WASHINGTON (Reuters) &#8211; During a blue-sky moment in 2018 near the end of a decade-long economic expansion, it was the United States that helped pull the world along as the extra cash from tax cuts and government spending flowed through domestic and global markets.





But if it was U.S. policy that pushed the world higher then, it is U.S. policy that threatens to pull the world under now as the country’s troubled response to the coronavirus pandemic emerges as a chief risk to any sustained global recovery.



Officials from Mexico to Japan are already on edge. Exports have taken a hit in Germany, and Canada looks south warily knowing that any further hit to U.S. growth will undoubtedly spill over.



“Globally there will be difficult months and years ahead and it is of particular concern that the number of COVID-19 cases is still rising,” the International Monetary Fund said in a review of the U.S. economy that cited “social unrest” due to rising poverty as one of the risks to economic growth.



“The risk ahead is that a large share of the U.S. population will have to contend with an important deterioration of living standards and significant economic hardship for several years. This, in turn, can further weaken demand and exacerbate longer-term headwinds to growth.”



It was a clinical description of a grim set of facts: After the U.S. government committed roughly $3 trillion to support the economy through a round of restrictions on activity imposed to curb the virus in April and May, the disease is surging in the United States to record levels just as those support programs are due to expire. More than 3.6 million people have been infected and 140,000 killed. Daily growth in cases has tripled to more than 70,000 since mid-May, and the 7-day moving average of deaths, after falling steadily from April to July, has turned higher.



Meanwhile the country has fractured over issues like mask-wearing that in other parts of the world were adopted readily as a matter of common courtesy. With some key states like Texas and California now reimposing restrictions, analysts have already noted a possible plateau to the U.S. recovery with the country still 13.3 million jobs shy of the number in February.FILE PHOTO: A 3D-printed coronavirus model is seen in front of a U.S. flag on display in this illustration taken March 25, 2020. REUTERS/Dado Ruvic/Illustration/File Photo



<h3 class="wp-block-heading">A GLOBAL DISAPPOINTMENT</h3>



For other major economic powers, that is a weight added to their own struggles with the virus and the economic fallout.



The U.S. economy accounts for about a quarter of world gross domestic product. Though much of that is service-related, and much of the direct impact of the virus is tied up in industries like restaurants with weak links to the global economy, the connections are still there. A lost job leads to lower consumer spending leads to fewer imports; weak business conditions lead to less investment in the equipment or supplies that are often produced elsewhere.



Year-to-date U.S. imports through May are down more than 13%, or roughly $176 billion.



In Germany, whose measures to contain the pandemic are considered to have been among the most effective, exports to the United States plunged 36% year-over-year in May. Analysts see little prospect for improvement, with year-to-date U.S. auto sales through June down nearly 24% from a year earlier.



“That is really a disappointment,” said Gabriel Felbermayr, president of the Kiel Institute for the World Economy, in a recent interview with radio network Deutschlandfunk. The spike in U.S. infections, he said, could not have been expected.



In Japan, the speed of the recovery is seen tied directly to U.S. success in stemming the virus.



“Japan’s recovery will be really delayed if the spreading of the coronavirus in the United States isn’t stopped and U.S.-bound exports from various Asian countries don’t grow,” said Hideo Kumano, a former Bank of Japan official who is now chief economist at Dai-ichi Life Research Institute.



<h3 class="wp-block-heading">PESSIMISM AT BOTH BORDERS</h3>



The IMF projected U.S. GDP will shrink this year by 6.6%, in line with many analysts’ projections.



The Bank of Canada is more pessimistic, forecasting U.S. GDP to fall 8.1% on the year. That has already been lowered once as the health situation decayed.Slideshow&nbsp;(2 Images)



A further leg down would hit Canada directly, with perhaps three-fourths of the country’s exports headed over the U.S. border.



“We did take down our U.S. projection &#8230; I would underline that there’s a lot of uncertainty, and the principle source of the uncertainty is the evolution of the coronavirus itself,” said BOC governor Tiff Macklem.



At the southern border, Mexico is also posting record daily numbers of new cases, but President Andres Manuel Lopez Obrador has at times deflected criticism of his government’s efforts by pointing to the U.S. numbers.



Lopez Obrador undertook a risky visit with President Donald Trump earlier in July, couching his journey to Washington as a matter of economic necessity as Mexico attempts to revive an economy that could shrink by 10% or more this year, according to forecasts.



The Mexican president hopes the new United States-Mexico-Canada Agreement (USMCA) trade deal, which took effect on July 1, will spur business and investment, but pessimism about the outlook has been growing.



“To the point that people in the U.S. are losing jobs or incomes it is a downward weight &#8230; and it will have ramifications on the ability to consume globally,” said Elizabeth Crofoot, senior economist at the Conference Board, which documented a record drop in global consumer confidence in a recent survey.



“We take one step forward and two steps back.”

US COVID-19

When the U.S. sneezes, the world catches a cold. What happens when it has severe COVID-19?

