<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1365" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance.jpg" alt="" class="wp-image-509912" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Dr-Sania-Nishtar-CEO-of-Gavi-the-Vaccine-Alliance-1536x1024.jpg 1536w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Dr. Sania Nishtar, CEO of Gavi</figcaption></figure>



A seminal moment in the future of immunisation in Africa occurred in Abidjan, Cote D’Ivoire, this week. In a meeting of the health ministers of nine African nations, a declaration was signed that will see these nations commit to a future where the costs of immunisation will be borne entirely out of their own budgets, helping fulfill the long-term mission of the organisation I lead, Gavi, which is to ultimately put itself out of business.



Why is this so important? Since 2000 Gavi has facilitated the immunisation of over one billion children – over half of the global birth cohort. Providing a shield against deadly yet easily preventable diseases has generated over US$200 billion in economic benefits as young people grow into healthy, wage-earning adults, parents are spared debilitating healthcare costs and health systems’ resources are freed up to provide other essential services. But Gavi’s model is designed so that countries pay a greater share of their national immunisation programmes as their income increases, placing them in the driving seat for determining the healthy futures of their populations.



Political will is one thing, however securing the resources and technical ability to realise that ambition is another entirely. Only 19 countries have transitioned away from Gavi support since 2000. A new era of immunisation began this week with the agreement of the Abidjan declaration &#8211; a commitment to self-sufficiency and vaccine sovereignty that sits at the heart of the Gavi model. Thank you to all those who have welcomed me in Abidjan and participated in a hugely productive visit for the Vaccine Alliance. Achieving sustainability requires huge amounts of collaboration, capacity-building and, at times, course-correction. Having nine countries signal their intention to joining the club in one week therefore represents a huge moment.



This is what makes this week’s Abidjan Declaration unprecedented. The nine signatory countries &#8211; Benin, Congo, Côte d’Ivoire, Djibouti, Ghana, Mauritania, Nigeria, Sao Tome and Principe and Senegal &#8211; all at separate stages on the Gavi transition pathway, have effectively formed a club to support and guide each other through the transition pathway. This means collaboration on establishing strategies that strengthen not only immunisation programmes but the institutions that underpin them and the budgetary mechanisms to support them. And it means building systems capable of supporting new vaccine introductions whenever they come online.



The collaboration will inevitably take many forms; for me, one of the most innovative new approaches is a plan to create a peer monitoring mechanism to allow the sharing of best practices across the group. The group’s commitment to working closely with civil society and the private sector, and to strengthen more broadly primary healthcare infrastructure are equally laudable.



That these commitments are being undertaken is admirable; that they are being undertaken at a time of considerable fiscal constraint caused by high costs of debt servicing, the ravages of climate change and other factors is even more impressive. In the spirit of the Lusaka Agenda, global health initiatives like Gavi are in turn committed to help countries achieve their long-term vision of nationally-funded healthcare systems in Africa.



In practice, Gavi will use its expertise to help countries plan and monitor vaccine programmes as they transition. It will also provide support to help structure innovative finance mechanisms in support of domestic resource mobilisation. We will also continue to support these countries even after they graduate &#8211; as we do for other former-Gavi countries and indeed other middle-income countries that have never been fully supported by our Alliance, through technical assistance.



The World Health Organisation also has an important role to play to support countries in transition in helping build capacity and sharing best practices that will assist the transition. Lastly, all international organisations have an obligation to coordinate support and assistance to countries to optimise the benefits they bring and minimise the transaction costs.



As I look back on my many meetings in Abidjan this week, I cannot help but think reflect on events that took place here as representing a milestone not just for the countries of Africa but for Gavi also. The government of Cote D’Ivoire deserves enormous credit, not just for committing to a sustainable immunisation future for itself but also for showing leadership, and showing the world what a Global South-led transition will look like. For Gavi, too, as we enter a replenishment year where donor funding will be crucial to helping us protect more children, against more diseases, than ever before over the coming five years, the Abidjan Declaration presents a powerful endorsement of our model; that money invested in Gavi today will help countries stand on their own tomorrow.

Dr Sania Nishtar, CEO of Gavi, the Vaccine Alliance

The Abidjan Declaration: an unprecedented moment in charting the future of sustainable immunisation in Africa

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1544" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-scaled.jpg" alt="" class="wp-image-508589" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-300x226.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-820x618.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-119x90.jpg 119w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-768x579.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/CAMB3048-1-1536x1158.jpg 1536w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Zen Dlamini &#8211; Executive Head: Infrastructure and Sovereign &amp; Public Sector, at Standard Bank CIB</figcaption></figure>



South African public-private partnerships (PPPs) are the key to unlocking the massive infrastructure investment opportunities available to investors. The funding capacity of local investors is, however, not sufficient to meet the country’s infrastructure funding needs. The total value of the country’s Strategic Integrated Projects project pipeline has grown from R340 billion in July 2020 to R540 billion today, and the South African Government estimates that it will require R3.2 trillion (US$168 billion) from the private sector in order to meet its infrastructure needs by 2030.



South Africa’s ambitious infrastructure objectives cover four mission-critical infrastructure areas: energy, transport, water and digital communications. These areas, were they to receive sufficient investment, would support economic growth and job creation, and act as an enabler of future development. President Ramaphosa said in March this year: “Infrastructure is an enormous economic multiplier, providing dividends for an economy long after the infrastructure has been delivered.”



To unlock this potential, and to meet South Africa’s crucially important developmental needs, the country’s state-owned companies (SOCs) are increasingly looking at International Investors for PPP opportunities aligned with their interests and capacity.&nbsp; Over the past decade, the GCC has emerged as a major investor with interest across Africa, with a growing number of trade deals that significantly benefit both regions. Foreign Direct Investments from the GCC into Africa from 2012-2022 saw $101.9 billion invested in 628 projects.&nbsp;



South Africa’s infrastructural investment opportunities span various economic sectors, offering portfolio diversification potential for investors seeking global opportunities. The opportunities include social and utility infrastructure projects to improve access to much-needed water and power resources, and vital transport networks, including roads, rail, and ports. There are also ample investment opportunities in digital infrastructure and developing agriculture and agro-processing infrastructure.



The South African government is highly incentivised to create conditions conducive to attracting international investments, and that includes establishing a predictable and sustainable regulatory environment. Faced with a notable decline in PPP activity in recent years, the National Treasury has instituted reforms that simplify and speed up the regulatory process of establishing PPPs.



It has created two pathways for PPPs: one for high-value projects and a simplified version for low-value projects (less than R2 billion). The reforms mean that low-value projects no longer have to go through the lengthy process of obtaining Treasury approvals. Thus, investors who want to partner with the government on a smaller project won’t need to go through the time-consuming processes previously required.



As a bank committed to fostering cross-border relationships and collaboration between all the local and international stakeholders that will make these partnerships a success, Standard Bank fully supports the amended PPP regulatory framework. We believe this will make it easier for South Africa to benefit from the more than $50 trillion international investment pool held by the world’s top 300 investors.



It is important that international investors work with institutions that can capably navigate the country’s broader regulatory framework. For instance, international investors entering into PPPs must prioritise community building, job creation, localisation, and skills transfer. They would also be expected to source local suppliers from the surrounding communities instead of importing necessary supplies. Unless given a special dispensation as a priority project, international investors must meet the local requirements.



For investors looking to explore South African PPP infrastructure investment opportunities, Standard Bank is ideally positioned to help. We have the local know-how, experience, and expertise and have been a committed role player in the government’s private sector capital-raising initiatives. In terms of assets, we are the largest of the big four commercial and investment banks in sub-Saharan Africa and are equipped to put together large, impactful, and high-profile PPPs.



Already a meaningful partner to many international investors, Standard Bank has a global presence in 20 countries on the African continent, as well as in the UAE, Dubai, Beijing, London, New York, New Jersey, and the Isle of Man. We are a preferred partner for many global multinationals coming to the continent and South Africa. We operate across multiple sectors and have been involved in many large infrastructure projects in the renewable energy sector in particular, including a sizeable hydro-electric project in the Northern Cape.



Standard Bank has long nurtured its relationships with investors in the GCC and the surrounding region, where investors have access to substantial capital and the appetite to invest in the opportunities South Africa has to offer. These opportunities offer investors sustainable, long-term returns and exposure to a fast-growing population with tremendous economic potential.



Standard Bank’s State-Owned Company Investment Summit, held recently in Dubai, provided a platform for investors in the Gulf region to connect with representatives of South Africa’s state-owned companies to explore infrastructure opportunities and possible collaborations. We expect the summit to lead to a round of significant infrastructural investment agreements, as has occurred at each previous iteration of this annual event.



PPPs in South Africa have played a crucial role in attracting much-needed private investment. But more is needed. By sharing risks and rewards with the private sector, and international investors in particular, the government can unlock additional funding sources and accelerate the development of critical infrastructure projects.



The overhaul of the PPP regulatory framework has been instrumental in sending the right message to international investors about South Africa’s infrastructure opportunities. The country cannot meet its massive infrastructure development goals – and reach its full economic potential – without international investors and successful PPPs. The latest regulatory changes shift the dial in the right direction for all stakeholders.

CAMB3048-1

South Africa’s PPP reforms provide an investor-friendly platform for global infrastructure capital

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1152" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-scaled.jpg" alt="" class="wp-image-505633" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Charlie-Robertson-View-From-MEA-colour-watercolor-1536x864.jpg 1536w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Charlie Robertson &#8211; Head of Macro-Strategy at FIM Partners and author of The Time-Travelling Economist</figcaption></figure>



The author is Head of Macro-Strategy at FIM Partners and author of The Time-Travelling Economist. The article first appeared on <a href="http://fdiintelligence.com/">fDiIntelligence.com</a>, a service from the Financial Times. 



