Nyshka Chandran
Source: <a href="https://www.cnbc.com/2018/07/25/brics-could-benefit-from-global-trade-tensions.html">The world&#8217;s major emerging economies could end up benefiting from global trade tensions</a>
<ul>
<li>Escalating trade tensions, and tariffs from U.S. President Donald Trump&#8217;s administration, could give BRICS countries fresh purpose to push forward their trade agendas.</li>
<li>Divergent trade policies between members, however, could be a problem.</li>
<li>The bloc — which consists of Brazil, Russia, India, China and South Africa — has struggled to establish a unified voice on the international stage.</li>
</ul>
<img loading="lazy" decoding="async" src="https://d16akly8855cs7.cloudfront.net/wp-content/uploads/2018/07/26140344/105350807-1532496152485gettyimages-967163620.1910x1000.jpg" alt="" height="1000" width="1910" data-licensor-name="Alexander Shcherbak | TASS"/>
The bloc of emerging economies known as 
BRICS 
 have long struggled to establish a unified voice on the international stage, but U.S. President Donald Trump may be providing them with an unlikely boost.
As the leaders of Brazil, Russia, India, China and South Africa gather in Johannesburg on Wednesday for their annual meeting, the issue of trade protectionism is set to dominate talks amid 
Trump&#8217;s proposed tariffs 
 on the European Union and Beijing. If the five-member group plays its cards right, it can use the matter to push forward the nations&#8217; own trade agendas.
BRICS members have an interest in developing a world with multiple countries filling leadership roles, so they will be looking to &#8220;take advantage&#8221; of tensions to &#8220;to build up the profile of BRICS,&#8221; said Duncan Innes-Ker, regional director for Asia at The Economist Intelligence Unit.
BRICS has sought to reject the Western dominance of international institutions, but a lack of unity prevents members from coming up with an alternative solution. Now, with Trump&#8217;s duties on imported steel and aluminum set to hurt each BRICS member — Beijing, New Delhi and Moscow have already responded with retaliatory duties — the bloc has fresh purpose to rally together.
That&#8217;s a positive for Beijing, 
which is now trying to tout itself as a champion of free trade 
 and has claimed it was &#8221; 
forced 
&#8221; to fight back against Trump&#8217;s measures with reciprocal tariffs.
&#8220;Given the failure of the 
G-20 finance ministers meeting 
 held earlier this week to defuse the threat to world trade from rising protectionism, the BRICS summit is likely to become a key global forum for galvanizing global support for multilateral trade liberalization,&#8221; said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit.
The Trump administration has said it is not advocating protectionism, but rather seeking to even a playing field that has been corrupted by unfair trade practices. Those penalized by Trump&#8217;s tariffs, however, have tried to paint the U.S. as no longer interested in free trade, vacating its traditional role on the global stage.
BRICS countries may try to step into that gap, negotiating wide-ranging trade agreements with many countries, Biswas continued.
The volatile global trade backdrop could also benefit emerging markets in more tangible ways.
&#8220;China might turn to India, Brazil, Russia &#8230; to source products it originally bought from the U.S., such as soy beans, wheat, and meat,&#8221; said Alex Capri, visiting senior fellow at the National University of Singapore. &#8220;This creates new opportunities for BRICS, at least temporarily.&#8221;
American firms may also seek to move some activities to emerging markets that are within existing trading blocs so as to avoid rising tariffs, he noted.
While many are hopeful for the three-day BRICS summit to advance trade liberalization, divergent policies between members could stand in the way.
&#8220;The challenge for BRICS has always been what exactly holds them together beyond a cute acronym,&#8221; warned Deborah Elms, executive director of the Asian Trade Centre, noting their different domestic structures. &#8220;China is outward looking and manufacturing focused. Brazil is increasingly outward focused, but mostly for agriculture, not manufacturing. India is really not open.&#8221;

The world’s major emerging economies could end up benefiting from global trade tensions