GENEVA (Reuters) &#8211; South Africa’s growing COVID-19 epidemic should be an alert to the rest of the continent to strengthen disease surveillance, the World Health Organization (WHO) said on Monday.FILE PHOTO: A logo is pictured at the World Health Organization (WHO) building in Geneva, Switzerland, February 2, 2020. REUTERS/Denis Balibouse



South Africa reported a surge of 13,373 new cases on Saturday, the fourth largest globally.



Botswana, Kenya, Namibia, Zambia and Zimbabwe also reported significant increases in cases over the past week, WHO’s top emergencies expert Mike Ryan told a news conference.



“Even though the numbers in those other countries are smaller I think what we starting to see is a continued acceleration of transmission in a number of countries in sub-Saharan Africa and I think that has to be taken very, very seriously,” he said.



“South Africa may unfortunately be a precursor, it may be a warning for what will happen in the rest of Africa. So I think this isn’t just a wake-up call for South Africa &#8230; we need to take what is happening in Africa very very seriously.”



The WHO also warned that indigenous communities comprising half a million people around the world are especially at risk from the pandemic due to often poor living conditions.



Director general Tedros Adhanom Ghebreyesus said that as of July 6, there were more than 70,000 cases reported among indigenous peoples in the Americas, with more than 2,000 deaths.



“Indigenous peoples often have a high burden of poverty, unemployment, malnutrition and both communicable and non-communicable diseases, making them more vulnerable,” Tedros said, adding that those in current epicentre the Americas were of particular concern.



The WHO boss urged nations to take all necessary health precautions, with special emphasis on contact tracing.



“We do not have to wait for a vaccine. We have to save lives now,” he said.



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Global infections stand at more than 14.5 million, according to a Reuters tally, with more than 600,000 deaths.



The WHO welcomed news that AstraZeneca’s experimental vaccine was safe and produced an immune response in early-stage clinical trials in healthy volunteers.



“We congratulate our colleagues for the progress they have made,” Ryan said. “This is a positive result, but there is a long way to go &#8230; We now need to move to large-scale trials.”

Dr Matshidiso Moeti – WHO Regional Director for Africa

South Africa outbreak should be wake-up call for continent: WHO

HAVANA (Reuters) &#8211; State-run stores in Cuba began selling some food and hygiene products in U.S. dollars on Monday as the import-dependent country faces a grave shortage of tradable currency to purchase goods abroad.People wait in line to enter a store that sells products in U.S. dollars in Havana, Cuba, 



Cuba last had to open such dollar stores for basic goods in the 1990s when the fall of the Soviet Union plunged the Communist-run island into a deep economic depression.



This time it is the coronavirus pandemic, which has shuttered tourism and hit other revenue earners, worsening an existing liquidity crisis due to the implosion of ally Venezuela’s economy and the tightening of U.S. sanctions on old foe Cuba.



Lines formed in front of the stores on Monday and Cubans packed banks to obtain the bank card needed to purchase dollar goods although most residents resigned themselves to obtaining the basics in local currency.



“Not all Cubans can buy there, we don’t all have family abroad,” Lazara Rodriguez, 43, a dancer who lives near one of the stores, said.



The government said 62 stores were opening across the country with more to follow in the coming months.



Some 80 outlets selling domestic appliances, car parts and other items such as motorbikes opened late last year, and used cars went on sale for greenbacks earlier in 2020.



The Cuban state monopolizes retail and foreign trade but pandemic fallout has worsened shortages of food, medicine and other goods and there are long lines at retail outlets.



Consumers said the dollar stores provided an option amidst scarcity for some, but complained they still lacked many products.



“Its good, the prices are acceptable, but it does not have many products like detergent, oil and ham,” retiree Guillermo Antigua said, exiting a store in Havana.



Cuba is reopening with no new cases of COVID-19 reported on Monday, but private eateries with no access to wholesale markets have been finding it difficult to put together an offer.



The new stores are an option for some.



“This is good. We have options to keep working. At least they are selling us products,” cafeteria owner Daniel Gonzalez said as he packed cheese and other items into his car.



Cuba legalized the dollar after the fall of the Soviet Union but it was taken out of circulation in 2004.



Since then, there have been two currencies, the peso and the convertible peso, which is valued at 24 pesos, circulating although possession of the dollar and other tradable currencies remained legal.



Cubans who patronize the dollar stores need a dollar-denominated bank card from an account opened with tradable currencies which may be obtained through offshore remittances or other means such as exchanging local pesos on the street.Slideshow&nbsp;(3 Images)



The government claims the convertible peso is equal to the dollar, but imported goods, when available, have huge mark-ups as they are purchased in tradable currencies. The peso and convertible peso have no value abroad.



“As in the 1990s, national currencies have lost their convertibility and do not allow companies to pay debts and import inputs,” Pavel Vidal, a former Cuban central bank economist who teaches at Colombia’s Universidad Javeriana Cali, said.



