increasingly played host to a fierce competition for influence, stemming from geopolitical rivalries in the Middle East. Typically, such dynamics feed fears of destabilization, particularly in a region with such a troubled recent history of violence.&nbsp;



While these struggles for influence have, at times, exacerbated problematic dynamics, for the most part these fears have proved to be exaggerated. For the most part, African governments have managed to extract significant material benefits, while Middle Eastern leaders have not militarized the region to the extent that some thought possible at times of maximum tension. A case could even be made that, far from destabilizing the region, power politics in the Middle East have materially contributed to the region’s stability.



The War on Terror, and later the regional tensions exacerbated by the 2011 Arab Uprisings, were the most important catalyst for increased Middle Eastern engagement in the region.&nbsp;



Somalia, in many ways, has been the most contested area. Qatari involvement in the country dates back to the 2000s, but since then, several Middle Eastern powers have used their wealth to support different candidates. The 2012 and 2017 presidential elections were particularly crucial moments, with Qatar’s preferred candidates victorious both times. The UAE, meanwhile, has secured deals with the breakaway Somali state of Somaliland and the semi-autonomous Somali region of Puntland to establish bases and commercial ports there. Turkey, a regional rival of both Abu Dhabi and Riyadh, has established a base in Somalia and explored the possibility of a naval base in Sudan.&nbsp;



Eritrea has also been seen as a strategically important ally – used for a time by the Iranians to smuggle arms to Gaza. In 2015, Saudi Arabia and the UAE persuaded President Isais Afwerki to abandon ties with Iran, instead joining their coalition against Tehran’s Houthi allies in the Yemen war and allowing Abu Dhabi to use Eritrea’s port of Assab as a military base. As part of this effort to strengthen their military footprint in the region, Riyadh also turned to neighbouring Djibouti, agreeing to build a new Saudi military base there.&nbsp;



Despite this, the much-feared militarization of the region has not, for the most part, come to fruition. While the UAE did use Assab as a base for a while, it later dismantled much of its military presence as it reduced its role in Yemen. Meanwhile, the bases in Somaliland and Puntland have not yet been developed, nor has the Saudi base in Djibouti. Turkey’s Mogadishu base was primarily used for training Somalia’s security forces rather than to house the Turkish military, and the Sudanese naval position never materialized.&nbsp;



This is due in large part to the fact that tensions within the Middle East itself have cooled, with notable rapprochements between the UAE, Saudi Arabia, Qatar, and Turkey, alongside the recent improvements in Iran-Saudi ties. The 2022 Somali election, which saw far less external competition than previously and the victory of a candidate with a ‘no enemies’ philosophy, serves as a useful indicator for the decreased level of competition.



This has meant that nations in the horn have been able to reap the rewards of the increased engagement, without suffering the consequences of destabilization. Indeed, this new strategic landscape has opened the door for Arab powers to make proactive contributions to the region’s stability. The UAE has been especially proactive, using diplomacy and strategic investment to grease the wheels of peace. The UAE’s role in brokering the historic 2018 peace agreement between Ethiopia and Eritrea after 18 years of diplomatic deadlock particularly stands out.&nbsp;



Elsewhere Abu Dhabi has also helped improve critical infrastructure, such as the ports of Assab, Bosaso, and Berbera. In the latter case, it further sponsored a new Berbera-Ethiopia highway, alongside the UK, that will allow the port to act as a major new outlet for Addis Ababa’s trade, boosting Somaliland’s economy. Other Middle Eastern states have similarly invested in infrastructure, notably Turkey’s upgrading of Mogadishu’s airport and port while Ankara, alongside Abu Dhabi, Riyadh and Doha have all significantly increased their deployment of aid to the Horn. Meanwhile Turkey and the UAE have joined the US, UK and other western governments in helping to train Somali (and, in the UAE’s case, Somaliland) security forces and coastguards in the twin battles against Jihadism and Piracy.



For the most part, then, leaders in the Horn can see this period of engagement as a success story. Partly, this is due to active efforts to limit the political influence of the Middle East, notably by Eritrea and Ethiopia, but is also down to the significant presence of other global powers in the Horn, notably the US, UK, EU, and China. Moreover, the rapprochements between key Middle Eastern powers have meant that concessions given away by African leaders have not been negatively exploited.&nbsp;



In a rapidly shifting geopolitical landscape, however, the challenge for leaders in the Horn, and in the Middle East, will be whether they can continue this balancing act. Middle Eastern states can clearly contribute to peace, stability, and development in the Horn – but the risks of destabilization should not be ignored.

9363412183_a97bfcd52e_k

Can Middle Eastern powers help stabilize the Horn of Africa?