Justina Crabtree
Source: <a href="https://www.cnbc.com/2018/07/23/china-president-xi-visits-senegal-belt-and-road-reaches-west-africa.html">China&#8217;s latest trade partner in Africa could help it export to the US</a>
<ul>
<li>Chinese President Xi Jinping has just concluded a visit to the west African country of Senegal, the first stop of his four-leg tour of the African continent.</li>
<li>Senegal&#8217;s coastal location could enable China to more easily access U.S. markets.</li>
<li>Senegal is the first West African country to sign up to China&#8217;s Belt and Road Initiative, a multi-billion dollar plan to resurrect ancient trading routes centered on China.</li>
</ul>
<img loading="lazy" decoding="async" src="https://d16akly8855cs7.cloudfront.net/wp-content/uploads/2018/07/24160223/105346104-1532344867993gettyimages-1003078598.1910x1000.jpg" alt="" height="1000" width="1910" data-licensor-name="Seyllou | AFP | Getty Images"/>
Chinese President Xi Jinping visited the West African country of Senegal over the weekend, building trade ties which could bear fruit in terms of China’s access to U.S. markets.
Xi met with his Senegalese counterpart Macky Sall, as well as Senegalese Prime Minister Mohammed Dionne, as part of a two-day visit which began on Saturday.
Following bilateral talks, Senegal signed up to be the first West African nation committed to China’s Belt and Road Initiative, a multi-billion dollar scheme to resurrect ancient trading routes centered on China.
Senegal, with a population of just 16 million, might seem like a curious stop for Xi given that Nigeria, Africa’s largest economy, is also in the West Africa region.
But according to 
Ibrahima Diong 
, who has served as Senegal’s minister of Chinese affairs, the country’s location is particularly attractive. 
“For any Chinese companies that would like to export to the U.S., you cannot get better than Senegal,” he told CNBC via telephone, highlighting its position on the west coast of the African continent.
China is Senegal’s second largest trading partner after its former colonial power France.
Xi’s visit to Senegal was the first stop of a broader tour of the African continent. He landed in Rwanda on Monday and will then attend a 
BRICS 
 summit in South Africa, before stopping in Mauritius. The Chinese president visited the United Arab Emirates earlier last week.
Xi&#8217;s Africa visit is his fourth to the continent since he took office in 2013, and his first overseas trip since beginning his second term as Chinese president in March of this year.
<img loading="lazy" decoding="async" src="https://d16akly8855cs7.cloudfront.net/wp-content/uploads/2018/07/24160229/105346108-1532345160539gettyimages-1003700530.1910x1000.jpg" alt="" height="1000" width="1910" data-licensor-name=" Seyllou | AFP | Getty Images"/>
While Senegal is the first West African country to partner with China as part of its Belt and Road Initiative, Chinese-built infrastructure projects are mushrooming in the region. Last week a railway network was opened in Nigeria’s capital Abuja, helping to address the country’s need for infrastructure.
But, China has been accused of lending to its Belt and Road partner countries under conditions that they will not be able to fulfill.
Diong pointed out that Senegal is a favorable place for China to do business given its stable democracy. He added that Senegal is already an established exporter of its oil and gas reserves, enabling China to carve out a different kind of relationship. “While China needs some commodities, (it doesn’t) want a relationship that’s just commodity driven,” he said.
Partnership with Senegal enables China to “make a dent in the francophone world,” added Diong. He said that “Africans are being extremely pragmatic” in their business decisions, and are no longer constrained by colonial ties.
That perspective was echoed in an editorial published in several South African newspapers over the weekend, in which Xi wrote that South Africa and China had “forged a deep friendship during our common struggle against imperialism, colonialism and racism.”
It detailed that &#8220;China’s direct investment in South Africa has grown by more than 80 times and (now) exceeded $10.2 billion in cumulative terms.&#8221;
For Diong, China&#8217;s inroads in Africa are symptomatic of a shifting geopolitical order, particularly as global media attention is largely focused on the U.S.&#8217; relationship with Russia.
“Africans love the Chinese story,” Doing said. “Beyond just money, China is seen by many Africans as a model to aspire towards,” he added.