“To ensure that at least some sectors and markets work, they have to dollarize them.”

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In Cuba, the old foe’s greenback makes a comeback

LONDON (Reuters) &#8211; British clothing and food retailer Marks &amp; Spencer (<a href="https://www.reuters.com/companies/MKS.L">MKS.L</a>) said on Monday it planned to cut 950 jobs as part of a restructuring, dealing a further blow to a sector that has already seen thousands of redundancies during the COVID-19 crisis.



M&amp;S said it had started a consultation with its employee representative group and had set out its intention to first offer voluntary redundancy to affected workers across central support functions, central operations and property and store management.



The cuts form part of M&amp;S’s plan to move to a “leaner, faster retail management structure,” it said.



Britain’s retailers, already struggling with high rents, business taxes, tight margins and online competition, were particularly hammered by the coronavirus lockdown.



Earlier this month health and beauty chain Boots (<a href="https://www.reuters.com/companies/WBA.O">WBA.O</a>) announced 4,000 job cuts, while department store chain John Lewis said it would likely shed 1,300.

london

Britain’s M&S plans to cut 950 jobs in restructuring

NAIROBI (Reuters) &#8211; The chairman of Kenya’s senate committee overseeing the government’s response to the coronavirus crisis has quit the post after police said he flouted an overnight curfew to enjoy drinks with others in a Nairobi bar.



“I will bear responsibility &#8230; I apologise to Kenyans and I will face the full consequences of the law,” Johnson Sakaja, who represents Nairobi county and is a close ally of President Uhuru Kenyatta, told reporters on Monday.



Police said Sakaja was caught in the early hours of Saturday morning drinking with about 10 others, long after a 9 p.m.-4 a.m. curfew had set in. He is the first Kenyan official to lay on his sword after breaking the myriad lockdown rules.



His lawyer and fellow senator Mutula Kilonzo said Sakaja would appear in court on Tuesday to face undisclosed charges.



Kenya began easing its lockdown earlier this month, but kept the curfew in place as well as a prohibition on bars. There have been a string of arrests for people drinking illegally.



The East African nation has so far reported just over 13,000 confirmed cases of COVID-19 and 234 fatalities.



Sakaja, 35, is one of a crop of youthful lawmakers who joined the legislature for the first time in 2013 on behalf of Kenyatta’s ruling party.

Op-Ed: Jubilee, Kanu formalise coalition as internal battles rage in Kenya

Caught flouting curfew in bar, Kenyan official quits COVID committee

JOHANNESBURG (Reuters) &#8211; South Africa’s rand weakened early on Monday as a global surge in COVID-19 infections put the brakes on risk-taking.



At 0700 GMT the rand was 0.19% weaker at 16.7300 per dollar compared to Friday’s close of 16.6975.



The rand had rallied to a one-month best in mid-week before facing technical resistance around the 16.50 mark.



Investors demand for yield was tempered by growing coronavirus cases locally and abroad, as well as resurfacing diplomatic tensions between Washington and Beijing.



“We start the trading week on a subdued risk negative footing as the surging number of COVID-19 cases once again weighs on markets,” TreasuryOne currency trader Andre Botha said.



More than 14 million people have been reported to be infected by the novel coronavirus globally and 595,459​ have died, according to a Reuters tally.



Locally, positive cases approached the 340,000, with nearly 5,000 deaths.



Bonds opened flat, with the yield on the benchmark 2030 paper up 0.5 basis points to 9.415%.

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South African rand retreats as virus surge weighs on sentiment

ABUJA (Reuters) &#8211; Nigerian Foreign Minister Geoffrey Onyeama said on Sunday he had tested positive for COVID-19, and became the first member of President Muhammadu Buhari’s cabinet to contract the new coronavirus.



Onyeama, 64, said on Twitter he had taken a COVID-19 test because of a throat irritation.



“Did my fourth Covid-19 test yesterday at the first sign of a throat irritation and unfortunately this time it came back positive,” he tweeted. “Heading for isolation in a health facility and praying for the best.”



Buhari’s cabinet has been conducting executive council meetings virtually as part of measures to keep the government working while abiding by social distancing rules.



The government started a phased easing of lockdowns in May after implementing measures to slow the spread of the virus, which has killed 778 people in Nigeria and infected more than 36,000.



Onyeama has played a role in repatriating Nigerians stranded because of travel restrictions during the COVID-19 pandemic.



Buhari’s former chief of staff, Abba Kyari, died in April from the novel coronavirus, making him the most high profile person in the country to die from the virus.

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Nigerian Foreign Minister Onyeama tests positive for coronavirus

ALGIERS (Reuters) &#8211; Algeria, already under financial pressure after a fall in energy earnings, expects state carrier Air Algerie’s losses from the coronavirus pandemic to reach 35 billion dinars ($272 million) this year, the government said on Saturday.



It said all other sectors have suffered losses due to movement restrictions and lockdowns aimed at limiting the spread of the novel coronavirus.