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="234" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-820x234.jpg" alt="" class="wp-image-424142" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-1536x439.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-weoch3-debt-kim-haughton-imf-photos-51982143308-2fc4aaa497-o-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



Public debt soared to a record during the pandemic, topping global gross domestic product. Now, with government debt still elevated, the rise in interest rates and the strong US dollar are adding to interest costs, in turn weighing on growth and fueling financial stability risks.



With several economies already in debt distress, we explore in an analytical chapter of our latest World Economic Outlook what policies work best to durably reduce public debt ratios (or debt to GDP). 



<figure class="wp-block-image"><a href="https://www.imf.org/en/Blogs/Articles/2023/04/10/how-to-tackle-soaring-public-debt?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://content.govdelivery.com/attachments/fancy_images/USIMF/2023/04/7429912/4677676/weo-chapter-3-charts-01_crop.png" alt="weo ch3 chart 1"/></a></figure>



Using two decades of data, we find that an adequately tailored fiscal contraction of about 0.4 percentage point of GDP—the average size in our sample—lowers the debt ratio by 0.7 percentage point in the first year and up to 2.1 percentage points after five years.



But the timing of the adjustment can impact what effect it has. The probability of reducing debt ratios through consolidation improves from the baseline (average) of about half to three-quarters when undertaken during a domestic and global boom or periods during which financial conditions are loose and uncertainty is low.



<figure class="wp-block-image"><a href="https://www.imf.org/en/Blogs/Articles/2023/04/10/how-to-tackle-soaring-public-debt?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://content.govdelivery.com/attachments/fancy_images/USIMF/2023/04/7429936/4677677/weo-chapter-3-charts-02_crop.png" alt="weo ch3 chart 2"/></a></figure>



Design also matters. In advanced economies, spending cuts are more likely to lower debt ratios than increasing revenues. Odds of success also improve when fiscal consolidation is reinforced by growth enhancing structural reforms and strong institutional frameworks.



This explains why fiscal consolidation hasn&#8217;t typically reduced debt ratios in the past—the right conditions and accompanying policies weren’t present.



There are important factors for why fiscal consolidation alone didn’t reduce the debt ratio level in about half of the cases: first fiscal consolidation tends to slow GDP growth. Second, exchange rate fluctuations and transfers to state-owned enterprises or contingent liabilities can offset debt reduction efforts. These “below-the-line” operations can increase debt, despite improvements in the primary balance (which would ordinarily drive down debt). Examples include unexpected transfers that the government provided to state-owned enterprises in Mexico (2016), and clearance of payments past due by the government in Greece (2016), which were all recorded as below the line items in the fiscal account.



Debt restructuring



While well-designed fiscal consolidation and growth-friendly structural reforms can help reduce debt ratios, they may not be sufficient for countries in debt distress or facing increased rollover risks. In such cases, debt restructuring—a renegotiation of the terms of a loan—may be necessary.



Restructuring is typically used as a last resort. It’s a complex process that requires the agreement of domestic and foreign creditors and involves burden sharing between different parties (for example, between residents and banks in most domestic restructurings). It can incur significant economic costs and there are reputational risks and coordination challenges.



But when combined with fiscal consolidation, it can significantly reduce debt ratios—on average, up to 8 percentage points or more after 5 years in emerging markets and low-income countries.



Seychelles, for example, had a debt ratio of over 180 percent in 2008, when the global financial crisis hit. After debt restructurings with both official Paris Club and private external creditors that involved a large reduction in face value of debt, this ratio sharply declined to 84 percent in 2010. Prudent fiscal policy combined with high GDP growth helped sustain the reduction in debt ratios.



We also found that it matters how deep the restructuring is. Public debt in Belize remained elevated despite two sequential restructurings, suggesting that even when done early, debt will stay high if the treatment is not deep enough. By contrast, debt ratios in Jamaica were significantly reduced with early and deep restructurings that were executed through an extension of maturity and a reduction in coupon payments rather than a reduction in the face value of debt. Notably, the fiscal space created by the debt service relief from restructuring was saved, as reflected in its strong fiscal consolidation.



<figure class="wp-block-image"><a href="https://www.imf.org/en/Blogs/Articles/2023/04/10/how-to-tackle-soaring-public-debt?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://content.govdelivery.com/attachments/fancy_images/USIMF/2023/04/7429938/4677678/weo-chapter-3-charts-03_crop.png" alt="weo ch3 chart 3"/></a></figure>



For countries that can afford a moderate and gradual reduction in debt ratios, it’s best to undertake fiscal consolidation when conditions are favorable, along with policies that include structural reforms aimed at promoting growth. Having strong institutional frameworks can prevent &#8220;below the line&#8221; operations that undermine debt reduction efforts and ensure that countries indeed build buffers and reduce debt during good times.