China’s latest trade partner in Africa could help it export to the US

Nyshka Chandran
Source: <a href="https://www.cnbc.com/2018/07/20/china-mediation-diplomacy-in-focus-as-xi-jinping-heads-to-africa.html">For years, China shied away from global conflicts. Not anymore</a>
<ul>
<li>Chinese President Xi Jinping will be visiting Senegal, Rwanda and South Africa in the coming days.</li>
<li>As Beijing increasingly presents itself as a mediator in political conflicts, China&#8217;s influence on the continent could grow.</li>
<li>Africa is home to massive Chinese investments and the country&#8217;s first overseas military base.</li>
</ul>
<img loading="lazy" decoding="async" src="https://d16akly8855cs7.cloudfront.net/wp-content/uploads/2018/07/20080312/105342020-1532055235774gettyimages-9923602821.1910x1000.jpg" alt="" height="1000" width="1910" data-licensor-name="YASUYOSHI CHIBA/AFP/Getty Images"/>
As the China invests billions in continent-spanning infrastructure projects, it&#8217;s building a stronger diplomatic voice to match its ever-expanding presence on the global stage.
Across the developing world, Beijing has been engaging in mediation diplomacy — a style of conflict resolution where it&#8217;s the sole or principal moderator — to protect its assets and gain recognition as a respectable superpower.
Africa, where Chinese President Xi Jinping will be touring in the coming days, has long been a training ground for Chinese peace efforts. In 2007, Beijing appointed its first-ever special representative to genocide-hit Darfur to help achieve a political settlement. And in 2015, Chinese officials brought together 
South Sudan’s 
 warring parties for negotiations. Just this week, the communist state offered to mediate in a border dispute between Eritrea and Djibouti, the latter of which is home to 
China&#8217;s first overseas military base 
.
Assuming the role of mediator could increase Beijing&#8217;s influence in nations home to Chinese investments, such as Senegal, Rwanda and South Africa where Xi will soon be visiting.
&#8220;Being seen as a mediator in regional disputes can only help burnish China’s image,&#8221; said researchers at the China Africa Research Initiative, a program at Johns Hopkins University. And in Africa, where 
Xi&#8217;s administration has established greater military links 
, it&#8217;s essential for Beijing to protect the stability of countries where China has economic interests, they added.
In fact, many speculate that it was 
China&#8217;s concerns over its investments in Zimbabwe 
 that resulted in the coup that ousted former leader Robert Mugabe in November of last year — a charge that Xi&#8217;s administration has denied.
According to Xi&#8217;s vision of a &#8220;community of common destiny,&#8221; a phrase he repeatedly uses in speeches, &#8220;China’s growth and prosperity becomes a part of the experience of all these other countries,&#8221; the researchers said, adding that such a line of thinking &#8220;can also be interpreted as a type of foreign policy or growing political influence.&#8221;
It&#8217;s a new development in China&#8217;s traditional diplomatic protocol. Since 1954, the Asian giant has said it practices mutual non-aggression and non-interference in the internal affairs of others. But the nation&#8217;s political ambitions have swelled considerably under Xi&#8217;s reign, and that&#8217;s led to a change of approach. With Chinese commercial and economic ventures now spanning the globe under the 
Belt and Road Initiative 
, Xi&#8217;s government is intensifying efforts to secure Chinese workers and interests abroad.
In 2017, Beijing hosted a meeting with the foreign ministers of Afghanistan and Pakistan to end terrorism-related hostilities between the two as Xi sought to incorporate Kabul into his 
$57 billion economic corridor with Islamabad 
. Last year also saw Xi raise the possibility of three-way talks with Israel and Palestine. He&#8217;s also 
proposed a peace plan for ethnic cleansing in Myanmar 
, which is home to a special economic zone being built by a China-led consortium.
But China&#8217;s attempts at brokering peace may be fundamentally limited. Its primary goal is a stable atmosphere for its global investment, so it is likely unwilling to enforce outcomes or apply pressure, strategists said.
“China will actively explore a way of resolving hotspot issues with Chinese characteristics and play a bigger and more constructive role in upholding world stability,&#8221; Foreign Minister Wang Yi said at 
last October&#8217;s 19th Party Congress 
.
A willingness to provide solutions with &#8220;Chinese characteristics&#8221; is significant, Angela Stanzel, senior policy fellow at the European Council on Foreign Relations&#8217; Asia division, wrote in a brief last week: &#8220;The implication behind this offer is that China is better placed to resolve regional and global problems than other countries, particularly the U.S.&#8221;
The Asian heavyweight may be seeking to demonstrate that, unlike Western countries, it doesn&#8217;t differentiate between democracies and dictators, Stanzel suggested.

For years, China shied away from global conflicts. Not anymore

WINDHOEK (Reuters) &#8211; Namibia secured a $218 million loan from the African Development Bank, the second tranche of a quarter billion dollar facility from the development lender to help the country finance its budget deficit, the finance ministry said on Thursday.
The southern African nation’s economy contracted in the final two quarters of 2017, and by 0.1 percent in the first quarter OF 2018. Its credit rating was cut to subinvestment late last year by Fitch over concerns of a deteriorating fiscal position.
Reporting by Nyasha Nyaungwa; Writing by Mfuneko Toyana; Editing by James Macharia

African Development Bank grants $218 million loan to Namibia, what you need to know