Air Algerie suspended both external and domestic operations in March before operating some emergency flights mainly from Europe, Turkey and Gulf countries.



That suspension caused losses estimated at 16.31 billion dinars by April, a figure that may climb to 35 billion by the end of the year, Finance Minister Ayman Benabderrahmane told a meeting with businessmen and unions.



President Abdelmadjid Tebboune has said air, sea and land borders would remain closed until the end of the health crisis.



The meeting, chaired by Prime Minister Abdelaziz Djerad, was intended to set up a commission with the aim of evaluating overall economic losses from restrictions linked to the virus.



“The state has taken preventive measures to cope with the health crisis. These measures have seriously affected the national economy,” Djerad told the meeting.



He cited energy, construction, public works and transport as the main sectors that have suffered since the government started imposing restrictions in mid-March.



OPEC member and gas-exporting Algeria has already announced public spending cuts and delayed planned investment projects for this year in sectors including energy to ease the impact of lower oil prices.



“Algeria is facing an unprecedented economic situation,” Djerad said.

7T-VKB_B737-800_Air_Algerie_(6776851695)

Algeria sees state carrier’s losses from coronavirus at $272 mln this year

(Reuters) &#8211; The World Health Organization reported a record increase in global coronavirus cases for the second day in a row, with the total rising by 259,848 in 24 hours.



The biggest increases reported on Saturday were from the United States, Brazil, India and South Africa, according to a daily report. The previous WHO record for new cases was 237,743 on Friday. Deaths rose by 7,360, the biggest one-day increase since May 10. Deaths have been averaging 4,800 a day in July, up slightly from an average of 4,600 a day in June.



Total global coronavirus cases surpassed 14 million on Friday, according to a Reuters tally, marking another milestone in the spread of the disease that has killed nearly 600,000 people in seven months. The surge means that 1 million cases were reported in under 100 hours.



The WHO reported 71,484 new cases in the United States, 45,403 in Brazil, 34,884 in India and 13,373 in South Africa.



India on Friday became the third country in the world to record more than 1 million cases of the new coronavirus, behind only the United States and Brazil. Epidemiologists say India is still likely months from hitting its peak.



Cases in Brazil crossed the 2 million mark on Thursday, doubling in less than a month and adding nearly 40,000 new cases a day. A patchwork of state and city responses has held up poorly in Brazil in the absence of a tightly coordinated policy from the federal government.



The United States, which leads with world with over 3.7 million cases, has also tried to curb the outbreak at the state and local levels with only limited success.

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

WHO reports record daily increase in global coronavirus cases for second day in a row

(Reuters) &#8211; Americans debated mask mandates and the reopening of schools during the coronavirus pandemic on Friday as state and local officials imposed conflicting orders and cases rose by more than 70,000 across the nation for the second day in a row.



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The United States recorded a total of at least 70,674 new COVID-19 infections on Friday after climbing by a record 77,499 a day earlier, the largest increase posted by any country since the pandemic started, according to a Reuters tally.



U.S. deaths on Friday rose by at least 912, the fourth day in a row that fatalities have exceeded 900 a day.



<h4 class="wp-block-heading">RELATED COVERAGE</h4>



<ul class="wp-block-list"><li><a href="https://www.reuters.com/article/us-health-coronavirus-usa-trump/trump-says-he-will-not-consider-a-national-mask-mandate-idUSKCN24I2WH">Trump says he will not consider a national mask mandate</a></li></ul>



In the state of Georgia, Governor Brian Kemp sued Atlanta’s mayor to prevent her from mandating masks.



Chicago Mayor Lori Lightfoot announced a plan to offer both in-person and remote instruction at the nation’s third-largest school district, over the objection of the teachers’ union, which wants remote learning only.



Americans have become divided along political lines over mask orders, with conservatives more likely than liberals to call the rules a violation of their Constitutional rights.



“Everybody saying that (wearing a mask) is a violation of their freedom &#8211; no, it’s not. Because a seatbelt is mandated and that’s to save your life,” said Sharon Taylor, 48, a cardiothoracic nurse in Atlanta.



With school set to resume in a few weeks, local officials across the country have announced a variety of plans to resume teaching.



<h3 class="wp-block-heading">TRUMP SAYS WON’T ORDER MASKS</h3>



California Governor Gavin Newsom, who until now has allowed school districts in the nation’s most populous state to set their own policies, said on Friday schools could reopen only in counties that for 14 days have stayed off a worsening trends watch list.



As of Friday, 30 of the state’s 58 counties were on the list and schools there must remain closed. Among them are Los Angeles, Sacramento and San Diego counties, accounting for nearly 40% of the state’s population.



The United States has been averaging about 60,000 cases a day in July with cases rising in 41 states on Friday, based on a Reuters analysis. Texas and Arkansas reported a record number of deaths on Friday, while Kansas, Ohio, North Dakota and Puerto Rico reported record numbers of infections.