Countries facing increased funding pressures or already in debt distress may have no viable alternative than a substantial or rapid debt reduction. Fiscal consolidation will likely be needed to regain market confidence and recover macroeconomic stability in these countries. In addition, policymakers should also consider timely debt restructuring. If pursued, the restructuring will need to be deep to reduce debt ratios.



For restructurings to succeed, global policymakers must also promote mechanisms to enhance coordination and confidence among creditors and debtors. The Group of Twenty Common Framework should be improved to bring greater predictability, earlier engagement, a payment standstill, and further clarification on comparability of treatment.

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How to Tackle Soaring Public Debt

As we approach the 2030 deadline for the achievement of critical Sustainable Development Goals, including the eradication of hunger and poverty, many opportunities are emerging for Africa to substantially reduce its food insecurity, create well-paying jobs, and promote the economic success of its women and youth, through transformed agricultural and food systems.



Indeed, the reality that the continent’s population is rapidly increasing – to reach 2.4 billion by 2050 – highlights the need for increased and sustainable agricultural production, alongside systems for delivering food around the continent – ultimately leading to food security and gainful employment.



Luckily, Africa has nearly all the natural resources needed to transform its agricultural productivity, including an agile and enlightened youthful population, large portions of arable land, and a climate profile that favors agricultural production when complemented with techniques like soil nutrient replenishment and irrigation.



However, the transformation that we seek will only come forth through dedicated leadership from governments, the private sector, development organizations, scientists, and farmer organizations. These stakeholders are critical in promoting and instituting a favorable policy environment for agriculture sector growth; spurring technology and innovation, and advancing financing and market opportunities.



Thankfully, around Africa, we have numerous participants that are actively driving transformation within their different specializations. For example, in Uganda, previous Africa Food Prize (AFP) winner Dr. Emma Naluyima, is a super-trainer on closed-loop farming, with her 1-acre enterprise serving as a global showcase of profitable and environmentally friendly agriculture. Across the continent, in Senegal, another AFP Laureate Baba Dioum is widely-recognized for his voice in policy development, a voice that has promoted cross-border agricultural trade in West Africa and helped to significantly advance the trade dimension of the Comprehensive Africa Agriculture Development Programme (CAADP).



I also must recognize the outstanding leadership of AGRA President Dr. Agnes Kalibata in the transformation of Africa’s food security and agricultural development, through her previous work as Rwanda’s agriculture minister where she, in a remarkably short time, turned the country into a farming success story. Under her leadership, AGRA has grown into a pioneering institution that is driving the transformation of Africa’s smallholder farmers’ work from a struggle to survive into thriving enterprises. Now at the beginning of its third strategic period, we expect from the institution interventions that increase farmers’ access to modern inputs, technologies and production knowledge; financing, and well-paying markets.



Alongside AGRA, the International Institute of Tropical Agriculture (IITA), and the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), also stand out for their steadfast and inspiring



commitment to a research agenda that aligns with Africa’s traditions, and the evolving needs of African farmers and consumers. There are many more individuals and organizations that are doing exceptional work in driving the change that Africa desires.



It is in recognition of such commitment that the AFP was founded nearly 18 years ago by various food systems partners, including AGRA, and has since feted over 26 deserving laureates from 10 African countries – including Naluyima, Dioum, Dr. Kalibata, IITA and ICRISAT. The US$100,000 award has consistently been issued even through the troublesome years of the COVID-19 pandemic. Its relevance in Africa’s annual awards calendar has been majorly sustained by its stellar administrative and selection panel led, until now, by H.E. Chief Olusegun Obasanjo, the former President of the Federal Republic of Nigeria, a cherished African leader and a well-respected farmer.



H.E. Chief Obasanjo’s stewardship of the African Food Prize for the past seven years, has been nothing short of a meticulous show of exemplary leadership. It is, therefore, with great pride that I accepted to take over from him as the chair of the AFP committee, a gigantic task, but which I am ready for, assured by the support of the exceptional team he bequeathed me. On which note, I invite all food system champions in Africa to join me in wishing the good Chief all the best as he continues leading the continent’s food systems transformation in many other different capacities.