Justina Crabtree
Source: <a href="https://www.cnbc.com/2018/07/09/ethiopia-eritrea-declare-end-to-war-economies-could-benefit.html">Ethiopia and Eritrea declare an end to war — and this could mean a lot for their economies</a>
<ul>
<li>Ethiopian Prime Minister Abiy Ahmed and Eritrean President Isaias Afwerki signed an agreement on Monday ending a long-standing war between their two countries.</li>
<li>Several deals between Ethiopia and Eritrea were announced over the weekend ahead of the official rapprochement, including Ethiopia&#8217;s access to an Eritrean port and the reopening of embassies in both countries.</li>
<li>The news could help Ethiopia as it grows as a East African manufacturing hub, opening up a new market in Eritrea and shoring up trade routes for its exports.</li>
</ul>
<img loading="lazy" decoding="async" src="https://cdn.cnbcafrica.com/wp-content/uploads/2018/07/12100213/105318125-1531144243697gettyimages-984393678.1910x1000.jpg" alt="" height="1000" width="1910" data-licensor-name="Yonas Tadesse | AFP | Getty Images"/>
The leaders of Ethiopia and Eritrea declared the end of a two decades-long war on Monday, and announced a raft of agreements which could boost economic growth in the East Africa region.
“The state of war has come to an end,” tweeted Fitsum Arega on Monday, the chief of staff to Ethiopian Prime Minister Abiy Ahmed.
Abiy and Eritrean President Isaias Afwerki signed a Joint Declaration of Peace and Friendship which included the agreement that “Transport, trade and telecommunication ties will be resumed; diplomatic ties and activities renewed,&#8221; according to a tweet by Eritrean Minister of Information Yemane Meskel.
Abiy arrived in the Eritrean capital of Asmara on Sunday. After talks with his counterpart Afwerki, a series of deals were announced, including Ethiopia’s access to an unnamed Eritrean port on the Red Sea, the reopening of embassies in both countries and the restoration of telephone lines that have been severed for two decades.
TWEET
According to Reuters, the prices of Ethiopian dollar-denominated bonds hit their highest in 10 weeks on Monday, following news of the rapprochement. The news agency also reported thousands of Eritreans cheering Abiy’s arrival on Sunday, waving the flags of both countries.
Meanwhile, U.N. Secretary General Antonio Gutteres is to meet with Abiy in the Ethiopian capital of Addis Ababa on Monday, sources told Reuters.
The news comes as Ethiopia continues its emergence as a regional manufacturing hub. The landlocked country on the Horn of Africa has seen double-digit economic growth as recently as 2017 thanks to its state-led development model which has espoused the mass opening of industrial parks.
According to Jared Jeffery, political analyst for Ethiopia at NKC African Economics, warmer relations will benefit Ethiopia’s economy on multiple fronts.
The rapprochement “will give Ethiopia access to the underdeveloped Eritrean market,” he told CNBC via email. This, in combination with Red Sea port access allowing Ethiopia more scope to ship its goods – as well as bargaining leverage with other ports it uses – will benefit its trade.
“Ethiopia struggles with foreign exchange and this is just one more step to partly alleviate the situation,” Jeffery added.
TWEET
Ethiopia is Africa’s second-most populous country with over 100 million inhabitants, and is banking on economic growth to create jobs for its youthful society.
Eritrea, a former province of Ethiopia, achieved independence in 1993. But, relations between the two countries have been marred by conflict for decades. The weekend meeting between Abiy and Afwerki was the first of its kind since a post-independence war from 1998 to 2000 which killed approximately 80,000.
Abiy’s overtures to Eritrea began last month. As part of an olive branch to end the war, he announced that flag carrier Ethiopian Airlines would resume flights to the country. Abiy himself has been in power for a 
matter of months 
, pushing a reformist agenda after his predecessor Hailemariam Desalegn 
resigned in February 
 amid mass protests.
Pariah state Eritrea is considered one of the world’s most secretive countries. Its system of indefinite military conscription has caused many young men to leave the country, forming a significant proportion of African migrants crossing the Mediterranean to Europe.

Ethiopia and Eritrea declare an end to war — and this could mean a lot for their economies

UPDATE 1-Ivory Coast&#8217;s ICP to ramp up cocoa grinding at two plants
ABIDJAN, June 22 (Reuters) &#8211; Ivory Cocoa Products (ICP) and Eurofind Group plan to begin cocoa grinding at a new 32,000 tonne plant near Ivory Coast’s main city of Abidjan by 2019, with capacity doubling by 2021, ICP’s Managing Director Ismael Al Khalil told Reuters on Friday.
ICP also plans to increase grinding capacity at an existing factory in the southern port city of San Pedro from the current 50,000 tonnes to 75,000 tonnes by 2021, Al Khalil said.
The expansion will make ICP the fourth-largest grinder in Ivory Coast, the world’s top cocoa producer, behind Barry Callebaut, Olam and Cargill.
The new plant will mostly produce cocoa butter and cake. By increasing its capacity, it expects to receive tax benefits offered by the government for any increase in capacity, Al Khalil said.
All output from the new plant will be sold to Theobroma, a unit of Swiss-based Ecom Trading.
Ivory Coast is aiming to process domestically half of its cocoa bean production by 2020 in a bid to boost the value of its exports and protect its economy from the volatility of global commodity markets. (Reporting By Ange Aboa; Writing by Aaron Ross; editing by David Evans)