For first-term US presidents, domestic affairs are the top priority. In the case of Joe Biden’s government, any bandwidth in the international arena is now fully taken up by tension with China, Vladimir Putin’s war, and now Israel and Gaza. Policy on Africa barely gets a look-in.&nbsp;



It’s a big shift from 10 to 20 years ago, when George W Bush (with initiatives tackling HIV relief and promoting debt forgiveness) and Barack Obama (who led the ‘Power Africa’ initiative) did focus some attention on the continent.&nbsp;&nbsp;



President Trump’s focus on limiting immigration, including from Africa, which he reportedly described as “<a href="https://www.nbcnews.com/politics/white-house/trump-referred-haiti-african-countries-shithole-nations-n836946" target="_blank" rel="noreferrer noopener">shithole countries</a>” (a quote he&nbsp;<a href="https://x.com/realDonaldTrump/status/951793123985973248" target="_blank" rel="noreferrer noopener">denied on X</a>), marked a change of tone. His administration’s interest in Africa seemed mainly about countering China.&nbsp;&nbsp;



President Biden has sparked different headlines. He invited a minority of African leaders to his democracy summit in 2021, and&nbsp;<a href="https://agoa.info/profiles.html" target="_blank" rel="noreferrer noopener">suspended</a>&nbsp;countries including Ethiopia and Uganda from the Africa Growth and Opportunity Act which provides duty-free access to the US. Civil wars in Libya and Sudan, and a spate of coups in west Africa, have triggered minimal US response.&nbsp;



Where the US has stood up is via greater support for IMF and World Bank involvement on the continent, including the $500bn Special Drawing Rights expansion of the IMF’s balance sheet in 2021 which has helped limit Africa’s sovereign defaults to Ethiopia, Ghana and Zambia. The US has backed hefty IMF/World Bank support to Kenya, putting multilaterals on course to represent 60% of its debt until 2035, IMF reports show.&nbsp;



Geopolitics is still a factor. Like his predecessor, President Biden wants to counter China, which surpassed the US as Africa’s largest trade partner in 2009, and Russia whose arms sales and interest in exploiting Africa’s natural resources has seen it support a number of the continent’s undemocratic leaders.&nbsp;<a href="https://ao.usembassy.gov/fact-sheet-the-u-s-angola-partnership/" target="_blank" rel="noreferrer noopener">US financing</a>&nbsp;for a railroad across Angola is a recent example of US efforts to peel one big player away from China’s influence.&nbsp;&nbsp;



With the upcoming US election, it’s unlikely the country will become more proactive in Africa. The continent’s gross domestic product of $2.9tn in 2023 was less than California’s, limiting the economic imperative. Unless there’s peace in Gaza and Ukraine, US officials just won’t have the bandwidth.&nbsp;

Screenshot

Africa neglected by limited US bandwidth

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="800" height="800" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image-800x800.jpg" alt="" class="wp-image-505630" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image-800x800.jpg 800w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image-300x300.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image-90x90.jpg 90w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image-768x768.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/07/Helen-Lubamba-image.jpg 1024w" sizes="(max-width: 800px) 100vw, 800px" /><figcaption class="wp-element-caption">Helen Lubamba, Stanbic Bank Zambia, Head of Corporate and Investment Banking</figcaption></figure>



Copper-rich Zambia has a rare opportunity to harness its critical minerals resources, kick-start the national economy and drive the global just energy transition.



Zambia has an abundant endowment of mineral wealth. Our world-class Copperbelt region is rich in copper and cobalt, and we also have lithium, nickel and bauxite. Zambia is the second-largest producer of copper on the continent and the sixth largest globally. Africa produces 77% of the world’s cobalt, of which Zambia is the second-largest producer on the continent, after the Democratic Republic of Congo (DRC). Copper and cobalt are both key ingredients in the electronic mechanisation that the world is going through.



These critical minerals will drive Africa’s just energy transition. Copper has always been a resilient mineral in terms of demand, which is why copper prices have generally held up well on global commodities markets over the years. Due to the heightened focus on energy transition and the urgent shift to electric vehicles, prices have been increasing to around $10 000 per metric ton. Some market analysts estimate that it could go as high as $40 000 per metric ton in the next 4 to 5 years because of the significant global demand combined with supply-side disruptions. Zambia is well placed to take advantage of this, being a producer of copper and cobalt, which is generally seen as a byproduct of copper.



From an extractive point of view, DRC is Zambia’s primary cross-border partner. About a year and a half ago, the governments of DRC and Zambia signed an MoU to build facilities in the Copperbelt area, with a view to extending the critical minerals value chain beyond extraction and into local processing and beneficiation.



The copper strip between the two countries creates a great opportunity to build the value addition industry around that area. We may not be manufacturing electric vehicles ourselves in the immediate future, but we can certainly start building the components. Private investors, including original equipment manufacturers (OEMs), are now coming closer to the mineral production areas and investing in growing the value chain closer to the source. The Zambian government is incentivising value addition on the ground, so more and more of these value addition requirements are becoming conditions for allowing investment in the local mining sector.



The government has a vital role to play here. Mining needs a stable investment environment to thrive. The sector needs a stable tax regime, for example, as mining remains a long-term business.



In the past, the national economy’s heavy reliance on mining – and particularly copper mining – meant that the government tended to push its tax demands onto the mining sector in order to raise more revenue. However, there is greater optimism now that Zambia’s current government has pledged more investment in mining and is moving towards a more stable environment by revising some of the tax practices of the past.



Amid this optimism, we are also seeing more exploration going into Zambia’s western border with Angola. In terms of logistics, we see Mozambique, Namibia, Zimbabwe, and even South Africa as crucial partners, even though we don’t necessarily share a common border with the latter.&nbsp;



Mining and minerals are a core part of the Standard Bank Group’s heritage. In fact, the Group itself is a product of the gold mining sector, having been established in the goldfields of South Africa’s old Transvaal. So, it’s part of our origin and it continues to be a big part of our sustainability plans.



In Zambia, Standard Bank financed the brownfields of what is now known as Barrick Gold Lumwana Mine. With the drive for more demand for critical minerals, we’re now funding a lot of existing operations, with clients including the likes of First Quantum, Vedanta Resources, Mopani (recent majority acquisition by IRH), and so on. But even when we work with multinationals or through our global offices, the focus is always on activities that impact Africa.



Mining is not just about the mines and the mining activity, it’s about the communities they impact. If you visit Zambia’s ‘old’ Copperbelt today, you’ll see how the region has regressed over the last 5 years. Several auxiliary and mining related companies no longer operate there because the two biggest mines in the region have not been operating at their optimum. As a result, Zambia’s copper production levels started receding. In 2015 the DRC surpassed us by producing 1 million metric tons of copper, while we were sitting at around 800 000 metric tons. We need to get those numbers up, and that can only be done through investment. Our current government has a target of 3 million tons of production by 2031.



To reach these ambitious production targets, you need power. So there’s a huge focus on energy right now – especially renewable energy. The energy sector is very exciting. It’s bringing various stakeholders together, from government to independent power producers to regional and cross-border partners, to provide that much-needed energy that will grow our continent.



When you look at energy supporting the extractive industry, there is talk of an interconnector coming in from East Africa. East Africa has a surplus of energy, whereas southern Africa has a deficit. Once that interconnector is completed, hopefully within the next two years, we’ll have energy from East Africa supplementing our energy supplies in the south.&nbsp;



But one thing we also to need be cognisant of is that as the demand for critical minerals grows, we’re going to see other suppliers stepping in. Therefore, Zambia must act NOW to take advantage of this windfall, and to get production out to generate economic and social impact for the country. As a country and bank that supports her growth, we are poised for it. We just need to make sure that we’re courageous enough to follow through on the opportunities.&nbsp;

Helen-Lubamba-image

Critical Moment

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="234" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-820x234.jpg" alt="" class="wp-image-500803" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-1536x439.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Credit: Andrew Caballero-Reynolds/IMF Photo</figcaption></figure>



The global economy avoided what could have been a systemic debt crisis during the turbulence of recent years, but vulnerabilities remain amid high debt servicing costs that pose&nbsp;<a href="https://www.imf.org/en/Blogs/Articles/2024/01/24/how-to-ease-rising-external-debt-service-pressures-in-low-income-countries?utm_medium=email&amp;utm_source=govdelivery">an important challenge</a>&nbsp;for low and middle-income countries. Some may yet confront major tests.



When countries do falter on debt, restructuring is critical to containing the damage. Restructuring should be as quick as possible because delays deepen distress by making adjustment harder and adding to the costs for both debtors and creditors. Longer waits leave people suffering when they lose jobs and face increasing poverty, while creditors watch their losses mount as they wait for recovery. It’s a lose-lose situation.



While some sovereign restructurings have faced significant delays, we are working with our counterparts to accelerate the process. The progress achieved so far shows how the world can work together to reduce risks.



<h2 class="wp-block-heading" id="h-common-framework-has-started-to-deliver-nbsp">Common Framework has started to deliver&nbsp;</h2>



The Common Framework, which brings creditor countries together to help restructure debt where needed, has started to deliver. How? By reducing the time from IMF staff level agreement – a key step toward an IMF program – to delivering the financing assurances from official creditors required for program approval. This means that the Fund can move in more quickly to provide much needed financial assistance to the country. For example, Ghana’s agreement this year took five months to cover those steps, roughly half the time it took for Chad in 2021 and Zambia in 2022. Ethiopia’s talks are likely to be faster, closer to the customary two or three months.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="950" height="950" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original.png" alt="" class="wp-image-500802" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original.png 950w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original-300x300.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original-800x800.png 800w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original-90x90.png 90w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/spr-blog-newsletter-size_original-768x768.png 768w" sizes="(max-width: 950px) 100vw, 950px" /></figure>



These improvements are possible in part because stakeholders have developed more experience working together, including with non-traditional official creditors like China, India, and Saudi Arabia. Earlier cases presented creditor coordination challenges. But becoming more familiar with the process helped parties better know what to expect, building trust, and allowing creditors to overcome more easily what had previously been stumbling blocks.



We are also seeing progress in accelerating debt restructuring for emerging market countries outside of the Common Framework. Sri Lanka’s case was faster than the process for Suriname that preceded it in 2021, reflecting improvements in creditor coordination and improved understanding of safeguards and assurances.



<h2 class="wp-block-heading" id="h-global-sovereign-debt-roundtable-has-been-effective-nbsp">Global Sovereign Debt Roundtable has been effective&nbsp;</h2>



The IMF, World Bank and the Presidency of the Group of Twenty introduced the Global Sovereign Debt Roundtable (GSDR) early last year to help overcome various disagreements on technical issues. Discussions among creditors and debtors have made progress on several key aspects, including&nbsp;<a href="https://clubdeparis.org/en/communications/page/comparability-of-treatment?utm_medium=email&amp;utm_source=govdelivery">comparability of treatment</a>&nbsp;among creditors, defining what debts are included in the restructuring, information sharing, and processes and timelines. This has helped accelerate ongoing restructuring cases and build good foundations for the future. That progress, summarized in a&nbsp;<a href="https://www.imf.org/-/media/Files/About/FAQ/gsdr/gsdr-compendium-of-common-understanding-on-technical-issues.ashx?utm_medium=email&amp;utm_source=govdelivery">recent report</a>, is a big step forward.



<h2 class="wp-block-heading" id="h-imf-is-reforming-its-debt-policies">IMF is reforming its debt policies</h2>



The IMF is building on our sovereign debt restructuring experience to make the process even faster. The Executive Board in April adopted significant&nbsp;<a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2024/04/16/Policy-Reform-Proposals-To-Promote-The-Funds-Capacity-To-Support-Countries-Undertaking-Debt-547821?utm_medium=email&amp;utm_source=govdelivery">reforms to our debt policies</a>:



<ul class="wp-block-list">
<li>They provide tools that generally would allow IMF program approval within two or three months of a staff-level agreement, including through safeguards that help us proceed in cases where there are coordination problems among creditors. Approval in principle for programs, which enables disbursement as soon as financing assurances materialize, will increase transparency and help complicated cases move along on such a schedule.</li>



<li>They create a new procedure for establishing financing assurances, which should provide greater flexibility over time. Accordingly, the Fund would assess that a “credible official creditor process” is underway, based on actions by the creditors and accounting for the creditor’s track record in delivering. This will eventually be considerably faster than the present practice of waiting for formal letters.</li>
</ul>



These reforms will facilitate faster engagement with the debtor country—a key step since delays can intensify a crisis. The reforms will also provide more information to creditors to help them reach restructuring decisions faster (either because the program can be approved more quickly, or through approval in principle). This would include information about our economic projections, policy commitments, and our debt sustainability analysis. This complements other Fund efforts to improve transparency and&nbsp;<a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2023/06/23/Staff-Guidance-Note-on-Information-Sharing-in-The-Context-of-Sovereign-Debt-Restructurings-535203?utm_medium=email&amp;utm_source=govdelivery">share information</a>&nbsp;in a timely manner with all stakeholders involved in the restructuring process.&nbsp;



High geopolitical tensions have made global economic cooperation more difficult. Yet we can take heart from the fact that creditors and Fund shareholders more broadly are coming together unanimously to assist countries that need debt restructuring. This is critical to further improve the international debt architecture which is a key priority, especially given the high debt levels and prohibitive debt servicing costs in some countries.