Finally, it is with great pleasure that I now invite applications and nominations for the 2023 prize, which will be issued at Africa’s Food Systems Summit (AGRF) in my home country, Tanzania, in September. I am eager to see the quality of nominations that will make it to the final panel. I am also calling upon everyone in Africa and beyond to keenly engage with the AFP process and to continue emulating its laureates in leading the change required to drive food systems transformation for Africa’s prosperity. AFP nominations page: <a href="https://africafoodprize.org/nominate/">https://africafoodprize.org/nominate/</a>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-820x547.jpg" alt="" class="wp-image-424076" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Kikwete-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">H.E. Jakaya Mrisho Kikwete is the former President of Tanzania and Chair, Africa Food Prize.</figcaption></figure>

Kikwete

It is important to celebrate Africa’s food systems transformation champions

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="234" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-820x234.jpg" alt="" class="wp-image-424057" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-1536x439.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/blog-2099x600-fm-ch-2-kim-haughton-imf-photos-52661303026-edffa4d55c-o-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Credit: Kim Haughton/IMF Photos</figcaption></figure>



Smart fiscal policy can help restore price stability and lessen the impact of the cost-of-living crisis.



High inflation can impose serious and lasting costs on the economy and people. But the distributive effects of inflation—the way it transfers money from some individuals to others—are complex.



To respond effectively to the sharpest upsurge in inflation in three decades and to address the damage done to households, policymakers should have a better understanding of how inflation affects various segments of society in different places.



In our&nbsp;<a href="https://www.imf.org/en/Publications/FM/Issues/2023/04/03/fiscal-monitor-april-2023?cid=bl-com-spring2023flagships-FMOEA2023001">April 2023 Fiscal Monitor</a>, we study the effects of (unexpected) inflation on people’s well-being from mid-2021 to mid-2022—a period when food and energy prices rose earlier and faster than other prices. The chapter offers several lessons for policymakers on the impact of inflation on households’ budgets and how fiscal policy can help curb inflation while supporting the vulnerable.



Impact on public finances



Analyzing how inflation affects public finances, our main finding is that&nbsp;unexpected&nbsp;inflation—such as in the recent episode—erodes the real value of government debt at the expense of bondholders. For countries with debt exceeding 50 percent of GDP, each percentage point of unexpected (“surprise”) increase in inflation reduces public debt by 0.6 percentage points of GDP, with the effect lasting for several years.<img decoding="async" alt="" src="https://www.imf.org/-/media/Images/IMF/Blog/Articles/Blog-Charts/2023/March/figure-1-v5.ashx">



As inflation becomes persistent and better anticipated, however, it stops contributing to declining debt ratios.



Likewise, deficit-to-GDP ratios initially decline as spending fails to keep pace with the rise in the monetary value of the economy’s output. But such effects fade even quicker.



Impact on households



Based on public surveys of thousands of households in six economies (Colombia, Finland, France, Kenya, Mexico, and Senegal), we find that inflation from mid-2021 to mid-2022 impacted people through three main channels: their consumption patterns; their income from wages, pensions, or transfers; and their assets and liabilities. The below chart displays the estimated effects of these channels to a developing economy (Kenya) and to an advanced economy (France), prior to any new government intervention in support of households. <img decoding="async" alt="" src="https://www.imf.org/-/media/Images/IMF/Blog/Articles/Blog-Charts/2023/March/figure-2-v5.ashx">



Although the impact varies across countries (and across income groups), the surveys reveal that:



<ul>
<li>The faster rise in food prices compared to other prices hurt poor families disproportionately because food represents a higher share of their total consumption. This effect was most pronounced in low-income countries. </li>



<li>Inflation eroded real incomes in commodity-importing countries, as wages across all income groups did not keep pace with prices. </li>



<li>As inflation eroded the monetary value of assets and liabilities, families with negative net worth benefitted at the expense of creditors, particularly in countries with developed financial and credit markets. </li>



<li>Redistributive wealth effects of inflation were also influenced by the age of the head of household: young families, which tend to be net borrowers, experienced gains through the wealth channels, whereas old households saw their wealth eroded.</li>
</ul>



Curbing inflation while protecting the vulnerable



Fiscal policy can support monetary policy in dealing with inflation because it also affects aggregate demand. Our statistical evidence suggests that fiscal policy’s impact on inflation has changed over the decades. For advanced economies we find that, since 1985, reducing public expenditure by 1 percentage point of GDP lowers inflation by half a percentage point.



In addition, fiscal policy can also help protect the vulnerable.



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The economic model used in the chapter incorporates inequality in incomes, consumption, and asset holdings. It shows that when central banks act alone—without the support of fiscal policy—they need to hike interest rates substantially to fight inflation. Fiscal tightening makes it possible to increase interest rates by less to contain inflation.