How increasing the capacity of cocoa production will benefit Ivory Coast’s economy

JOHANNESBURG (Reuters) &#8211; South Africa’s economy is expected to recover from a poor start this year, rescued by stronger growth in the rest of the world, a Reuters poll found on Wednesday.
South African gross domestic product shrank 2.2 percent in the first quarter, led by a slowdown in agriculture and mining, after expanding 3.1 percent in the final three months of last year.
However, the survey of 24 economists taken in the past week forecast the economy would grow 1.7 percent this year. That was only 0.1 percentage point lower than predicted last month and up from a 1.3 percent forecast at the start of the year.
“The rest of the world is doing very, very well, so on the export side of things we will actually start doing better,” said Busisiwe Radebe, an economist at Nedbank. “That is why you see that lift that we are expecting.”
Last Friday, Fitch affirmed South Africa’s sub-investment- grade credit rating but noted signs of improvement in governance and prospects of a mild cyclical upturn.
However, it doubts new President Cyril Ramaphosa’s efforts will make a significant difference to the 1.7 percent growth it expects for this year.
South Africa needs growth levels multiple times faster than the forecast to make any meaningful reduction in unemployment. About a quarter of the labour force is currently out of work.
Employment prospects were made worse by a poor showing from South Africa’s mines in April. Output fell 4.3 percent year-on-year in the industry, which employs large swathes of the country’s largely unskilled labour force.
A United States-China trade conflict has escalated further and economists are wary of its effect on emerging market currencies.
Still, Miyelani Maluleke, an economist at Absa Capital,said domestic demand still had enough momentum to deliver GDP growth of 1.7 percent this year.
“There were some one-off factors that contributed to the first-quarter GDP contraction and the effect of those will likely wear off,” Maluleke said.
The South African Reserve Bank is expected to keep its repo rate unchanged at 6.5 percent until 2020. It cut its main interest rate by 50 basis points to 6.50 percent in March.
Inflation is projected to average 4.9 percent this year and 5.2 percent next.
Editing by Larry King

Here’s the projected growth rate for South Africa’s economy

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Rwanda’s economy expanded by 10.6 per cent in the first quarter of 2018, where GDP at current market prices was estimated at 1,985 billion Rwandan Francs up from 1,816 billion Rwandan Francs in the previous year. Yussuf Murangwa, Director General of the National Institute of Statistics of Rwanda spoke to CNBC Africa for more.

Rwanda economy expands 10.6% in Q1 2018

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</div>
CNBC Africa sat down with the President of the Chamber of Commerce Muhammed Jagana, on how private sector can fast-track growth.

Private sector key to economic growth – Gambia Chamber of Commerce

LAGOS (Reuters) &#8211; Annual inflation in Nigeria slowed to 11.61 percent in May, its lowest level in more than two years and its 16th straight monthly drop, the National Bureau of Statistics said on Wednesday.
It fell from 12.48 percent in April. A separate food price index showed inflation at 13.45 percent in May, compared with 14.80 percent in April.
Food inflation has been in double digits for almost three years, but has slowed for more than six months.
The statistics office said the highest increases were recorded in potatoes, yam and other tubers, as well as vegetables plus fish, bread and cereals.
Last month the central bank governor held interest rates at 14 percent, saying that inflation was still above its single-digit target. The bank said inflation could worsen again with the influx of cash from spending related to Nigeria’s much-delayed 2018 budget.
Nigeria emerged from its first recession in 25 years in 2017, helped by higher oil prices, but growth remains fragile.
It passed a record 9.12 trillion naira budget last month meant boost growth, but excessive spending could stoke inflation especially in the run-up to February 2019 presidential election.
The central bank has kept benchmark rates tight for more than a year to curb inflation, support the naira and attract foreign investors into its debt market.
Reporting by Chijioke Ohuocha and Didi Akinyelure; Editing by Alison Williams

Nigeria’s inflation hits two-year low in May: Here are the country’s highest increases recorded