<h2 class="wp-block-heading" id="h-what-s-next">What’s next</h2>



As we strive to reduce delays, it is important to note that sovereign defaults and requests for comprehensive debt relief have tapered off since 2021 and 2022. The last notable request was Ghana’s more than a year ago. Markets have reopened earlier this year for low-income countries, with Benin, Cote d’Ivoire, Kenya, and Senegal having raised money from foreign investors. Emerging market bond spreads are back to pre-pandemic levels, signaling investor confidence that those countries can repay debt.



However, spreads for about 15 percent of emerging markets are at distressed levels, underscoring vulnerability. Likewise, low-income countries still need to refinance about $60 billion of external debt each year over the next two years—about triple the average in the decade through 2020. Around 15 percent of low-income countries are in debt distress and another 40 percent are at high risk of distress.



So, progress on debt must continue. The GSDR will continue to address remaining key restructuring challenges such as how official and private creditor processes can move in parallel, and ways to address liquidity challenges. This could involve a potential menu of options for countries including the use of the Common Framework for coordinated liquidity relief; liquidity management operations such as debt swaps or buy backs; and ways to support new inflows including through risk-sharing instruments.



The IMF will distill our policies in a sovereign debt handbook that we plan to publish later this year. This clarity should further underpin more efficient processes. We are also reviewing the debt sustainability framework for low-income countries, jointly with the World Bank, to ensure it remains fit for purpose.&nbsp;



<h2 class="wp-block-heading" id="h-easing-the-liquidity-squeeze">Easing the liquidity squeeze</h2>



More will be needed to address debt challenges and avoid distress amid elevated interest rates and financing needs, against a backdrop of enormous long-term financing needs for economic development and to cope with climate change.



Borrowing countries, creditors, and the international community have roles to play. Borrowers must foster economic growth and boost government revenues so that they can create space to finance development and climate-related spending while maintaining debt on a sustainable path. Given that policy reforms in borrowing countries will take time to deliver results, official creditors should consider mobilizing more funding at reduced cost, particularly grants. The Fund will continue to help support these efforts and provide adequate financing, including through the review of our concessional facilities.



A forthcoming blog will elaborate on how the international community must keep working together to help ease the burden of borrowing and alleviate the liquidity squeeze facing many emerging and low-income countries.

blog-2099×600-spr-sovereign-debt-restructuring-process-c-andrew-caballero-reynolds-imf-photo

Sovereign Debt Restructuring Process Is Improving Amid Cooperation and Reform

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-820x547.jpg" alt="" class="wp-image-500322" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Chido-Munyati-Panel-1-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Chido Munyati</figcaption></figure>



Over the last 20 years, China has become sub-Saharan Africa’s <a href="https://www.imf.org/-/media/Files/Publications/REO/AFR/2023/October/English/china-note1.ashx">largest bilateral trading partner</a>. Around 20% of the region’s exports now go to China and about 16% of Africa’s imports come from China, according to the International Monetary Fund (IMF). This amounted to a record <a href="https://www.scmp.com/news/china/diplomacy/article/3250552/china-africa-trade-hit-282-billion-2023-africas-trade-deficit-widens-commodity-prices-key-factor">$282 billion</a> in total trade volume in 2023. Primary commodities — metals, mineral products and fuel — represent about three fifths of Africa’s exports to China, while it typically imports Chinese manufactured goods, electronics and machinery.



At the same time, China has also emerged as the largest bilateral creditor to Africa, providing African countries with a new source of infrastructure, mining and energy financing. China’s <a href="https://openknowledge.worldbank.org/entities/publication/02225002-395f-464a-8e13-2acfca05e8f0">share</a> of total sub-Saharan African external public debt was <a href="https://www.imf.org/-/media/Files/Publications/REO/AFR/2023/October/English/china-note1.ashx">less than 2%</a> before 2005 but grew to about 17%, or $134 billion, by 2021.



Moreover, Chinese foreign direct investment (FDI) has increased significantly over the last two decades. In 2003, <a href="https://www.sais-cari.org/chinese-investment-in-africa#:~:text=Chinese%20FDI%20in%20Africa%20Data%20Overview&amp;text=Flows%20surged%20from%20US%2475,Bank%20of%20China%20(ICBC)">the annual FDI flow from China to Africa</a> was approximately $75 million. It peaked at $5 billion in 2022, representing about 4.4% of the region’s total FDI. The Belt and Road Initiative (BRI), a global development strategy launched in 2013, is the framework for China&#8217;s FDI directed primarily towards transportation, energy and mining infrastructure.



While the relationship between China and the African continent has been ripening over the years, a recent deceleration of economic growth means both will now need to take a more prudent approach if they want to maintain future trade relations and investment flows.



<h2 class="wp-block-heading" id="h-china-africa-economic-relations-are-evolving">China-Africa economic relations are evolving</h2>



In 2020 and 2021, China and Africa continued to <a href="https://www.fmprc.gov.cn/eng/wjb_663304/zwjg_665342/zwbd_665378/202112/t20211217_10471245.html">strengthen their economic cooperation</a> through various strategic plans and initiatives within the frameworks of the BRI and the Forum on China-Africa Cooperation (FOCAC), a partnership platform established in 2000. This cooperation plan is focused on aligning the BRI with the African Union’s Agenda 2063 — a strategic framework for the socio-economic transformation of the continent over the next 50 years.



The cooperation plan prioritizes improving infrastructure connectivity across Africa to facilitate trade and economic integration. It also aims to enhance trade facilitation, financial integration and policy coordination between China and African countries. The latter will ensure development strategies are harmonized and mutually reinforcing.



However, China&#8217;s investments and loans in Africa have declined in recent years. This shift <a href="https://www.cnbc.com/2024/04/12/chinas-policy-to-boost-demand-by-700-billion-will-have-a-bigger-and-bigger-impact-official-says.html">has been attributed</a> to various factors including a slowdown in China’s economic growth and its desire for a more sustainable development model. Consequently, <a href="https://www.bu.edu/gdp/2023/09/18/a-new-state-of-lending-chinese-loans-to-africa/">total new loan commitments in 2022</a> were only $995.5 million <a href="https://www.bu.edu/gdp/chinese-loans-to-africa-database/">compared</a> to a high of $28.5 billion in 2016. And at the last FOCAC held in November 2021, China announced <a href="https://idsa.in/africatrends/FOCAC-2021-Key-Takeaways-10-1-2">a $40 billion financial commitment to Africa</a>, a significant decrease from the $60 billion pledged in 2018. About half of this decrease was due to a fall in infrastructure lending.



The <a href="https://www.mfa.gov.cn/eng/wjdt_665385/2649_665393/202208/t20220819_10745593.html#:~:text=Both%20the%20Chinese%20and%20African,a%20shared%20future%20in%20the">new commitments</a> signify a shift away from direct infrastructure financing towards trade credit for regional exports, while promoting an increase in private investments. China is also <a href="https://carnegieendowment.org/research/2024/05/how-is-chinas-economic-transition-affecting-its-relations-with-africa?lang=en">buying less crude oil</a> from Africa, leaving major African oil producers earning significantly less than they did before the pandemic.



African economies have certainly benefited from China’s unprecedented growth, but they must now adapt to a deceleration of export volumes, investments and loans. According to the IMF, every 1 percentage point decline in China’s real GDP growth rate leads to <a href="https://www.imf.org/en/Publications/WP/Issues/2024/02/23/Navigating-the-Evolving-Landscape-between-China-and-Africas-Economic-Engagements-545104">about a 0.25 percentage point</a> decline in sub-Saharan Africa’s total GDP growth within a year.



<h2 class="wp-block-heading" id="h-the-next-chapter-in-china-africa-economic-relations">The next chapter in China-Africa economic relations</h2>



In the decade ahead, China’s private sector, rather than its state-run enterprises, will likely lead trade and investment in Africa. Of the 3,000 Chinese enterprises that are invested in Africa, more than <a href="https://insightplus.bakermckenzie.com/bm/international-commercial-trade/south-africa-trade-relations-with-china-grow-stronger">70% are private sector</a> businesses. The African Continental Free Trade Area (AfCFTA) is likely to accelerate this trend by promoting the growth of regional value chains, offering Chinese businesses access to a larger unified African market. A similar outcome was realized with the EU’s single market – China is now <a href="https://www.statista.com/statistics/1364662/international-trade-eu/#:~:text=The%20European%20Union%20has%20experienced,EU's%20largest%20external%20import%20partner.">the EU’s largest external import partner</a>.



Officially launched in 2021, the AfCFTA creates a single market <a href="https://www.sanews.gov.za/south-africa/afcfta-agreement-presents-economic-opportunities-investors">projected to grow</a> to 1.7 billion people and $6.7 trillion in consumer and business spending by 2030. The preferential trade agreement will increase international exports and intra-African trade, particularly in agriculture and green technology minerals. This will unlock opportunities for local and global businesses to enter and expand throughout new markets across the continent. The first <a href="https://www.weforum.org/publications/an-action-plan-to-accelerate-global-business-and-investment-in-africa/">private sector action plan</a> for the AfCFTA was launched at the World Economic Forum’s annual meeting in January 2024.



To realize this immense potential, both regions must prioritize greater coordination between the AfCFTA and the BRI. Investments should be targeted to catalyze the region’s industrialisation and manufacturing plans, and to enhance trade connectivity. At a BRI Forum in October 2023, <a href="https://english.www.gov.cn/news/202310/18/content_WS652f7ef9c6d0868f4e8e060b.html">the Chinese government said</a> the next phase of the BRI will be “small yet smart”, with an increased focus on green development and the digital economy.



Better coordination and synergy will ensure mutual benefits and sustainable growth for Africa and China. Ministers and business leaders from Africa are convening in China for the Annual Meeting of the New Champions in June to advance progress in regional cooperation and coordination. These discussions will focus on building on the momentum created to date, while also finding growth amid increasing geopolitical and economic risk.

Centre for the Fourth Industrial Revolution, Rwanda Launch

Why strong regional value chains will be vital to the next chapter of China and Africa’s economic relationship

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="1365" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-scaled.jpg" alt="" class="wp-image-497835" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Parvoleta-Shtereva-Gemcorp-1536x1024.jpg 1536w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Parvoleta Shtereva, CIO of Gemcorp</figcaption></figure>



Even as we celebrate the progress made in gender equality and women&#8217;s empowerment in emerging markets (EMs) and beyond, we must recognise the significant work that remains.