But to safeguard the poor—who benefit more from public services—tax hikes or cuts in lower-priority spending must be combined with larger transfers. This strategy results, by design, in no drop in consumption for the poor, but also in a lower decline in overall consumption.

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Fiscal Policy Can Help Tame Inflation and Protect the Most Vulnerable

<h2 class="wp-block-heading" id="h-south-african-airways-saa-is-poised-for-growth">South African Airways (SAA) is poised for growth </h2>



It has now been nearly two years since SAA emerged from its business rescue process in 2021, a process that led to an extensive restructuring in all key areas of the business. This reorganisation and subsequent changes are beginning to bear fruit.&nbsp;



After emerging from the business rescue process, SAA resumed flights in September of the same year, beginning with just three routes (which grew to ten routes by the end of December last year). SAA has since operated nearly 9,000 commercial flights, delivering more than 1.2 million seats.&nbsp;



The one key point that stands out is customer affinity to our brand, SAA is a strong brand across the globe and our presence was missed. We do not take for granted the return of our customers and the SAA team is committed to providing the customer experience attached to our national carrier status, SAA is truly the spirit of our nation.&nbsp;



It may certainly be difficult for those outside the airline to see just how dramatically SAA has shifted. I am saying this cognisant of various analyses and views, most of which are highly negative. But, from where I am sitting, SAA is well poised for survival and growth in the medium term.&nbsp;



<h2 class="wp-block-heading">We are not talking about the same airline</h2>



Are we the same airline that we were before we went into business rescue in December 2019? No. Not in terms of the size of our fleet, our route, or our staff complement. And in many ways, that is a good thing.



SAA the airline now has a staff complement of approximately 1,000 people &#8211; a fraction of the pre-business rescue staff size. We have seven aircraft, and since December, we now operate ten routes, excluding the destinations we reach through our codeshare agreements.&nbsp;



The massive, unwieldy giant has been replaced with a smaller airline that expands cautiously. In a departure from the SAA of the past, every new route is considered carefully to ensure profitability and long-term sustainability.



<h2 class="wp-block-heading">Our finances tell a promising story of recovery</h2>



Our financial performance has improved significantly and the third quarter financial results of SAA the airline were positive. It is important to note that SAA is a group of companies, the different companies’ results are consolidated and were marginally negative at the end of quarter 3, while the airline entity results were positive. There appears to be confusion in terms of whether SAA has posted positive results or not, the question is which SAA we are talking about.&nbsp;



It is an important milestone to achieve positive results, considering the airline had posted significant losses for several years and was the very entity that was placed in business rescue, nearly leading to the collapse of the entire airline group.&nbsp;



The airline business is capital intensive and it is important that it generates cash on an ongoing basis to fund working capital and capex. This aspect remains a balancing act, but we are glad that in the 2023 Budget Speech, Finance Minister, Enoch Godongwana announced R1bn allocation for SAA. Of course, this will be used to cover outstanding business rescue-related liabilities, specifically those relating to the final dividend payment to creditors and the refund of legacy un-flown tickets to affected passengers &#8211; which date back to the period when SAA was placed in business rescue in December 2019. The airline will continue to negotiate with National Treasury for the balance of the funds and ensure the airline meets all the conditions that may need to accompany the flow of these funds.



As with many airlines, at SAA we plan to increase our fleet size as we pursue growth and return to destinations we once serviced and/or new destinations.&nbsp; The growth in fleet and routes will contribute to the improvement of the bottom line as any increase in flying activities will enable offsetting the existing already optimised overhead structure without overly increasing the costs.&nbsp;



<h2 class="wp-block-heading">SAA is more than just an airline</h2>



Next year, SAA will celebrate 90 years in the sky. That is nearly a century of excellence in aviation, an unparalleled track record, and &#8211; it must be emphasised &#8211; a contribution to growing critical aviation skills on the African continent. Indeed, there are not many pilots and aviation professionals in South Africa, who have not, at some point, worked at SAA.



It is not an understatement to say that SAA has probably contributed to the growth of aviation on the continent more than any other airline &#8211; nurturing a cohort of expert pilots, housing rare skills and connecting places in Africa, that, in some cases, did not enjoy direct air connections before. From connecting governments on diplomatic missions to business engaging to striking game-changing deals, the impact of SAA cannot be underestimated.