By Dave Mohr (Chief Investment Strategist) &amp; Izak Odendaal (Investment Strategist), Old Mutual Multi-Managers
&nbsp;
Political concerns have dominated markets in recent months. It has mostly been US President Donald Trump throwing his weight around (tariffs, Iran, North Korea), but in the past week Italy has been the source of market unease. The attempt by Italy’s two populist parties to form a government including an anti-euro finance minister was blocked by the Italian president. The issue is not the instability of Italy’s governments. After all, the country has on average changed government once a year since the end of World War 2. The issue is that Italy is now a key part of the Eurozone (its third largest economy, in fact), and any hint that a new government might pull out of the single currency will cause chaos. Unlike ‘Brexit’, where the UK will continue to use the pound once the UK exits the European Union, an ‘Italeave’ or ‘Quitaly’ event would result in the redenomination of all debts, assets and contracts into a new, probably weaker currency.
We saw this movie with Greece between 2011 and 2014, but Italy is much bigger and systemically more important than Greece. It is too big to fail, but also too big to bail out, as often noted. However, this also means that Italy is much less likely to take the painful choice of leaving the euro (Greece bit the bullet of painful austerity instead of leaving). By Friday, markets breathed a sigh of relief after a second attempt at forming a government succeeded, this time with a less controversial choice of finance minister and a more technocratic cabinet overall. This might not be the last time these concerns bubble to the surface, given that the Italian people are right to feel aggrieved. Italy’s economic performance has been dismal over the past decade, and real per capita incomes never recovered to pre-crisis (2008) levels.
&nbsp;
Returns under pressure
The more pressing issue for investors is that returns from the main asset classes (with the notable exception of local fixed interest) have been disappointing over the past three years. The largest component of a typical Regulation 28 compliant balanced fund is local equities. The annual return including dividends over three years on the FTSE/JSE All Share Index was 5.4% at the end of May. Year-to-date returns are -4.3%, with May itself having been a deeply negative month (-3.5%). The FTSE/JSE Capped SWIX, our preferred local equity benchmark since it limits concentration risk, returned 3.5% per year over three years due to a more realistic and responsible weighting to Naspers, which returned 19% per year over the three years.
If we just focus on more recent returns, the underperformance is fairly widespread across sectors. Financials and Industrials were deeply negative in the first five months of 2018, while Resources have returned 8%. However, within the latter sector, gold and platinum miners have lost in excess of 20% this year while the heavyweight diversified miners have gained 17%. While Naspers enjoyed an incredible run over the past few years, 2018 has not been great, with a 12% decline to end May. British American Tobacco, the other mega-cap Industrial stock, is down 20% year-to-date.
&nbsp;
Local is global
It seems ironic that the local market is struggling so much at a time when optimism about the local economy has increased sharply. But the JSE no longer reflects the local economy, now that its largest constituents are global firms. It is also true that optimism in the local economy has probably increased faster than activity. This week’s first quarter GDP release is likely to be disappointing, but the overall economic outlook is still an improvement on the previous few years.
In fact, it is increasingly the case that major equity markets do not closely reflect their domestic economies anymore, being dominated instead by multinational firms that sell their wares across the globe, instead of focusing on a single market. Therefore, when thinking about investments, we need to take the health of the global economy into account. The OECD (a think-tank representing the world’s most advanced economies) stated in its latest economic outlook that, “trade and financial integration since the mid-1990s has made economies more dependent on developments abroad…Integration is particularly apparent in financial markets, with a common global factor increasingly determining domestic equity and government bond prices.”