<h2 class="wp-block-heading" id="h-labour-force-participation">Labour force participation</h2>



Labour force participation rates are a critical metric of gender equality and economic development. World Bank data on female-to-male labour force participation highlights significant disparities across the EM universe. In regions such as the Middle East and India, these ratios remain notably lower while Africa’s ratio is one of the highest in the world and on par with that of China and North America, according to McKinsey research. Notably, Africa has also made strides in increasing female representation on executive committees and boards, with the highest board-level representation globally. However, most African women still work in low-paid, often subsistence-level jobs in the informal economy and, as evidenced by Chart 2, do not have matching access to financial services.



Governments are taking action on female labour participation. For example, Saudi Arabia has prioritised increasing women&#8217;s participation in the workforce as a core component of its Vision 2030 initiative, recognising that economic growth and gender equality are deeply intertwined. However, it takes more than government policy to destroy the structural barriers that prevent women from fully participating in the workforce. Cultural norms and expectations, impaired access to education and childcare facilities are just a few of the obstacles that need to be addressed. We have been a proud supporter of EMpower – The Emerging Markets Foundation – a philanthropic organisation that supports a multitude of women- and adolescent girl-focused programmes, dedicated to life skills, leadership, livelihoods and sexual and reproductive health. Meaningful progress is only possible through community-wide engagement with parents, elders, male peers, educators and the authorities and it takes time.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1196" height="712" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED.png" alt="" class="wp-image-497833" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED.png 1196w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-300x179.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-820x488.png 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-151x90.png 151w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-768x457.png 768w" sizes="(max-width: 1196px) 100vw, 1196px" /></figure>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="1196" height="688" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1.png" alt="" class="wp-image-497834" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1.png 1196w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1-300x173.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1-820x472.png 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1-156x90.png 156w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Graph-OPED-1-768x442.png 768w" sizes="(max-width: 1196px) 100vw, 1196px" /></figure>



<h2 class="wp-block-heading" id="h-access-to-water-and-sanitation">Access to water and sanitation</h2>



In many emerging markets women dedicate their daily time to a number of vital activities, ranging from generating an income, looking after children and elders to securing water supply for their homes by fetching water from sources that could be miles away.



Access to water from close and reliable sources has a positive impact on women&#8217;s lives, with benefits that go beyond well-being and health: dignity, ability to protect their families from disease, access to income opportunities by not having to spend time searching for water. Girls, who are usually assigned to this activity, can devote time to attending school and receiving a formal education and enjoying their childhood.



In Angola, Gemcorp Capital is financing a number of important infrastructure projects, including universal access to water with the Águas de Benguela, EPAL&#8217;s Sistema III, Quilonga Grande projects, as well as projects to combat drought in southern Angola in the provinces of Cunene and Huíla, which will guarantee access to water throughout the year, thus preventing families from constant need to migrate and enabling food security for the communities. These projects underway will benefit around 24 million people.



<h2 class="wp-block-heading" id="h-technology-driving-progress">Technology driving progress</h2>



Mobile telephony has revolutionised access to financial services, particularly for women and rural populations. Since 2000, mobile phone usage has surged in EM countries, often surpassing that of developed markets. One company driving data access across a number of African countries is Africell, part of Gemcorp’s investment portfolio. Africell is a fast-growing mobile network operator that provides affordable and reliable mobile network coverage to over 12 million subscribers across Africa. Their services include voice, data and mobile money, significantly contributing to economic growth. The rapid spread of mobile communications has had a profound impact on rural areas, where traditional infrastructure – both telephony and banking &#8211; is often lacking. This technological leap has empowered many women by providing financial inclusion through mobile payment services, enabling them to start businesses and achieve financial independence. The World Bank emphasises that no technology has spread faster globally than mobile communications, underscoring its critical role in development​.



Jumo, a financial technology platform provider and another one of our investee companies, is a major force in driving financial inclusion and development in Africa. One-third of Jumo’s 24 million unique customers are women and Jumo’s AI-powered scoring models are gender-, age- and ethnicity-blind. By leveraging technology, women can overcome prejudice and gain equal access financial services to improve their economic standing and gain greater autonomy. Financial inclusion is a cornerstone of women&#8217;s empowerment, allowing women to save money, invest in education and health, and build businesses. Supporting these innovative businesses through investment and policy measures is crucial for fostering sustainable development.



<h2 class="wp-block-heading" id="h-the-road-ahead">The road ahead</h2>



This is just a glimpse of the multitude of interventions that are crucial to supporting the women of emerging markets in their quest for equity and equality. Securing global financing for Africa and other rapidly growing emerging markets regions is essential. Policymakers, businesses, investors and civil society must work together to create inclusive policies, invest in women-focused initiatives, and ensure that technological and economic advancements benefit all.

Parvoleta-Shtereva-Gemcorp

Women in Emerging Markets: Progress and the path forward

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="2048" height="585" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-scaled.jpg" alt="" class="wp-image-496208" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-300x86.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-820x234.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-160x46.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-768x220.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/blog-2099x600-dollar-dominance-blue-planet-studio-by-getty-images-1536x439.jpg 1536w" sizes="(max-width: 2048px) 100vw, 2048px" /><figcaption class="wp-element-caption">Credit: Blue Planet Studio/iStock by Getty Images</figcaption></figure>



Dollar dominance—the outsized role of the US dollar in the world economy—has been brought into focus recently as the robustness of the US economy, tighter monetary policy and heightened geopolitical risk have contributed to a higher greenback valuation. At the same time,&nbsp;<a href="https://www.imf.org/en/News/Articles/2024/05/07/sp-geopolitics-impact-global-trade-and-dollar-gita-gopinath?utm_medium=email&amp;utm_source=govdelivery">economic fragmentation</a>&nbsp;and the potential reorganization of global economic and financial activity into separate, nonoverlapping blocs could encourage some countries to use and hold other international and reserve currencies.



Recent data from the IMF’s&nbsp;<a href="https://data.imf.org/?sk=e6a5f467-c14b-4aa8-9f6d-5a09ec4e62a4&amp;utm_medium=email&amp;utm_source=govdelivery">Currency Composition of Official Foreign Exchange Reserves (COFER)</a>&nbsp;point to an ongoing gradual decline in the dollar’s share of allocated foreign reserves of central banks and governments. Strikingly, the reduced role of the US dollar over the last two decades has not been matched by increases in the shares of the other “big four” currencies—the euro, yen, and pound. Rather, it has been accompanied by a rise in the share of what we have called nontraditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies. The most recent data extend this trend, which we had pointed out in an earlier IMF&nbsp;<a href="https://www.imf.org/en/Publications/WP/Issues/2022/03/24/The-Stealth-Erosion-of-Dollar-Dominance-Active-Diversifiers-and-the-Rise-of-Nontraditional-515150?utm_medium=email&amp;utm_source=govdelivery">paper</a>&nbsp;and&nbsp;<a href="https://www.imf.org/en/Blogs/Articles/2022/06/01/blog-dollar-dominance-and-the-rise-of-nontraditional-reserve-currencies?utm_medium=email&amp;utm_source=govdelivery">blog</a>.



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="950" height="821" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original.jpg" alt="" class="wp-image-496207" style="width:512px;height:auto" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original.jpg 950w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original-300x259.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original-820x709.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original-104x90.jpg 104w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-1-dollar-dominance-for-newsletter_original-768x664.jpg 768w" sizes="(max-width: 950px) 100vw, 950px" /></figure>



These nontraditional reserve currencies are attractive to reserve managers because they provide diversification and relatively attractive yields, and because they have become increasingly easy to buy, sell and hold with the development of new digital financial technologies (such as automatic market-making and automated liquidity management systems).



This recent trend is all the more striking given the dollar’s strength, which indicates that private investors have moved into dollar-denominated assets. Or so it would appear from the change in relative prices. At the same time, this observation is a reminder that exchange rate fluctuations can have an independent impact on the currency composition of central bank reserve portfolios. Changes in the relative values of different government securities, reflecting movements in interest rates, can similarly have an impact, although this effect will tend to be smaller, insofar as major currency bond yields generally move together. In any event, these valuation effects only reinforce the overall trend. Taking a longer view, over the last two decades, the fact that the value of the US dollar has been broadly unchanged, while the US dollar’s share of global reserves has declined, indicates that central banks have indeed been shifting gradually away from the dollar.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="538" height="465" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-2-dollar-dominance-for-newsletter_crop.jpg" alt="" class="wp-image-496206" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-2-dollar-dominance-for-newsletter_crop.jpg 538w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-2-dollar-dominance-for-newsletter_crop-300x259.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/chart-2-dollar-dominance-for-newsletter_crop-104x90.jpg 104w" sizes="(max-width: 538px) 100vw, 538px" /></figure>



At the same time, statistical tests do not indicate an accelerating decline in the dollar’s reserve share, contrary to claims that US financial sanctions have accelerated movement away from the greenback. To be sure, it is possible, as some have argued, that the same countries that are seeking to move away from holding dollars for geopolitical reasons do not report information on the composition of their reserve portfolios to COFER. Note, however, that the 149 reporting economies make up as much as 93 percent of global FX reserves. In other words, non-reporters are only a very small share of global reserves.



One nontraditional reserve currency gaining market share is the Chinese renminbi, whose gains match a quarter of the decline in the dollar’s share. The Chinese government has been advancing policies on multiple fronts to promote renminbi internationalization, including the development of a cross-border payment system, the extension of swap lines, and piloting a central bank digital currency. It is thus interesting to note that renminbi internationalization, at least as measured by the currency’s reserve share, shows signs of stalling out. The most recent data do not show a further increase in the renminbi’s currency share: some observers may suspect that depreciation of the renminbi exchange rate in recent quarters has disguised increases in renminbi reserve holdings. However, even adjusting for exchange rate changes confirms that the renminbi share of reserves has declined since 2022.



Some have suggested that what we have characterized as an ongoing decline in dollar holdings and rise in the reserve share of nontraditional currencies in fact reflects the behavior of a handful of large reserve holders. Russia has geopolitical reasons to be cautious about holding dollars, while Switzerland, which accumulated reserves over the last decade, has reason to hold a large fraction of its reserves in euros, the Euro Area being its geographical neighbor and most important trading partner. But when we exclude Russia and Switzerland from the COFER aggregate, using data published by their central banks from 2007 to 2021, we find little change in the overall trend.



In fact, this movement is quite broad. In our 2022&nbsp;<a href="https://www.imf.org/en/Publications/WP/Issues/2022/03/24/The-Stealth-Erosion-of-Dollar-Dominance-Active-Diversifiers-and-the-Rise-of-Nontraditional-515150?utm_medium=email&amp;utm_source=govdelivery">paper</a>, we identified 46 “active diversifiers,” defined as countries with a share of foreign exchange reserves in nontraditional currencies of at least 5 percent at the end of 2020. These include major advanced economies and emerging markets, including most of the Group of Twenty (G20) economies. By 2023, at least three more countries (Israel, Netherlands, Seychelles) have joined this list.