President Donald Trump has urged a return to normal, stressing the importance of reigniting the economy. The Trump administration and some health experts argue children are better off in classrooms for their development, and also to allow parents to return to work.



Trump told Fox News on Friday he did not believe in implementing a national mask mandate.



Dr. Anthony Fauci, the nation’s top infectious disease specialist, urged political leaders to “be as forceful as possible in getting your citizenry to wear masks.”



Miami Beach, Florida imposed an 8 p.m. curfew in its entertainment district after social media posts showed maskless revelers crammed into restaurant patios.



Oklahoma City’s council voted in favor of an indoor mask requirement in the absence of a statewide face-covering mandate.



In Georgia, Kemp &#8211; a Republican and Trump supporter &#8211; urged all Georgians to wear masks for at least four weeks but said mandates were unenforceable and suggested they would hobble the economy.Slideshow&nbsp;(3 Images)



“Brian Kemp does the bidding of President Trump,” Atlanta’s Democratic Mayor Keisha Lance Bottoms, who has tested positive for the coronavirus, told CNN on Friday.



Louis Charles, 68, of Atlanta, sided with the mayor on Friday as he wore a mask, all alone, sorting through his mail outside a post office.



“It’s wrong,” Charles said. “The mayor is trying to help people. This is a pandemic. How much worse does he want it?”



Reporting by Daniel Trotta, Peter Szekely, Rich McKay, Lisa Lambert, Lisa Shumaker, Maria Caspani, Gabriella Borter, Andrew Hay, Liza Feria, Brendan O&#8217;Brien and Dan Whitcomb; Writing by Daniel Trotta and Dan Whitcomb; Editing by Rosalba O&#8217;Brien, Cynthia Osterman and Lincoln Feast.

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U.S. divided over masks, schools as coronavirus cases rise by over 70,000 again

NEW YORK (Reuters) &#8211; Investors are searching for bargains in the world of U.S. small-caps, as the beaten-down asset class prepares for what may be the worst earnings season in its history amid a resurgent coronavirus pandemic.



Small-cap companies are expected to post a year-over-year earnings declines of approximately 90% as companies report their second-quarter results over the next several weeks, compared to a 67% hit for mid-caps and 44% for large-caps, according to Jefferies. That would be the largest drop since the fourth quarter of 2008, data from S&amp;P Dow Jones Indices showed.



While some investors had counted on a third-quarter rebound, many are now concerned that potential coronavirus-fueled economic shutdowns in California, Florida and Texas will deal a disproportionate hit to smaller firms, which are more directly tied to domestic spending and have been among the biggest beneficiaries of stimulus measures delivered by the Federal Reserve and Congress.



People fear a “‘Night of the Living Dead’ of small-cap companies that would otherwise go bankrupt without the benefit of the stimulus and record-low interest rates,” said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.



Small-cap stocks are often considered a barometer of investor sentiment and tend to be among the first to recover in an economic revival. Their lackluster performance this year has led to concerns over the sustainability of a nascent recovery in unemployment and other key metrics after devastating declines.



The Russell 2000 index of small-cap companies is down approximately 12% for the year to date, compared with a less than 1% decline in the S&amp;P 500 index, according to Refinitiv data. The Russell 2000 is up just 16.5% over the last 5 years, compared with an approximately 52% gain in the S&amp;P 500.



There are signs that recent economic gains may already be faltering. Real-time measures of the economy such as retail foot traffic and employee work hours have stalled recently, as states have implemented new restrictions to try to halt the spread of coronavirus pandemic.



Still, some investors believe a patient approach will win out over time.



Jon Christensen, a portfolio manager at Kayne Anderson Rudnick, said the recent jump in coronavirus cases will likely make small-caps more volatile until there is a vaccine or effective treatment.



As a result, Christensen is buying companies he believes will outperform over the next three years, despite recent hits to their share prices. He recently added shares of daycare provider Bright Horizons Family Solutions Inc (<a href="https://www.reuters.com/companies/BFAM.N">BFAM.N</a>), which are down 23.1% for the year to date.



“Over the long term, even if we have more people working from home we know that Bright Horizon centers will continue to benefit from people needing childcare away from home,” he said.



Joe Van Cavage, a portfolio manager at Intrepid Capital, is focusing on companies that were gaining market share ahead of the economic shutdowns. He has purchased shares of discount retailers Burlington Stores Inc (<a href="https://www.reuters.com/companies/BURL.N">BURL.N</a>) and Ollie’s Bargain Outlet Holdings Inc (<a href="https://www.reuters.com/companies/OLLI.O">OLLI.O</a>), which he believes could benefit from a prolonged economic recession as consumers trade down and spend less.



With fewer companies providing earnings guidance, “we say ‘Let’s stay on the edge of the storm and see what we can scoop up and not fly into the middle and try to hold onto dear life,” he said.

wall street

WEEKEND READ: Wall Street Week Ahead: Fund managers navigate ‘Night of the Living Dead’ in small caps

TUNIS (Reuters) &#8211; The collapse of Tunisia’s shortest-lived government since its 2011 revolution has plunged its young democracy into a new crisis after successive failures by elected leaders to turn political freedom into economic success.