This is a role that SAA has always played, and while it has admittedly diminished as we work to rebuild and streamline the airline, it is the space that we will undoubtedly reclaim in years to come.&nbsp;&nbsp;



It is the more intangible, but nevertheless important part of the story when we talk about the meaning of SAA. As we build on the finances and profitably &#8211; let us not forget that in many ways, SAA is more than just an airline.&nbsp;

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Why the ‘new SAA’ can (and will) succeed, writes SAA Interim Chief Financial Officer, Fikile Mhlontlo

<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-820x547.jpg" alt="" class="wp-image-424029" width="344" height="229" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/04/Wemabank22854-2-1-scaled.jpg 2048w" sizes="(max-width: 344px) 100vw, 344px" /></figure>



Wema Bank Plc hereby announces Moruf Oseni as the substantive Managing Director and Chief Executive Officer effective April 1, 2023. After serving in acting capacity since January 1, 2023, Oseni will be succeeding Ademola Adebise, following approval by the Central Bank of Nigeria (CBN).



Oseni&#8217;s journey with Wema Bank began in 2012 when he joined as an Executive Director. Before his appointment as MD/CEO, he served as Deputy Managing Director for the last four years, a role where he demonstrated the capacity to lead the bank to even greater heights as it continues to evolve into a financial powerhouse.



With over 25 years of experience, including more than 16 years at senior to executive management levels, Oseni was the MD/CEO of MG Ineso, a principal investment and financial advisory firm. He had also served as Vice President at Renaissance Capital and was an Associate at Schroder Salomon Smith Barney/Citigroup Global Markets in London.



Oseni&#8217;s credentials speak for themselves, with an MBA from the Institut European d&#8217;Administration des Affaires (INSEAD) in France, a Master&#8217;s in Finance (MIF) from the London Business School, and a B.Sc. in Computer Engineering from Obafemi Awolowo University (OAU). He is also an alumnus of the Advanced Management Program (AMP) of the Harvard Business School and King&#8217;s College, Lagos.



In addition to Oseni&#8217;s appointment, the CBN also approved the appointments of Wole Akinleye as Deputy Managing Director, and Tunde Mabawonku as Executive Director. Wole Akinleye previously served as the Executive Director in charge of Corporate Banking and the South-West Business, while Tunde Mabawonku served as the Bank’s Chief Finance Officer. The Board is confident that these new appointments will be crucial to the continued transformation and growth of the Bank as it positions itself as a market leader in Nigeria&#8217;s banking industry through technology and innovation.



All appointments are effective from April 1, 2023.

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Moruf Oseni takes over as the MD/CEO of Wema Bank Plc

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="501" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-820x501.webp" alt="" class="wp-image-423986" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-820x501.webp 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-300x183.webp 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-147x90.webp 147w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-768x469.webp 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA-1536x939.webp 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/03/responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA.webp 1600w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">250 Chief Strategy Officers from 20 industries recently shared vital emerging inflexion points. Image: Getty Images/iStockphoto</figcaption></figure>



Disruptions and developments that suddenly affect us often brew on the periphery, or under the surface, well before they break through. These inflexion points – the moment when those trends break through – cause business assumptions to change. They are high impact shifts; as described by Andy Grove, they will “push you to make fundamental change in your business strategy. Nothing less is sufficient”.



The good thing about inflexion points is that that they can be anticipated before they emerge. To do this, we must increase our ability to “see around corners”. This can be done by “getting out of the building”; by getting in direct contact with our broader environment and including different perspectives. What might be foreign and invisible from where I sit could be very present from where someone else is. What might be at the edge or the periphery for my organization might be at the core for another in a different sector.



<h2 class="wp-block-heading" id="h-inflexion-points-for-chief-strategy-officers">Inflexion points for Chief Strategy Officers</h2>



Last week, more than 250 Chief Strategy Officers from more than 20 industries got out of their building. Some of them joined us for a cross-industry horizon scan in which they explored, prioritized and shared perspectives on what they believe might be some of the emerging signals that are currently brewing at the edge and could potentially break through as inflexion points over the next three to five years. Here are some of the key elements that were discussed:



<h3 class="wp-block-heading" id="h-1-new-hubs-new-corridors">1. New hubs, new corridors</h3>



There is an increasing focus on how countries are becoming more insular. The major US-China corridor is contracting, and COVID has led to a more widespread deceleration of globalization – or even deglobalization.



However, what we see under the surface when following movement of capital, goods and people paints a different picture. While this is yet to fully materialize, we observe the emergence of new corridors that are yet to consolidate but that might soon overtake the major ones we know today. This could point to more globalization rather than less.



What is key here is the need to understand better how new patterns are emerging. While value chains have evolved gradually in the past, new forces are emerging that could shape and accelerate their evolution, including semiconductors, pharmaceuticals or the energy transition, creating a new set of interdependencies.