<figure class="wp-block-image"><a href="https://www.imf.org/en/Blogs/Articles/2024/06/11/dollar-dominance-in-the-international-reserve-system-an-update?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://content.govdelivery.com/attachments/fancy_images/USIMF/2024/06/9634024/5505914/chart-3-dollar-dominance-for-newsletter_crop.jpg" alt="chart showing the declining percentage of global FX reserves held in US dollars"/></a></figure>



<a href="https://www.sciencedirect.com/science/article/pii/S0022199623001083?utm_medium=email&amp;utm_source=govdelivery">We also found</a>&nbsp;that financial sanctions, when imposed in the past, induced central banks to shift their reserve portfolios modestly away from currencies, which are at risk of being frozen and redeployed, in favor of gold, which can be warehoused in the country and thus is free of sanctions risk. That work also showed that the demand for gold by central banks responded positively to global economic policy uncertainty and global geopolitical risk. These factors may lie behind the further accumulation of gold by a number of emerging market central banks. Before making too much of this trend, however, it is important to recall that gold as a share of reserves still remains historically low.



<figure class="wp-block-image"><a href="https://www.imf.org/en/Blogs/Articles/2024/06/11/dollar-dominance-in-the-international-reserve-system-an-update?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener"><img decoding="async" src="https://content.govdelivery.com/attachments/fancy_images/USIMF/2024/06/9634027/5505915/chart-4-dollar-dominance-for-newsletter_crop.jpg" alt="chart showing gold holdings in official reserve assets"/></a></figure>



In sum, the international monetary and reserve system continues to evolve. The patterns we highlighted earlier—very gradual movement away from dollar dominance, and a rising role for the nontraditional currencies of small, open, well-managed economies, enabled by new digital trading technologies—remain intact.

blog-2099×600-dollar-dominance-blue-planet-studio-by-getty-images

Dollar Dominance in the International Reserve System: An Update

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="761" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-820x761.jpg" alt="" class="wp-image-494420" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-820x761.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-300x278.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-97x90.jpg 97w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-768x713.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1-1536x1426.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/Richard-1.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Richard Firth, CEO, MIP Holdings</figcaption></figure>



Since government announced the passing of the National Health Insurance (NHI) Bill, industry experts, business leaders, legal experts, and numerous other commentators have voiced opinions as to why implementing NHI is either going to be a nightmare, or frankly impossible. Reasons have ranged from the difficulty of integrating two very different existing systems to challenges with funding, but all criticisms of the bill essentially boil down to a belief that the execution of the NHI will be, at best, piecemeal and ineffective. At worst, the implementation of the NHI could remove access to private medical coverage entirely, according to some experts, leaving everyone in the country reliant on the already overstretched and underfunded public health system.



These criticisms are not unfounded. History has proved that state-run kitties like the one proposed for the funding of the NHI are open to looting and mismanagement. In addition, governments are incapable of building entrepreneurial businesses, focusing on policy rather than profits. One just has to look at the Road Accident Fund and Workman’s Compensation Fund to get a glimpse of the complexities involved in managing such large pools of money. The NHI financial process will make both these units look tiny in comparison to the number of transactions and volume of money that will flow daily through the system.&nbsp; There are however, centers of excellence, The Government Employees Medical Scheme commonly known as GEMS have built a quality business unit focused on the healthcare for government employees.&nbsp; Both their member management and claims processes are held up as being one of the best and largest individual schemes in the country.&nbsp; We can take learnings from here!&nbsp;



However, there is a way to ensure that the NHI delivers on the government’s dream of universal healthcare for all, while enabling South Africans from all walks of life to access the world-class medical resources that currently define private healthcare in the country.



<h2 class="wp-block-heading" id="h-technology-can-make-nhi-a-viable-reality">Technology can make NHI a viable reality</h2>



What is currently missing from the proposed implementation of the NHI is a scientific, unified and integrated pricing approach for all medical procedures agreed by both medical practitioners and payors. &nbsp;We have the technology and the capabilities to price every single procedure and diagnosis, and can use that to create the framework on which the basis for the NHI can be built.



In 2009 the competition commission found the single exit price across all fees was anti-competitive and cancelled this form of pricing.&nbsp; In any successful healthcare model, a single price is the only way forward.



A standardised, structured pricing approach, integrated into the processes of the healthcare system, will guarantee that all spend is allocated correctly. This will not only eliminate the risk of mismanaged funds, but also make sure that patient bills are fair and that the entire healthcare value chain – from doctors, to hospitals, to pharmaceutical providers – is reimbursed fairly.



Take an appendectomy, for example. Using historical data to determine everything from the length of a hospital stay to the exact doses of all medications needed, we can arrive at a standard figure for the procedure. Using this figure, the correct amount will always be allocated to the surgeon, the anesthetist, the hospital, and so on, leaving no room for overpricing or fraud.



This approach would also create an easy way to integrate public and private healthcare. Knowing exactly what each procedure costs, government could start “auctioning” patients to “private” hospitals who generally manage overall utilization by bed availability, allowing them to take on patients and procedures based on their capabilities, the availability of beds, and so on. The end result would therefore be focused on patient outcomes rather than costs, revolutionising how medical care is delivered in South Africa.



<h2 class="wp-block-heading" id="h-public-and-private-sectors-working-hand-in-hand">Public and private sectors working hand-in-hand</h2>



There’s no doubt that the current health system is not working, but without a structured, systematic approach to the implementation of NHI, we run the risk of creating even more problems. It will take years to get the right architecture in place, and once that is done, we will also have to ensure that the right oversight is in place.



Shifting the government funding model from allocating a state hospital a budget to moving all hospitals to a “claim for services” rendered model minimises the risk of fraud and other financial improprieties.&nbsp; This costing model will also help drive quality and patient outcomes will play a big part of the payment and control processes. The proposed central NHI fund will be dealing with billions every year, and will require stringent controls. A trustee system needs to be set up, preferably with representatives from both the public and private healthcare sectors providing guidance and oversight.



I really believe that this model can be implemented in the government funded SASSA grantees for a pilot project and then grow the scheme into the private sector. This will allow government time to prove its plan and show how the system can work. With the right systems in place, and all stakeholders working together, South Africa can build a national health system that not only works for everyone in the country, but that can set a new international standard.

Richard-1

Paving the way for an effective NHI

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-820x547.jpg" alt="" class="wp-image-493908" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/OYSLL7OT2BLMVOGKKGITWL2LUQ-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">FILE PHOTO: A money changer counts U.S. dollar banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan/File Photo</figcaption></figure>



Looking for growth? Africa is the continent that every country, trade minister, and business owner should turn their heads toward.&nbsp;<a href="https://www.afdb.org/en/news-and-events/press-releases/africa-dominates-list-worlds-20-fastest-growing-economies-2024-african-development-bank-says-macroeconomic-report-68751" target="_blank" rel="noreferrer noopener">According to the Africa Development Bank</a>’s latest macroeconomic report, it confirmed that the African continent is set to maintain its position as the second-fast-growing region, just next to Asia. According to the report, next year “up to 41 countries across the continent will achieve an economic growth rate of 3.8% and in 13 of them, growth will be more than 1 percentage point higher than in 2023.” These are incredible statistics that demonstrate the growth opportunity across Africa due to the surging population and booming GDP growth.&nbsp; Africa is forecasted to outpace global growth averages throughout 2024.



The report also counted 11 African nations among the world’s twenty fastest-growing economies this year &#8211; enviable, especially to our neighbors in North America and Europe. Additionally, according to the&nbsp;<a href="https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/ZAF/GHA/KEN/ETH/CIV/RWA" target="_blank" rel="noreferrer noopener">International Monetary Fund</a>’s GDP growth tracker, the African region significantly outpaces South America’s GDP growth, with a real GDP growth rate of 3.5% versus South America’s 1.4%. On the other hand, Africa still maintains a close range behind Asia, which leads with 4.4% to Africa’s 3.5%. However, in the coming years, according to&nbsp;<a href="https://www.statista.com/statistics/1224205/forecast-of-the-total-population-of-africa/#:~:text=Forecast%20of%20the%20total%20population%20of%20Africa%202020%2D2050&amp;text=According%20to%20the%20forecast%2C%20Africa's,as%20the%20most%20populous%20countries." target="_blank" rel="noreferrer noopener">Statista</a>, Africa will experience a significant population boom, with an estimated 2.5 billion inhabitants by 2050. This, in turn, will significantly close the population gap with Asia by 2100. As GDP growth typically grows as the population does, the GDP growth gap could be narrowed down within the next few years.&nbsp;



Needless to say, not only will there be tremendous population growth, but foreign direct investment, employment opportunities, standard of living, purchasing power, and more will grow exponentially as countries that have been listed as “commodity-dependent” will expand into diversified services fit for their young, digital population.



Why doesn’t money “follow” the data from Africa the way it does in other continents, like into Asia or South America? Often, companies considering expansion tell us that they see Africa as “more complex,” “more corrupt,” and more “volatile” than other emerging continents. &nbsp;



However, if you spend any time with a CEO or politician from Asia or South America &#8211; it’s clear that they also operate in markets with high barriers to entry and difficult operational environments.



Perception is the enemy of foreign investment in Africa.&nbsp; This is why the biggest new entrants to the continent in the last decade have come directly from Asia and South America &#8211; where they feel the market is similar, rather than more difficult.



The diversity of currencies, varying regional regulations, and lack of legacy financial infrastructure are hurdles to rolling out a pan-African business in a snap. However, fintechs have flooded the market to fill this gap for the last 15 years. &nbsp;



Now, those with the most longevity, experience, and long-term consistent growth are making it easy to do business across the continent.



These fintechs (and their supporting ecosystem of service providers) know that Africa’s currency diversity is a strength, not a weakness. They also know that African fintech infrastructure rivals, if not surpasses, many other markets.



And finally, there are more than enough professional services providers, banks, and other partners with which to scale in Africa.



So, while many new entrants to African commerce are quick to blame other reasons for their difficulties in scaling, the only major obstacle to their growth (aside from their own perceptions of Africa) is cost.



Cross-border payments still cost African and African-based businesses too much. African businesses shouldn&#8217;t have such a high price (in time or fees) to move into other African or G20 currencies or to make transfers across the continent or into Europe. Yet, they do.



At a recent gathering of corporate treasurers operating in Africa, the single biggest complaint was that the internal policies only allowed them to partner with a single bank. This policy and the outlook on what available partners should be is beyond outdated.



Now, these costs may surprise many businesses as they begin their expansion to African markets. However, it is not a problem of currency diversity, financial infrastructure, or service. Instead, the problem is the knock-on effect of how businesses in Africa have not been prioritized by non-African partners. Historically, limited choices in foreign exchange, cross-border transfers, and international market access still drive these higher costs of doing business today. &nbsp;



These costs have also made Africa’s fintech sector the most inventive. Our tradition of financial innovation, dating back to mobile money, directly results from African founders and fintechs actively challenging and dismantling this system. In every sector they’ve expanded into, they’ve provided more and better choices. This ecosystem of fintech and alternative financing is nearly identical to what resolved the higher costs of cross-border business in Asia and Latin America as well, and their economic growth proves it is worth the effort.



African businesses need more choice. The opportunity (and pressure) of international liquidity should help it finally arrive.



In doing so, however, we must be vigilant that the systems evolving to serve new expansions into Africa also work for African businesses. This means using partners that can facilitate direct African-to-African currency exchange. Not just to protect the exchange rate of the currencies themselves but also to maintain the speed of value exchange.