What makes it tricky is that the global revenues of multinational firms are translated into their home currencies at prevailing exchange rates. In the case of South Africa, the rand ended May 5% stronger than the 2017 average rand-dollar exchange rate (of R13.30). The stronger currency not only reduces the rand returns from global markets, but also the rand earnings of global companies. With South African balanced funds now allowed up to 30% exposure to offshore assets (more if Africa is included), the typical South African balanced fund probably has direct and indirect global exposure in excess of 50%. If the rand’s strong run since January 2016 is running out of steam, it will be beneficial to local returns.
The OECD’s latest global growth forecast confirms the view that the underlying economic picture remains healthy, despite a sluggish first quarter, especially in Europe. Global growth of close to 4% is expected over the next two years, in line with the long-term average. In other words, not historically strong growth, but the best patch in several years. There are risks to this optimistic outlook – there always are. These include the increased protectionist stance of the US and the risk of a surging dollar if the Federal Reserve (Fed) hikes rates too aggressively. But with inflation still subdued, the Fed need not be in a hurry. The first inflation indication from May, the average hourly wages of workers, increased 2.7% year-on-year. This is still remarkably low given that unemployment declined to 3.8%.
&nbsp;
Valuations reasonable
Global equities (MSCI All Countries Word Index) were marginally positive in May and also year- to-date in US dollar terms. Over the past 12 months, global equity returns are a decent 12% and 8% over three years annualised. Given the recent weakness in price and strong earnings growth, equity markets are reasonably valued based on traditional valuation methods such as forward price: earnings (PE) ratios. These PE ratios across the major markets are somewhat above long-term averages, but not dramatically so, as long as expected earnings growth materialises. While global growth is solid and valuations reasonable, there is no reason to believe that the return outlook from equities has fundamentally deteriorated. One simply has to be patient.
&nbsp;
Fat years and lean years
The valuation of the local market is skewed by the size and rating of Naspers, which trades at a forward PE ratio of 24 due to its exposure to the Chinese internet giant, Tencent. Excluding Naspers, the local market is not expensive.
Chart 1 shows the rolling three-year annualised returns of the local and global equity markets (both in rand and with dividends reinvested) over the past 40 years. Equity returns have been trending lower since 2015, and this is clearly a source of concern for investors. However, the chart clearly shows that returns are cyclical, with fat years followed by lean years. Over time, there are more fat years than lean ones, and the average annual growth over this entire period is 20%. Staying out of the market means betting against this strong upward trend. You might get it right for a while, but over time the odds are stacked against you.
&nbsp;
Diversification helps
The impact of equity volatility can of course be cushioned by diversifying across other classes. Taking the other major asset classes in turn, developed market bonds are not attractive despite recent rate rises (though the knee-jerk sell-off in Italian debt created a terrific opportunity for the brave). Local bonds have stood out, delivering 5% year-to-date, 11% over 12 months and 8% per year over three years. But it remains an attractive asset class given high yields and low inflation. The Reserve Bank’s conservative stance of maintaining positive real interest rates also supports local fixed interest returns. Local property, for so long the darling asset class of local investors, slumped 19% this year, largely due to corporate governance and sustainability concerns over the Resilient stable of companies. It means that listed property is barely positive over three years. This too is a sector that has internationalised dramatically over the past decade, with 40% to 50% of revenue generated outside South Africa (depending on the choice of benchmark). The sell-off has created a much more attractive entry level, but the tough operating environment is likely to put downward pressure on distribution growth.
Unfortunately, nobody can manufacture returns (except through running a Ponzi scheme). We have to work with what the market gives us and then attempt to add some value through valuation-based active asset allocation and selecting the right fund managers within each asset class to do security selection. The market has not been giving us much. However, the return outlook from a diversified portfolio has not dramatically and permanently declined.