<h3 class="wp-block-heading" id="h-2-understanding-the-green-economy">2. Understanding the green economy</h3>



While most are rightly focused on the mechanics of the transition to low-carbon energy systems, Strategy Officers highlighted an underappreciation of the impact that it will have in redefining current economic and geopolitical dynamics. The transition will create new winners and losers within and across countries.



A new economy of raw materials, such as lithium, nickel, cobalt, manganese and graphite, will emerge. In a scenario that achieves the Paris Agreement goals, the total demand for those materials would rise significantly by “over 40% for copper and rare earth elements, 60-70% for nickel and cobalt, and almost 90% for lithium”. Electric vehicle and battery storage have already overtaken consumer electronics as the largest consumer of lithium. There is a need for a better understanding and appreciation of where these new strategic resources are, who owns them and what this will mean.



<h3 class="wp-block-heading">3. The Great Unretirement</h3>



Workforce and talent are omnipresent in every discussion – whether it is about hybrid work, or about skills and reskilling. But one of the most underappreciated trends concerned employees who are over 50 years old and how they will affect labour markets over the next few years.



By 2031, we could expect a mass retirement of the baby boomers (people born between 1946 and 1964), who will by then have reached the age of 67. This is expected to <a href="https://www.bls.gov/opub/mlr/2022/article/projections-overview-and-highlights-2021-31.htm">drive a decline</a> in the labour force participation rate until 2031. There are, however, mixed signals within this broader trend. For instance, while many older workers left the workforce during the pandemic, the waning of COVID-19 and the skyrocketing cost of living are reversing this trend. Some even talk about a “Great Unretirement”, highlighting how workers over 50 are returning to paid employment across advanced economies.



These still seem to be taking companies by surprise. There is a need to think more seriously about that age group to avoid talent shortages, and a significant loss of knowledge and experience within the workforce. The OECD estimates that the development of a multigenerational workforce and better opportunities for older employees could drive an increase of 19% of GDP per capita over the next 30 years.



<h3 class="wp-block-heading">4. From owning data to data-sharing</h3>



For several decades, businesses across industries have relied on proprietary data to gain a competitive edge. The growing prevalence of cloud computing, the internet of things (IoT) and other technological advancements are steering this trend in the opposite direction of collaborative data-sharing.



But most companies are yet to realize the potential of shared data and its ability to unlock new opportunities. Gartner predicts that organizations that promote-data sharing will outperform their competitors on most business value metrics. The same research highlights that “Data and analytics leaders who share data externally generate three times more measurable economic benefit than those who do not”. Companies that embrace shared data stand to benefit from increased collaboration, improved efficiency, and the ability to tap into a broader pool of expertise. Those that cling to proprietary data risk being left behind as their competitors forge ahead with innovative solutions.



<h3 class="wp-block-heading">5. Beyond the hype of exponential AI</h3>



As usually happens with technology, artificial intelligence has followed the pattern of going from hype to disillusionment. Mainstreaming terms such as “generative AI”, ChatGPT’s success is the latest to reignite debates about the future of the technology.



There is now a common agreement that “smart machines, bots and systems powered mostly by machine learning and artificial intelligence will quickly increase in speed and sophistication between now and 2035”. A recent Gartner study highlights that by 2025, 30% of outbound marketing messages from large organizations will be synthetically generated, up from less than 2% in 2022. By 2030, a major blockbuster film could be released with 90% of the film generated by AI.



If the recent frenzy triggered by ChatGPT should teach us something, it is the need to focus on the following more prominently. Firstly, generative AI should be approached as a general-purpose technology, meaning that is has the potential to affect and alter our economy and society. Past general-purpose technologies include the steam engine or electricity. Secondly, while ChatGPT has focused a lot of our attention recently, it represents only one of the many applications of generative AI, which could also include drug design, development of new materials, synthetic data etc. Finally, there is a need to safely and ethically experiment and develop new use cases for this technology, as a vital way of informing the development of our approach and governance moving forward.



<h2 class="wp-block-heading">Corporate change agents</h2>



Seeing an inflexion point coming is only the beginning of the journey. The next steps include defining strategic options about what your organization will do about them and finally your ability to bring your organization with you in the implementation of the change required. Remember, that these inflexion points have high level of impact and will likely require more than small tweaks to your strategy, but rather a significant and deep rethinking.