We cannot allow our system to evolve into one where business owners have days or weeks-long wait times to access their capital. We must also watch carefully to ensure that any business looking to capitalize on African value invests equally in African success. This should include hiring employees in Africa and encompass partnering with African companies, using African banks, and routing payments through African-licensed payments services providers (as well as holding and doing business in African currencies).



Africa is already a benchmark for fintech invention and is quickly becoming the ideal standard for economic growth. Within the next decade, we will be the global hub of international talent, as well as home to one of the most important consumer markets in the world. We can arrive at this future even more quickly if we can cut costs for African businesses while maintaining our high expectations for those companies that seek to join us here.&nbsp;

FILE PHOTO: A money changer counts U.S. dollar banknotes at a currency exchange office in Ankara

Cross-border payments are still costing businesses in Africa too much

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="333" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-820x333.jpg" alt="" class="wp-image-493885" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-820x333.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-300x122.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-160x65.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-768x312.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-1536x625.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/hero-editors-letter-lighter-c-Daniel-Lievano-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



“Prosperity, like peace, is indivisible,” US Treasury Secretary Henry Morgenthau Jr. said as he opened the Bretton Woods conference in 1944. It was, as he put it, an “elementary economic axiom” to help guide the founders of the IMF.



Today, these words are more important than ever. Our biggest challenges—from global warming to demographic and technological transformations—cannot be resolved by countries acting alone.



Yet just when we need greater international cooperation, we get the opposite: more fragmentation, conflict, and global disengagement; more zero-sum thinking that risks leaving our world poorer and less secure.



As we mark the IMF’s 80th anniversary, we ask: How can the Fund continue to adapt to the new realities and the changing needs of our 190 members? This&nbsp;<a href="https://www.imf.org/en/Publications/fandd?utm_medium=email&amp;utm_source=govdelivery">F&amp;D issue</a>&nbsp;seeks to provide answers that are inspiring and thought-provoking.



IMF Managing Director&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Economic-possibilities-for-my-grandchildren-Kristalina-Georgieva?utm_medium=email&amp;utm_source=govdelivery">Kristalina Georgieva</a>&nbsp;strikes an optimistic note and calls for “21st century multilateralism”—a framework for international cooperation that’s more open and representative, with a better balance between advanced economies and the voices of emerging market and developing economies.



These voices are represented in this issue by top policymakers such as Barbados’ Prime Minister&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/The-IMF-Must-Lead-on-Debt-Sustainability-Mia-Amor-Mottley?utm_medium=email&amp;utm_source=govdelivery">Mia Mottley</a>, Kenyan President&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/A-Consensus-is-Forming-for-IMF-Reform-William-Ruto?utm_medium=email&amp;utm_source=govdelivery">William Ruto</a>, and&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Latin-America-and-The-IMF-Pablo-Garcia-Silva?utm_medium=email&amp;utm_source=govdelivery">Pablo García-Silva</a>, a former vice-governor of Chile’s central bank. The economic fortunes of their regions depend, in many ways, on a better multilateral system, and they suggest ways in which the IMF can deliver that for its members.



On that point, proposals abound. <a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Geopolitics-Corroding-Globalization-Adam-S-Posen?utm_medium=email&amp;utm_source=govdelivery">Adam Posen</a> reckons that narrowing the IMF’s mandate to its core macroeconomic mission and giving it greater operational independence would make it more evenhanded. <a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Point-of-View-Reform-or-Risk-Irrelevance-Raghuram-Rajan?utm_medium=email&amp;utm_source=govdelivery">Raghuram Rajan</a> makes a related point: delegating more authority to the IMF’s management—coupled with reform to more fairly allocate quotas, the financial contributions paid by each member—could help bring a fragmented world together on critical issues.



Among these is&nbsp;<a href="https://www.imf.org/en/Topics/climate-change?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">climate change</a>. That brings us to&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/The-IMFs-Climate-Change-Debate-Masood-Ahmed?utm_medium=email&amp;utm_source=govdelivery">Masood Ahmed’s</a>&nbsp;piece, which considers the ongoing debate over the IMF’s proper role in addressing the climate threat.



The Fund, of course, has long adapted to change. The IMF’s&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/New-Surveillance-Tests-Ceyla-Pazarbasioglu?utm_medium=email&amp;utm_source=govdelivery">Ceyla Pazarbasioglu</a>&nbsp;shows how much the organization has evolved in its regular reviews of member economies and its regional and global analyses. In a similar vein,&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Picture-This-The-Evolving-IMF?utm_medium=email&amp;utm_source=govdelivery">Atish Rex Ghosh and Andrew Stanley chart</a>&nbsp;how IMF lending, in particular, has evolved rapidly over the past 30 years. And historian&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/Moving-To-Complexity-Harold-James?utm_medium=email&amp;utm_source=govdelivery">Harold James</a>&nbsp;draws lessons from the past for global financial risk management.



As we move forward, one thing remains clear. “We cannot have a better world without international cooperation,” notes Georgieva. Taking inspiration from John Maynard Keynes, one of the IMF’s founding fathers, she concludes: “Keynes would encourage us to go even further as a global ‘transmission line’ for sound economic policies, financial resources, knowledge—and as the ultimate platform for global economic cooperation.”



We also mark the&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2024/06/FandD-at-60-the-life-and-times-of-Finance-Development-Anna-Postelnyak?utm_medium=email&amp;utm_source=govdelivery">60th anniversary</a>&nbsp;of this quarterly magazine,&nbsp;<a href="https://www.imf.org/en/Publications/fandd?utm_medium=email&amp;utm_source=govdelivery">Finance &amp; Development</a>.&nbsp;Just as the Bretton Woods institutions and the global economy have adapted, so too has F&amp;D. Today we are a platform on which thought leaders in many fields and from many countries explain and debate issues central to the global economy.



I want to express my gratitude to all our readers and contributors as we look forward to another 60 years of fresh thinking and inspiring debate.

hero-editors-letter-lighter-c-Daniel-Lievano

As IMF Turns 80, Mounting Global Challenges Mean World Must Work Together

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="602" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-820x602.jpeg" alt="" class="wp-image-493622" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-820x602.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-300x220.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-123x90.jpeg 123w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-768x564.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330-1536x1127.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/06/d2395096-83de-5eaa-f46e-9146c37f3330.jpeg 1677w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



At this critical junction for our democracy, it is vital that our politicians put the country first. It is time for the women and men of integrity who wish to guide this country on the path to growth and prosperity stand up and provide leadership. We need a stable government that will continue the vital work that has already been done to put our economy on the right track to create jobs and tax revenue. We cannot afford any disruption to this momentum.



The results will be a shock to many politicians, but when it comes to what we as citizens need, nothing changes. We need jobs, we need the economy to grow, and we need to generate revenue that can be taxed.



To have that, we need a stable and reliable government, committed to the rule of law and economic reform. As the parties that are sending members to parliament seek a workable plan, they must be clear about what “workable” means. It must be capable of enduring – we do not need a spectacle of votes of no confidence and repeat elections that we see in some countries where coalitions are the norm. The deals struck now must be capable of going the distance for a full five-year term.



Critically, though, the deals struck now must underpin policy continuity – they must enable the government to stick to the fiscal prudence that we have managed to return to governance over the last few years, and they must maintain the reform momentum needed to get the economy growing. Key interventions like Operation Vulindlela must be embraced and strengthened. The next government must continue the hard work of rebuilding institutions, particularly the criminal justice system. As a country, we must continue to restore our international standing, escape the FATF grey list and improve the national balance sheet so we can one day regain an investment grade credit rating. These objectives must be clear for the next government if it is going to deliver for South Africans.



I am confident that many parties share these objectives, but I know also that some do not. We must be wary of populism. The majority of South Africans voted for parties that are committed to clean governance, retaining the integrity of the constitution and the rule of law, and continuing to protect and safeguard the independence of our democratic institutions, including the judiciary and the Reserve Bank. The business community and global investors are aligned with this majority.



I know that many in our country suffer in conditions they should never have to endure. For over five years citizens have been getting poorer on average as the economy has grown slower than the population. Unemployment has continued to grow. This is a distressing position to be in 30 years after democracy, especially when at the halfway point we had been growing at 5%, unemployment was under 20% and it felt like we were making progress. There are lots of reasons we lost that momentum, among them that our institutions and governance were systematically undermined. We have for the last few years begun to rebuild our institutions and enact reforms that will help facilitate increased investment and private participation. This takes time to result in improved economic performance – business confidence must be rebuilt and investors have to actually make the investment and build the capacity to take advantage of an improved environment. I know that we are at the beginning of that recovery, with electricity stability returning and a proactive plan to improve logistics and other network industries. Populism would risk once again destroying this momentum before it has been able to grow and deliver.



We need instead a recommitment to reforms and evidence-based policy making that does the hard work of getting institutions to work effectively. We need to continue the professionalisation and reskilling of the public sector, enabling improved frontline delivery from the most rural districts to the biggest metros. We need effective policy making from the top, with economic planning closely developed alongside fiscal policy to maximise economic outcomes. We need investment in infrastructure to improve the capacity of our economy.



The negotiations from now on must put these objectives front and centre. That is what putting South Africa first means. This is what South Africans deserve. We do not want the spectacle of parties putting their narrow ambitions first, even less so individual personalities doing so. We certainly do not need a government that will reverse the progress made. I hope that we can quickly find a resolution and get to work in building the country that we all deserve.

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It is time for our politicians to put South Africa first

Geneva, Switzerland, 29 May 2024&nbsp;– The latest&nbsp;<a href="https://www.weforum.org/publications/chief-economists-outlook-may-2024/">Chief Economists Outlook</a>&nbsp;released today presents a growing sense of cautious optimism about the global economy in 2024. More than eight in ten chief economists expect the global economy to either strengthen or remain stable this year – nearly double the proportion in the previous report. The share of those predicting a downturn in global conditions declined from 56% in January to 17%.



But geopolitical and domestic political tensions cloud the horizon. Some 97% of respondents anticipate that geopolitics will contribute to global economic volatility this year. A further 83% said domestic politics will be a source of volatility in 2024, a year when nearly half the world&#8217;s population is voting.



“The latest&nbsp;Chief Economists Outlook&nbsp;points to welcome but tentative signs of improvement in the global economic climate,” said Saadia Zahidi, Managing Director, World Economic Forum. “This underscores the increasingly complex landscape that leaders are navigating. There is an urgent need for policy-making that not only looks to revive the engines of the global economy but also seeks to put in place the foundations of more inclusive, sustainable and resilient growth.”



<h2 class="wp-block-heading" id="h-regional-variations">Regional variations</h2>



Growth expectations have improved, though unevenly, across the globe. The survey reveals a significant boost in the outlook for the United States, where nearly all chief economists (97%) now expect moderate to strong growth this year, up from 59% in January.



Asian economies also appear robust, with all respondents projecting at least moderate growth in the South Asia and East Asia and Pacific regions. Expectations for China are slightly less optimistic, with three-quarters expecting moderate growth and only 4% predicting strong growth this year.



By contrast, the outlook for Europe remains gloomy, with nearly 70% of economists predicting weak growth for the remainder of 2024. Other regions are expected to experience broadly moderate growth, with a slight improvement since the previous survey.