Understanding the impact of Italy’s politics and possible departure from the EU on global markets

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Nigeria&#8217;s 2018 budget is yet to be passed despite assurances from the Senate President Bukola Saraki that it would be presented last week. Eze Onyekpere, Lead Director, Center for Social Justice joins CNBC Africa for more.

Nigeria’s 2018 budget the most delayed in 19 years

<div id="attachment_306274" style="width: 706px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-306274" class="wp-image-306274 size-large" src="http://cnbc.africa/wp-content/uploads/2018/05/Durban_beach1-1110x569.jpg" alt="" width="696" height="357" />Picture: Wikimedia Commons</div>
By Unathi Sonwabile Henama
Tourism is a growing sector in many African economies. The sector is highly competitive and Western countries continue to dominate trade in tourism, whilst Africa receives less than 10% of global tourism receipts.
The largest travel exhibition in Africa, Africa Tourism Indaba started on the 8 May 2018 at the ICC in Durban. It provides a meeting space for travel buyers and product owners to sell destination Africa.
Given political will and political support, tourism can succeed in a country. Durban is a model city. The 100% political support it received ensures that tourism succeeds in driving the economy of the city.
Durban undertook an in-depth analysis of its tourism performance, to identify weaknesses, and to mitigate the decline in tourism. Durban learnt from this exercise, by reflecting on the successes and failures of its tourism plans.
<h4>Analysis of tourism red tape</h4>
As we attend the Indaba, there must be an analysis of tourism red tape. International tourism in SA has grown above 12%, whilst the decline in domestic tourism, reflect on a poor economy.
South Africa will need more international tourists to mitigate the decline of domestic tourism. The celebrated 12% growth of international tourism remains an underachievement when one analyses the potential of South Africa.
The country has the potential to achieve 50% year-on-year growth if tourism red tape is addressed. Tourism red tape includes visa regulations and airlift and air access to South Africa. The vision of the National Tourism Sector Strategy (NTSS) was that South Africa must be a Top 20 tourism destination by the year 2020. The NTSS was an inclusive contract between the state and the tourism industry for growth.
<h4>5 Million tourists in 5 years</h4>
In 2017, the language at the Indaba was different. The NTSS was declared an amnesia item, and the term &#8220;5 in 5&#8221; was the new rhetoric. This implied that South Africa should seek 5 million more tourists in 5 years.
It is  important to identify the visa regulations and airlift and air access as the stumbling blocks limiting tourism and the attainment of the NTSS vision. The attention of the tourism industry has been squarely on the visa regulations, which shall be finalised soon. The resolution of the visa regulations is a foregone conclusion, but the tourism trade had failed to raise the equally important issues of airlift and air access.
The Department of Transport is the new turf ground, where the tourism industry must lead the process of persuasion and diplomacy for open skies. The democratic state must test open-skies just like it persuaded South Africans to try out the e-tolls.
<h4>Open skies, competition &amp; lower prices</h4>
Open skies mean greater frequency, more competition, and lower prices, which will benefit both tourists and citizens. As South Africa experiences a decline in mining, manufacturing and agricultural production, tourism is emerging as a reliable economic messiah.
Tourism has been acknowledged as the new gold, and if it is the new gold, tourism must be assisted to succeed driving South Africa’s economy.
The structural challenges of unemployment, poverty, inequality, and pedestrian economic growth are too pressing for us to ignore the untapped potential of the tourism industry in SA. The South African tragedy is that poverty coexists with wealth and opulence, to an extent that poverty is normalised, and we have become oblivious to its existence.
It means we may be contributors to the spread of poverty, through our unconscious actions. The aviation committees at the Department of Transportation have unfairly targeted Comair, one of the most successful companies in the tourism industry. These unfortunate actions must be raised by the travel trade at Africa’s Tourism Indaba, to ensure that the Minister of Transport Minister Blade Nzimande is made aware of the unfortunate conduct of officials within his Department that threaten the attainment of tourism growth as detailed by President Ramaphosa during SONA.
<h4>Tourism needs a supporting public service</h4>
Tourism more than any other sector needs a supporting public service in order to succeed. The World Economic Forum Travel &amp; Tourism Competitiveness Index Ranking, ranked SA 53rd, 5 points below its ranking in 2015. SA lags its BRICS partners, China (15th), Brazil (27th), India (40) and Russia (43rd). Mauritius is ranked 55th, and this small island country is two places below South Africa.
Considering that South Africa has a far superior tourism than Mauritius, these rankings should be sobering for the country as a destination. South Africa can improve its ranking to be in the Top 20 destinations by the year 2020, if the spirit of collaboration succeeds to reducing red tape limiting tourism growth.
Before that is achieved, the economic race to tourism growth must be confronted within the state apparatus. Maybe let’s learn from Durban by facing the demons that limit tourism growth in SA, located within the Department of Transportation. It won’t be an easy conversation, but it’s a conversation that is long overdue.
Unathi Sonwabile Henama teaches tourism at the Tshwane University of Technology and writes in his personal capacity

Op-Ed: Tourism Indaba – Focus on tourism red tape

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McLean Sibanda, CEO of The Innovation Hub speaks to CNBC Africa’s Rofhiwa Madzena on what SA can learn from India’s digital economy at the on-going India-South Africa Business Summit 2018.

McLean Sibanda on what SA can learn from India’s digital space

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South Africa&#8217;s Minister of Small Business Development Lindiwe Zulu has encouraged small business and entrepreneurs to explore opportunities outside the country for growth.

Lindiwe Zulu implores small businesses to look outside SA for growth

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Adi Godrej, CEO, India-SA CEO Forum explains why he’s very bullish on South Africa at the on-going India-South Africa Business Summit 2018.

Adi Godrej on why he’s bullish on SA outlook

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Minister Rob Davies from the department of trade of industry in South Africa emerged from this year’s India-South Africa Business Summit, having discussed key bilateral opportunities for India and South Africa.

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The world’s major emerging economies could end up benefiting from global trade tensions

China’s latest trade partner in Africa could help it export to the US

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African Development Bank grants $218 million loan to Namibia, what you need to know

Ethiopia and Eritrea declare an end to war — and this could mean a lot for their economies

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Rwanda economy expands 10.6% in Q1 2018

Private sector key to economic growth – Gambia Chamber of Commerce

Nigeria’s inflation hits two-year low in May: Here are the country’s highest increases recorded

Understanding the impact of Italy’s politics and possible departure from the EU on global markets

Nigeria’s 2018 budget the most delayed in 19 years

Op-Ed: Tourism Indaba – Focus on tourism red tape

McLean Sibanda on what SA can learn from India’s digital space

Lindiwe Zulu implores small businesses to look outside SA for growth

Adi Godrej on why he’s bullish on SA outlook

Minister Rob Davies on India-SA investment opportunities

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Advertise With Us

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