Prime Minister Elyes Fakhfakh’s coalition had only taken office in February after months of political wrangling in the deeply fragmented parliament formed by last year’s election.



His resignation on Wednesday means there will be a new round of talks to try to form a government and, if that fails, another election just as the country demands clear leadership to handle the global pandemic and its economic fallout.



For Tunisia, widely seen as the sole comparative success story of the “Arab Spring” it triggered nine years ago with the revolution that introduced democracy, the stakes could hardly be higher.



“Enough is enough,” said Samia ben Youssef, a teacher out shopping at a street market in the Ettahrir district of Tunis.



“At a time when people are suffering from a crisis, when coronavirus is spreading around the world, they let us face our destiny alone,” she added.



Already, in the impoverished southern towns where the rising flared in 2011, a fresh wave of protesters are demanding jobs and more government aid, while the government said last week it wanted to delay debt repayments to four donor countries.



On Thursday some of these protesters started blocking Tunisia’s modest oil exports by closing a pumping station, a tactic that has already damaged the phosphate industry.



Against this fraught backdrop, Tunisia faces a reckoning with its awkward democratic model, a mix of parliamentary and presidential systems but without a constitutional court, which was intended to resolve disputes but has not yet been set up.



With many leading politicians, including the president, wanting to change the system, the party that did best in a recent opinion poll is the one that champions the old, pre-revolution, autocracy.



“My fear is we are entering an era of turbulence and without having enough political force to face it &#8230; It’s a very gloomy scenario,” said Youssef Cherif, a political analyst.



<h3 class="wp-block-heading">POLARISATION</h3>



Politicians now have until late August to form a new government with majority support in parliament, but will struggle to bridge the divisions that weakened Fakhfakh’s coalition.



The largest party is the moderate Islamist Ennahda, the only constant presence in Tunisian politics since the revolution as numerous other parties rapidly came and went. But it has only a quarter of the seats and its leader, Rached Ghannouchi, faces a vote of confidence as parliament speaker.



Tunisia’s biggest political rift is over fiscal policy. Ennahda has tended to stand with parties that favour reforms sought by donors to curb spending and public debt.



President Kais Saied appears to stand on the other side of that division, Cherif said, along with Arab nationalist parties and the other major player in Tunisian politics, a powerful labour union.



Talks have already started with the International Monetary Fund over a new loan programme, but it has previously wanted tough economic reforms that much of parliament opposes.



In parliament on Thursday the tense political atmosphere was encapsulated by Abir Moussi and her populist Destouri party, which voices support for the ousted autocracy of Zine el-Abidine Ben Ali, who died in exile last year.



They seized the speaker’s chair to stop Ghannouchi sitting there, raising the spectre of renewed tension between Islamists and secularists and aggravating the risk of street confrontations between their supporters.

IMF_logo

Public debt, populism and protests as Tunisia faces crisis

JOHANNESBURG (Reuters) &#8211; South Africa’s Reserve Bank is expected next week to cut its repo rate for the fifth time this year, most likely by 25 basis points to an all-time low of 3.5% as the COVID-19 pandemic batters the economy, a Reuters poll found.



The SARB cut rates in May by 50 basis points after the economy was shut down to limit the spread of the novel coronavirus. That followed two aggressive 100 basis point cuts in succession in March and April.



But the decision at the July 23 meeting is in the balance. The July 9-16 poll found 13 of 28 economists expected a 25 basis point cut and two expected 50 basis points to 3.25%. Thirteen said the Bank would leave rates unchanged.



“Given growth risks, the SARB will be willing to ease further, perhaps even accommodating a negative real repo rate temporarily in 2021,” Razia Khan, head of research for Africa and the Middle East at Standard Chartered, said.



“Although the SARB introduced secondary-market bond purchases in March, this was in response to significant market dislocations. Monetary accommodation is likely to happen through more conventional rate cuts,” Khan added.



The local bond yield curve had steepened in recent months as investors fretted over the long-term sustainability of gross debt.



Median forecasts from the poll suggest rates are expected to be left at 3.5% for the remaining September and November meetings this year. The SARB may then raise the repo rate to 3.75% next year.



Still, annual inflation in South Africa has moderated sharply to 2.1% and is expected to average 3.4% this year before quickening to 4.1% next year. That is still within the Reserve Bank’s comfort level of 3-6%.



South Africa’s economy in the last quarter is expected to contract 38.7%, the poll found. That would be the most since comparable records began in 1993, the year before South Africa held its first fully democratic elections.



It would follow a 2.0% contraction reported for the first quarter of the year, before Africa’s second-largest economy largely shut down in March.



The economy is forecast to partially bounce back by an annualised 19.3% in the three months to September and grow in all of the following quarters. That would likely mean 3.5% growth next year following an 8.0% contraction this year.