<figure class="wp-block-image"><img decoding="async" src="https://assets.weforum.org/editor/IO4DnivC687EtO1AJbeZmdy9rfqIjBXRQ96_ubSGNzk.jpg" alt=""/></figure>



<h2 class="wp-block-heading" id="h-a-challenging-landscape-for-decision-makers">A challenging landscape for decision-makers</h2>



The latest survey highlights the escalating challenges confronting businesses and policy-makers. Tensions between political and economic dynamics will be a growing challenge for decision-makers this year, according to 86% of respondents, while 79% expect heightened complexity to weigh on decision-making.



Among the factors expected to affect corporate decision-making are the overall health of the global economy (cited by 100%), monetary policy (86%), financial markets (86%), labour market conditions (79%), geopolitics (86%) and domestic politics (71%). Notably, 73% of economists believe that companies&#8217; growth objectives will drive decision-making, almost double the proportion that cited the role of companies’ environmental and social goals (37%).



<h2 class="wp-block-heading" id="h-long-term-prospects-and-priorities">Long-term prospects and priorities</h2>



Most chief economists are upbeat about the prospects for a sustained rebound in global growth, with nearly 70% expecting a return to 4% growth in the next five years (42% within three years). In high-income countries, they expect growth to be driven by technological transformation, artificial intelligence, and the green and energy transition. However, opinions are divided on the impact of these factors in low-income economies. There is greater consensus on the factors that will be a drag on growth, with geopolitics, domestic politics, debt levels, climate change and social polarization expected to dampen growth in both high- and low-income economies.



<figure class="wp-block-image"><img decoding="async" src="https://assets.weforum.org/editor/uWdP2yTU2GLztw6zgvz4DTLDRg5OYGH6P2vq8doEPvY.jpg" alt=""/></figure>



In terms of the policy levers most likely to foster growth in the next five years, the most important across the board are innovation, infrastructure development, monetary policy, and education and skills. Low-income economies are seen as having more to gain from interventions relating to institutions, social services and access to finance compared to high-income economies. There is a notable lack of consensus on the impact for growth of environmental and industrial policies.



<h2 class="wp-block-heading" id="h-about-the-chief-economists-outlook-report">About the Chief Economists Outlook Report</h2>



The&nbsp;<a href="https://www.weforum.org/publications/chief-economists-outlook-may-2024/">Chief Economist Outlook</a>&nbsp;builds on the latest policy development research as well as consultations and surveys with leading chief economists from both the public and private sectors, organized by the World Economic Forum’s Centre for the New Economy and Society. It aims to summarize the emerging contours of the current economic environment and identify priorities for further action by policy-makers and business leaders in response to the compounding shocks to the global economy. The survey featured in this briefing was conducted in April 2024.



The&nbsp;Chief Economists Outlook&nbsp;supports the World Economic Forum’s&nbsp;Future of Growth Initiative, a two-year campaign aimed at inspiring discussion and action on charting new pathways for economic growth and supporting policy-makers in balancing growth, innovation, inclusion, sustainability and resilience goals. Learn more about the&nbsp;Future of Growth Initiative&nbsp;<a href="https://initiatives.weforum.org/future-of-growth-initiative/home" target="_blank" rel="noreferrer noopener">here</a>.

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Chief Economists: The Economic Outlook Is Brightening But Political Risks Loom Large in 2024

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-820x547.jpg" alt="" class="wp-image-415808" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/03/MicrosoftTeams-image-8-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Black woman in an African market receiving payment via contactless transfer from a customer using their mobile phones.
Photo: via Shutterstock</figcaption></figure>



Imagine Salimata working in Nairobi and sending money home to her mother every month, instantly and directly from her mobile money account in Kenya into her mother’s mobile money account in Burkina Faso. Instead of withdrawing cash to give to a remittance company and requiring her mother to travel to an agent to collect it, they both save time and money with lower fees and a better exchange rate.



Many governments across the continent have taken a giant leap forward in making this scenario real. More than half of all countries in Africa already have an instant payment system that allows every person, business, or government entity to transfer money to each other, no matter which bank or financial service provider they use. We believe it is possible to establish such inclusive instant payment systems in every African country by 2030.



But we mustn’t stop there. Governments should seize this momentum to connect these systems to each other to enable continent-wide instant payments by the end of the decade &#8212; building a future-ready interoperable African payment systems that can be an exemplar for cross-border payments globally.



This is an ambitious but achievable objective – and vital to enable the <a href="https://www.worldbank.org/en/topic/trade/publication/free-trade-deal-boosts-africa-economic-development">African Continental Free Trade Area</a> to grow intra-Africa trade from 18% to about 50% by 2030. There are already instant payment systems in place across 34 African countries. Systems&nbsp;that support&nbsp;instant payments across borders are available today (such as GIMACPAY in the CEMAC region, PAPSS, TCIB in the SADC region, BUNA for the Arab countries) or are being built (in the WAEMU, COMESA,&nbsp;ECOWAS, and EAC regions).



By enabling instant payments from local currency to local currency, these regional instant payment systems have the potential to become early exemplars of the G20 Roadmap for Enhancing Cross-border Payments, demonstrating the high potential to boost growth and trade by making these payments faster, cheaper, and more transparent.



As they become increasingly interconnected, these systems will catalyze the emergence of pan-African companies, driving innovation and competition for the benefit of all consumers. Inclusivity must be at the heart of these efforts, particularly addressing the challenges that women face in accessing financial services. Five African countries still forbid women to open a bank account without a male co-signer. We need more women at the table helping design these systems and the products they make possible, and we need to track data by gender to measure progress. Inclusivity also requires that non-bank financial service providers be connected to these systems. Mobile-money providers are the drivers of financial inclusion across Africa.



As African leaders meet at the African Development Bank’s annual meeting in Kenya later this month, they have an opportunity to harness the momentum to enable all countries in Africa to deliver inclusive growth, jobs, and streamlined access to services and opportunities.&nbsp;Instant payment systems are an integral component of building a safe, inclusive digital public infrastructure (DPI), along with other components like digital ID and data exchange, and they provide the most immediate opportunity to begin implementing interconnected DPI across Africa. This is also a moment to guide the existing and future regional systems towards a continental blueprint so that every single African country is connected to at least one and possibly several of these systems.



Realizing this opportunity starts with mobilizing the political will, technical assistance, and funding to implement inclusive instant payment systems in every country in Africa. Interconnecting these systems and achieving the full benefits requires harmonizing regulations, including &#8220;passporting&#8221; risk-proportional payment licenses to allow easier expansion of fintech companies across countries.



We urge decision-makers to work toward establishing a unified payment services directive at the African Union. Similar to Europe&#8217;s initiative, such a directive could not only address the challenges inherent to dealing with a complex regulatory landscape, but also boost competition, consumer protection, and women’s economic power across the continent.



As more and more countries move to build an instant payment system, they can turn to a powerful network to support their immediate needs for information and funding. Technical assistance is freely available from entities including the World Bank and <a href="https://www.africanenda.org/">AfricaNenda</a> who can share lessons and best practices. Countries can freely adapt open-source software, like <a href="https://mojaloop.io/">Mojaloop</a> or <a href="https://tazama.org/index.html">Tazama</a>, to build their payment systems rather than start from scratch, lowering costs. Funding is available from initiatives like Co-Develop and other donors, and more resources are being mobilized. We estimate it would cost a few $100 million to set up inclusive, instant payment systems across all of Africa, offering an amazing social impact with a relatively small investment compared to other infrastructure. We recognize this will not be an easy task, but we are optimistic that continent-wide, interconnected &nbsp;inclusive instant payment systems are within reach. And in doing so, the African continent can be a role model for the rest of the world. Salimata will continue to support her mother, only instantly and affordably. Hundreds of millions like her will prosper and build resiliency as well.



Sabine Mensah is deputy CEO of AfricaNenda Michael Wiegand is Director of Inclusive Financial Systems at the Bill &amp; Melinda Gates Foundation

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How instant payment systems across Africa can be the role model for the world

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-820x547.jpg" alt="" class="wp-image-490015" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-135x90.jpg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/levi-meir-clancy-bxyV1SfGMFU-unsplash.jpg 1920w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo Credit: Levi Meir Clancy</figcaption></figure>



All for health, health for all. That’s the theme of this year’s World Health Assembly (WHA)’s annual meeting. It encapsulates the central problem facing all health systems – and, by extension, the ministers who direct them – that every individual should have equal access to the health services they require without financial hardship. The truth is that very few people do.



The COVID-19 pandemic has been a transformative force for healthcare systems, both positively and negatively. On the positive side, it accelerated the development of vaccines, fostered the creation of alternative care models, and spurred the digitalization of health services. However, it also unleashed a host of challenges. It disrupted universal health coverage, disproportionately affecting low- and middle-income countries (LMICs), triggered a mass departure of healthcare workers, and wreaked havoc on families and societies with its toll on lives and resources.



Health ministers are agents of change; the more effective they are, the greater the change. Typically, however, health ministers face a raft of challenges, blunting their effectiveness. Health portfolios are often under-resourced in terms of funding and personnel. Compared to their ministerial counterparts, the health minister typically has less influence and power, resulting in health needs slipping down the list of priorities in the face of mounting geopolitical and economic challenges. And yet, health ministers should be at the forefront of setting and championing health policies on the pressing challenges of our day.



As the World Health Organisation’s decision-making body, the WHA is at the vanguard of tackling global health-related challenges. It has enjoyed marked success since its inception, notably in eradicating smallpox and polio and facilitating the collaboration required to develop and distribute vaccines for malaria and COVID-19. The WHA is currently turning its attention to continued work in the field of immunisation and pandemic preparedness, as well as improving maternal health, addressing Antimicrobial Resistance (AMR), climate and health issues, and finally, workforce health, the progress on which then affects health-related elements of the SDGs.



The organization operates at the direction of its member states. Still, it is important to note that its mandate has grown disproportionately large in relation to its funding, potentially affecting its longer-term ability to deliver. This is vital to understand because it means that some of the support to effect change needs to come from elsewhere, most obviously through the health ministers of WHA member states and through the type of collaboration and knowledge sharing that the World Economic Forum and its stakeholders can offer.



Governments often view the likes of health, education, housing, transport, or the green transition as conflicting priorities when, in fact, they should be viewed holistically as drivers of health and invested in as such. On a broad level, we need to think about why healthcare is not better prioritised in different situations globally and how the situation can be changed. This may, in turn, provide the answers and solutions to the dilemma of the health minister, who faces the same problems at a ministerial level. The crux of the issue is that health ministers make decisions affecting all societal sectors and, ultimately, a country’s prosperity. Therefore, health ministries must be adequately resourced, and their ministers must be given the agency and knowledge to effect change.



No ‘one size fits all’ approach will eradicate the world’s health and healthcare provision problems, but all would benefit from stronger collaboration, dialogue, and shared best practices. Through its multistakeholder approach, which naturally provides a range of perspectives on an issue, the World Economic Forum’s Centre for Health &amp; Healthcare helps to strengthen the knowledge and understanding of those health ministers and ministries with which it works. In doing so, it seeks to propel the global health agenda and accelerate the progress of health-related SDGs.



Mirroring the WHA’s current priorities, the Forum has several primary action areas for its workstreams during 2024 and 2025 – AMR, climate &amp; health, digital health, health equity and women’s health. These are vital areas in need of further attention and action, without which health services globally will face increased challenges and costs.