Building on this, one of the key elements that came out of the discussion with Strategy Officers was about the evolution of their role, which includes the need to develop a deep and specialized understanding of an increasingly broad range of areas. Strategy Officers are no longer experts in a given industry, but have to become proficient in sustainability, talent, AI, quantum computing, or anything else that might be required. In addition, while their ability to scan and see around corners is key, they increasingly need to act as internal translators on those topics, as integrator and change agent in the company.

responsive_big_webp_HA0pAukoNhwQcuviOByNoEWkBu64vKAsuSGywInipKA

Industry strategy: 5 potential inflexion points on the radar of Chief Strategy Officers

Water underpins all life forms, and the water situation in Africa is diverse. Within a country or region, the situation can shift from water scarcity to abundance. This necessitates tailored measures to protect sources of water from— water catchments, lakes, rivers, streams, or wetlands— without disrupting the natural systems and livelihoods that depend on it.



Across the continent, there is an urgent need to conserve freshwater ecosystems to safeguard the important services that they play in supporting communities as a source of water for domestic use and agriculture, as well as supporting livelihoods through fishing and the use of water for energy production, whether hydropower or cooling. This is in addition to being home to 12 percent of the Earth’s known species, including mammals, birds, fish, insects, and plants—a richer diversity of life forms per unit area, compared to land and oceans.



However, these healthy freshwater ecosystems and their sources are dwindling, as water flows and levels are receding. The continent, and indeed the whole world, is staring at a crisis that is both about water scarcity and loss of biodiversity. This is due to multiple threats facing freshwater ecosystems, including climate change; invasive species, such as water hyacinth; and overdependence, as well as direct degradation, from farming, industry, and pollution. These risks need to be addressed to maintain water’s many benefits to African people and the planet. It is just as urgent to conserve its rich biodiversity with the continent’s population projected to double by 2050, exerting more pressure on natural resources.



Unfortunately, when it comes to protection, freshwater systems have historically not received as much attention as land and oceans, a trend that is starting to be reversed. Leading with science, The Nature Conservancy (TNC) is bringing together governments, communities, NGOs, and private sector, to help protect and restore these sources of life that we depend on.



Solutions to protect these water sources must be long-lasting and tailored to an area&#8217;s unique features. For instance, different approaches would be needed for the wet Congo Basin covering nine countries, and the expansive Okavango, the world largest inland freshwater delta, whose terminal basin never reaches the sea and almost all its water is from Angola. Besides, because it is expensive to move water from one place to another, it calls for locally applied solutions that also consider the prevailing circumstances and do not disrupt economic activity.



Development and the environment can co-exist, with neither suffering at the expense of the other. TNC has been at the forefront in championing replicable, nature-based, public-private approaches across the continent with a track record of success. This is transforming <a href="https://www.nature.org/en-us/what-we-do/our-insights/perspectives/gabon-30-30-leading-conservation/">Gabon</a> into a model for smart development, applying conservation science in freshwater and hydropower planning to support its green ambition; and using a web-based freshwater conservation blueprint tool to evaluate development scenarios for ones that benefit people and nature the most while minimizing harm. In the <a href="https://www.nature.org/en-us/about-us/where-we-work/africa/stories-in-africa/protect-freshwater/?vu=africawater">Lake Tanganyika</a> basin that covers Tanzania, Zambia, Burundi, and the Democratic Republic of the Congo, it is about rapidly scaling fisheries co-management best practices, combining ground-breaking science, local knowledge, and proven methods. In the <a href="https://www.nature.org/en-us/magazine/magazine-articles/okavango-delta-african-oasis/">Okavango Basin</a>, this has taken a multi-pronged approach that proactively bundles conservation efforts with smart development and sustainable financing to maximise positive economic, social, and environmental benefits, while forestalling risks and mitigating unavoidable impacts. And in Kenya, the Upper Tana-Nairobi Water Fund has inspired cities across the continent to set up programs that work with communities to protect watersheds for the benefit of upstream and downstream users. Africa needs more initiatives like these.



To accelerate the pace and scale of conserving freshwater ecosystems, significantly more investment is needed. Different actors, from government and development finance institutions to non-profits and communities, also need to work together to arrive at low cost, high impact and replicable solutions. Local communities must be an integral part of such efforts, as stewards and holders of knowledge and rights, leaning on their traditional approaches while protecting their social, cultural, and economic interests.



To sustain our rivers and lakes for the incalculable benefits to people and planet, we must all coordinate and collaborate our conservation actions, including those for cross-border rivers and lakes. It is time for the world to work together in implementing the goals for protecting and restoring freshwater sources, while avoiding risks, for the benefit of generations to come.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="697" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-820x697.jpg" alt="" class="wp-image-421601" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-820x697.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-300x255.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-106x90.jpg 106w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-768x653.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-1536x1305.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/Ademola-Ajagbe-2-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Ademola Ajagbe is the Regional Managing Director, Africa at The Nature Conservancy</figcaption></figure>

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