South_African_Reserve_Bank_Pretoria_1989

POLL: S.Africa’s Reserve Bank to cut rates again, by modest 25 bps

LONDON/ABIDJAN (Reuters) &#8211; The steepest dive in cocoa demand in a decade has thrown into jeopardy a plan by top producers Ivory Coast and Ghana to guarantee some two million farmers a living wage, sources within the countries’ regulators said.



Leading chocolate-makers agreed to a proposal from the African nations last year to charge the industry a premium for cocoa beans and guarantee a minimum income to farmers who earn just $1 a day.



But the scheme, set to come into effect this October, was based on expectations that international cocoa prices would stay within average ranges. Instead, the impact of the COVID-19 pandemic on demand has driven them to their lowest in nearly two years and they are expected to stay weak for at least a year, the industry says.



“It is not certain we will be able to guarantee farmers the amount originally expected,” a source at Ivory Coast’s cocoa regulator the Coffee and Cocoa Council (CCC), which sets the official farmer price each season, told Reuters.



The source, who declined to be named because he is not authorised to speak to the press, said the country’s cocoa sales for next season were some 30% below average levels for the time of year.



The CCC did not respond to Reuters’ requests for comment.



A spokesman for the Ghana Cocoa Board (Cocobod) said in a statement sent via WhatsApp the process of determining the price cocoa farmers will get was ongoing. He added, however, farmers would still get a better price than without any premium.



<h3 class="wp-block-heading">MINIMUM WAGE ERODED</h3>



Market weakness could appear a good thing for chocolate consumers offered discounts on the high street, but for farmers it could mean hunger.



Already the closure of retail outlets during lockdowns to try to contain the novel coronavirus stifled impulse-buying of chocolate, significantly denting demand.



Now widespread economic hardship is expected to limit sales just as the industry anticipates production will rebound when the new cocoa season starts, generating a large global surplus.



A series of meetings between representatives of the cocoa industry, Ivory Coast and Ghana last year agreed a premium of $400 a tonne for all sales for the upcoming 2020-21 season, including any production sold ahead of the season’s start in October.



Because the market has suffered a sustained fall with prices now below $2,000 a tonne, even with the premium added, the earnings of Ivory Coast and Ghanaian farmers will fall below the guaranteed minimum wage.



Four sources in total at Ivory Coast and Ghana’s cocoa regulators, all asking not to be named, predicted the income guarantee would be missed by around $120 a tonne. That would mean farmers get some increase in revenue, but far short of expectations.



Calculations made by Ivory Coast and Ghana when the new pricing plan was agreed a year ago showed a $400 premium would allow them to guarantee farmers 70% of a minimum $2,600 a tonne target price from 2020/21 onwards, or about 20% more than they currently receive.



Farmers in Ivory Coast and Ghana said they had yet to be told they would receive any less and were counting on an increase for the upcoming season.



“Life is hard for us cocoa farmers and if the price is not good, we cannot live well. Everything is expensive and you don’t earn enough to live like men. Here in the village we survive,” Alidou Konate, a farmer with 7 hectares in Duekoue, in western Ivory Coast told Reuters.



Francis Yeboah, who has 3 acres in the Ashanti region of Ghana said all farmers had “put a lot of hope in this new pricing system” and it was up to industry and the government to make up the difference in the event of any shortfall.



“Even if the coronavirus has an impact on the market and it lowers the price, it is up to the government to find a way to maintain a high price for the poor cocoa farmers that we are. It’s not up to us to make a sacrifice but to the chocolate-makers and the government,” he said.



<h3 class="wp-block-heading">TRADE ALSO ANXIOUS</h3>



Figures from the industry offer little comfort.



An internal report from Barry Callebaut, seen by Reuters, shows the world’s biggest chocolate maker expects a global surplus of 317,000 tonnes in 2020/21, the biggest since 2016/17, when excess supplies kept world prices below $2,000 a tonne for more than a year.



Barry Callebaut also adjusted a previously expected 85,000 tonne deficit for 2019/20 to a 6,000 tonne surplus.



The company’s sales dropped 14.3% in the April to June quarter. It expects a gradual rebound over the next three years, but it will not be enough to balance the market in 2020/21.



It is not just farmers who will suffer. Some traders fear for their livelihoods.



“I’m concentrating my efforts on saving my job. Our business is getting impacted. Small trade houses will probably go bankrupt this year,” the head of cocoa trading at a global commodities house said, also asking not to be named.



($1 = 0.7965 pounds)

Cocoa_farmer_David_Kebu_Jnr_holding_the_finished_product,_dried_cocoa_beans_ready_for_export._(10687070725)

Pact to aid poor cocoa farmers in peril as COVID-19 hits demand

LAGOS (Reuters) &#8211; Annual inflation in Nigeria rose for a 10th straight month in June, lifted by higher food and healthcare costs, the statistics office said on Friday, as the coronavirus pandemic disrupted logistics.