AMR offers a good example because as antibiotics and antimicrobial drugs prove increasingly ineffective against infection, mortality rates will increase, hospital stays lengthen and healthcare costs rise, potentially reaching trillions of dollars by 2050. To address this, health ministers must be given the agency to champion multifaceted policies, but they need support to achieve this.



The Forum is dedicated to strengthening continued collaborations between government – and with them, their health ministers – and business to improve access to healthcare worldwide. A prime example of how it supports knowledge sharing between the public and private sectors is the Forum’s support for the Global Alliance for Women’s Health, which, at the WHA meeting, will launch the Cervical and Breast Cancer Coalition in collaboration with Kenya’s Ministry of Health.



Highlighting how health ministers can be empowered with greater knowledge and expertise, the coalition will provide ministers and their teams with access to expert partners and resources to help identify gaps and challenges and then step in to support health strategy. Incidents of regional best practice can then be shared and scaled up, where appropriate.



Everyone deserves quality, affordable, accessible healthcare products and services, and healthcare services deserve the resources and agency to offer this. By better supporting health ministries and strengthening the role and position of health ministers, we can create a virtuous circle in which health is prioritised, accelerating progress in tackling local and global health challenges.

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Why health ministers must be at the forefront of global healthcare processes

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-820x547.jpg" alt="" class="wp-image-400651" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ-768x513.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/04/Absa_HQ.jpg 830w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">ABSA has rebranded itself and its logo is on display at its headquarters in Johannesburg and surrounds on Tuesday, August 7 2018. Pic: Waldo Swiegers / Bloomberg</figcaption></figure>



Authors: Sejeng Matlhako, Head: Regional Transactional Banking Sales (Business Banking) Absa CIB and Stanley Hlamalani Godi, Regional Segment Head: Relationship Banking Coverage Growth, Absa Group



Growth-focused businesses in South Africa are increasingly looking to cross-border trade for opportunities to develop their bottom-line and deepen their revenue channels. A combination of the right banking partner and technology is making this a viable option for organisations looking for new markets.



It is no secret that economic growth in South Africa has been constrained through a number of factors which has left the International Monetary Fund (IMF) forecasting a growth rate of just 1% in 2024.



With a growth rate of 1%, the economic pie is not getting any bigger and entrepreneurs are forced to compete with each other and navigate increasingly narrow operating margins.



The problem with being inwardly focused and purely looking at the South African market is that we forget that we form a part of the global economy. Tourism for example has recorded a significant rebound in 2023 – while it hasn’t quite reached pre-COVID-19 levels, 8.5 million tourists came into South Africa. While the sector has been negatively impacted by the pandemic enforced lockdowns, it does contribute nearly 9% to Gross Domestic Product (GDP). In Rand terms, data from Statistics South Africa indicated that domestic visitors spent R435bn in 2022 and pre-pandemic, international tourists were bringing in over R121bn per year. These are sizable markets in the South African context and represent very real business opportunities.



Agriculture has been another positive proof point for international trade with South African products being exported across the globe and soybeans and avocadoes are in great demand from the European Union (EU) through to China. Research out of the Agriculture Business Chamber released in February 2024 indicated that South Africa hit a new record in exports in 2023 with $13.2bn – this was achieved despite major issues at the ports and other logistics constraints. Importantly, the sector was not simply driven by exports but also included $7bn in imports.



Import and Export trade is not limited purely to the traditional markets like the EU, China, India, and the US. Earlier this year, President Ramaphosa announced South Africa’s first shipment and preferential trading under the African Continental Free Trade Area (AfCFTA). According to the World Bank, if fully implemented, the AfCFTA could raise incomes by 9% by 2035 and lift 50 million people out of extreme poverty.



As South African – and broader African businesses – are waking up to the opportunities beyond their home markets, the issue of access to finance becomes a key challenge. If we look across our portfolio and where we are seeing a lot of activity, it is typically in capital-intensive sectors including logistics, automotive, mining and manufacturing.



A major pain point that many of the growth businesses in our commercial and business banking portfolios face is that they often struggle with cashflow issues and then are forced to pursue funders who offer quick turnaround times but at very expensive rates. This is an interesting dynamic that is playing out in the market at the moment where fintech’s in the lending space are offering funding solutions which are perhaps nimbler than those offered from traditional banks, but which often come at a higher cost to the entrepreneurs.



One of the frustrations that the banking sector often encounters is that its clients are taking on the incorrect type of funding solutions for their long-term sustainability. The right solutions may take longer to unlock but should be more suitable for the client in the long run. This could include cheaper debt, lower administration fees and more flexible payment terms.



While there is a natural tension between the banks and the fintech operators, one of the areas where we are seeing some encouraging gains is around the Digitisation of client documents and other records required for finance. Whether you are applying for funding or you are importing and exporting goods, you shouldn’t be filling in the same forms over and over again with high levels of administrative friction inhibiting your ability to do business.



We are encouraged by the partnerships we are seeing with our stakeholders to introduce digital solutions to reduce friction and allow for swifter transacting across the business banking ecosystem – from SME through to larger corporate transactions.



Lastly, we believe that if we are serious about the subject of growth in South Africa, then we cannot ignore the Environmental, Social and Governance (ESG) discussion. While many of the larger businesses – including multinationals and those listed on the JSE &#8211; in South Africa are beginning to understand the role that ESG plays in terms of unlocking funding and opportunities, many of our business banking clients and stakeholders do not understand how they can utilise this as a growth channel for themselves.



Banks have a key role to play in educating the market around ESG solutions and how they can participate.



South African and African businesses form a key part of the global economy and while there are some constraints around growth, we have the ability to participate in the broader global economy. If we can identify solutions that include import and export of products, we are no longer constrained by the domestic economy. It is a global playground for entrepreneurs, and we look forward to working with them to unlock these growth opportunities to see them flourish.

Absa Reboots Image As 100 Years Of Barclays In Africa Ends

Unlocking growth: Cross-border trade gives African entrepreneurs access to new markets

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="216" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-820x216.jpg" alt="" class="wp-image-486162" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-820x216.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-300x79.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-160x42.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-768x202.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-1536x405.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/2099x600-ssa-cf-critical-minerals-hero-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /></figure>



The region has an opportunity to develop critical minerals markets and processing industries to maximize the coming boom



From electric vehicles to solar panels to future innovations, the global transition to clean energy is set to further heighten demand for critical minerals. Between 2022 and 2050, demand for nickel will double, cobalt triple and lithium rise tenfold, according to the International Energy Agency. With sub-Saharan Africa estimated to hold about 30 percent of the volume of proven critical mineral reserves, this transition—if managed properly—has the potential to&nbsp;<a href="https://www.imf.org/-/media/Files/Publications/REO/AFR/2024/April/English/MineralsNote.ashx">transform the region</a>, the latest&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2024/04/19/regional-economic-outlook-for-sub-saharan-africa-april-2024">Regional Economic Outlook</a>&nbsp;reports.



<figure class="wp-block-image"><img decoding="async" src="https://www.imf.org/-/media/Images/IMF/News/Country-Focus/2024/Charts/afr-cf-critical-minerals-chart1-v1.ashx?w-1200px" alt=""/></figure>



Sub-Saharan Africa is already at the center of global critical mineral production. The Democratic Republic of Congo accounts for over 70 percent of global cobalt output and approximately half the world’s proven reserves. South Africa, Gabon and Ghana collectively account for over 60 percent of global manganese production. Zimbabwe, alongside the Democratic Republic of Congo and Mali, hold substantial but yet-to-be-explored lithium deposits. Other countries with significant critical mineral reserves include Guinea, Mozambique, South Africa, and Zambia.



With growing demand, proceeds from critical minerals are poised to rise significantly over the next two decades. Global revenues from the extraction of just four key minerals—copper, nickel, cobalt, and lithium—are estimated to total $16 trillion over the next 25 years, in 2023-dollar terms. Sub-Saharan Africa stands to reap over 10 percent of these cumulated revenues, which could correspond to an increase in the region’s GDP by 12 percent or more by 2050. Given the volatile nature of commodity prices and the unpredictability over the future direction of technological innovation, these estimates have a high degree of uncertainty—but the general direction is certainly encouraging.



Beyond extraction



The region can generate even greater windfalls by not only exporting raw materials but processing them as well. Raw bauxite, for instance, fetches a modest $65 per ton, but when processed into aluminum it commands a hefty $2,335 per ton, in end-2023 prices. Yet the thousand trucks a day that carry unprocessed lithium from Zimbabwe to ports for shipping to China show that local processing options for critical minerals are too often limited.



<figure class="wp-block-image"><img decoding="async" src="https://www.imf.org/-/media/Images/IMF/News/Country-Focus/2024/Charts/afr-cf-critical-minerals-chart2-v2a.ashx?w-1200px" alt=""/></figure>



Developing local processing industries could significantly boost value added, create higher-skilled jobs, and increase tax revenues—thereby also supporting poverty reduction and sustainable development. By diversifying their economies and moving up the value chain, countries will become less exposed to volatile commodity prices, and more able to protect themselves against exchange rate volatility and foreign currency reserve pressures.



Foreign direct investment can help provide the capital and expertise to develop mineral processing industries, but the absence of a substantial regional market makes local processing investments less enticing. Policymakers need to remedy this.



Regionally coordinated policies



A regional strategy built on cross-border collaboration and integration can create a larger, more attractive regional market for much-needed investment. A regional strategy is also essential to fully leverage the diversity of critical minerals—clean energy technology requires combining multiple minerals scattered across the region.



Sub-Saharan Africa’s anticipated population boom, coupled with rapid urbanization and industrialization, will likely increase demand for renewable energy and expand the market for processed minerals. The African Continental Free Trade Area can play a key role in reducing trade barriers and developing infrastructure, potentially uniting fragmented critical mineral markets for larger-scale operations and forming regional value chains that draw on both raw and processed mineral inputs. Coordination can also start on a smaller scale, paving the way for larger regional hubs. For example, the Democratic Republic of the Congo and Zambia are collaborating on battery production for two- and three-wheeled electric vehicles popular in African markets.



Countries also need to collaborate on policies to create more favorable investment and business environments. Simplifying bureaucratic procedures and harmonizing mining regulations across borders would foster a stable, predictable investment environment. Efforts to minimize the environmental impacts of mining and processing will help unlock new funding and investment opportunities in green finance. Strengthening the Africa Mining Vision, launched in 2009 by the African Union, could serve as a key framework for these regional efforts.



Domestic reforms



Complementing regional approaches, countries can undertake structural reforms to support domestic companies in mining and related processing sectors. They should approach the application of local content requirements, which mandate the use of local materials and labor, with caution. More broadly, many countries need to reevaluate their inward-looking policies, which can often result in inefficiencies, market distortions, and increased costs. Export bans on raw materials, in particular, can backfire and cause production to fall.



Countries can develop a supportive business environment by strengthening domestic financial markets and improving access to finance. New fintech innovations offer exciting potential to help firms that serve the mining sector but face difficulties in securing traditional financing. Managing new resource windfalls responsibly also requires accountable and transparent institutions, allied with appropriate tax regimes and sound public financial management.

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