Inflation climbed to 12.56%, its highest level in more than two years, from 12.4% in May, the National Bureau of Statistics said.



A separate index for food, which accounts for the bulk of the inflation basket, showed a price increase of 15.18% from 15.04% in May.



Nigeria has more than 34,000 confirmed cases of coronavirus and 76 deaths. Most cases are in urban areas, where the brunt of price increases is felt, especially for imported drugs and food.



Nigeria’s central bank meets early next week to set interest rates.

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Nigerian inflation rises for 10 months in a row in June

JOHANNESBURG (Reuters) &#8211; South Africa’s rand was unchanged early on Friday as investors reassessed the impact of coronavirus, with infections locally and worldwide continuing to climb. At 0715 GMT the rand had not moved against the dollar, still trading at its overnight closing level of 16.7400 per dollar. The rand rallied most of last week and early this week, reaching one-month highs. But momentum has since stalled as coronavirus infections rose around the world, especially in the United States, and local cases breached 200,000. Risk demand was also weakened by data showing China consumer demand slackened and by renewed tensions between Washington and Beijing. President Donald Trump’s administration is reported to be considering banning travel to the United States by all members of the Chinese Communist Party. “The South African currency surrendered gains as risk appetite ebbed in the wake of poor data out of China, dwarfing optimism surrounding promising vaccine trial results,” said analysts at NKC African Economics. Bonds were weaker, with the yield on the 2030 government issue up 7 basis points to 9.42%.

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LONDON (Reuters) &#8211; Blended finance, a mix of public and private capital, is set to boom in Africa to meet funding demand from businesses cash-strapped in the wake of COVID-19 and as investors seek safeguards against financial risks.



Africa has been hit hard by the pandemic, pushing it into its first recession in 25 years and likely to drag 27 million people in the sub-Saharan region alone into extreme poverty.



Businesses across the continent have struggled as banks and other financiers have slashed lending at a time when companies facing plummeting revenues need cash to pay suppliers.



Blended finance, which gained traction in recent years to help governments respond to long-term challenges such as climate change and food security, is helping fill the void.



Proponents such as the World Bank’s private sector investment arm IFC and the Bill &amp; Melinda Gates Foundation have in the past helped mobilise up to $50 billion for Africa, more than a third of the global market.



But with the continent facing an estimated $44 billion fiscal gap, such funding is being used to help fix short-term challenges, like trade finance for medical supplies or working capital to keep businesses afloat.



For example, the IFC says it is allocating twice as much funding to blended finance as in recent years.



“What we’re seeing is a tremendous amount of demand from distributors for some sort of working finance to help their customers,” said John Simon, founding partner of U.S.-based TOTAL Impact Capital, which aims to invest for social good.



TOTAL Impact Capital and another firm, Cardano Development, aim to harness blended finance in countries including Kenya to help buy thousands of pharmaceutical sales invoices where goods have already been delivered.



By advancing only a portion of the invoice value, with the balance paid at collection, the investment ensures returns for investors, while alleviating cash flows for the companies by shortening payment cycles, said Nico de Nijs CEO of IMFact, a company set up by the pair.



Demand has surged in the pandemic’s aftermath, said Ladé Araba, Africa managing director for Convergence, a global network for blended finance, noting more interest from institutional investors such as pension funds and insurance companies.



Comparing the demand in 2020 to spikes after the 2008-9 financial crisis and in 2015, she said many of the deals involved loans which offered more generous and flexible terms than those from a bank or institutional investor.



Calculating returns for blended finance can be tricky.



As they involve a “concessional funder”, returns for private investors were often limited by the need to avoid the perception of subsidising private profits, said Simon.



Araba said such funding attracted private investment by either transferring risks to soft loan providers or providing an additional risk premium &#8211; and a more attractive upside &#8211; for investors.



<h3 class="wp-block-heading">SHRINKING PIPELINE</h3>



International banks are striving to play a role, either through lending or by pulling in private investors.



Japan’s MUFG was one of several banks involved this month in a loan, backed by a 359 million euro ($409.5 million) guarantee by MIGA, part of the World Bank Group, to help the Eastern and Southern African Trade and Development Bank offer trade and project finance to its 22 member states.



JPMorgan in January launched a unit through which it aims to finance more than $100 billion annually in development activities from investment banking deals, with extra contributions from its markets businesses.



IFC is using blended finance to support cash-strapped companies it deems have a sustainable future with a focus on International Development Association (IDA) countries, many of whom are in Africa, said Martin Spicer, IFC’s director of blended finance.



“We’ve had a shrinking of the immediate pipeline of projects, but an increase in the COVID funds part of the business,” said Spicer, adding that the timeline was uncertain for the delayed projects.



Before the coronavirus outbreak, about 50% of blended finance investment targeted energy and financial services, said Araba.



This was partly because much of the focus had been on helping governments meet global targets to improve education, infrastructure, food security, climate change and health by 2030, requiring $5 trillion to $7 trillion per year.



($1 = 0.8766 euros)

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