Open banking represents a promising opportunity for incumbent banks and <a href="https://www.cnbcafrica.com/2021/how-kenya-aims-to-become-global-hub-for-fintech-innovation/">up and coming fintechs</a> to develop and deliver innovative digital financial services to consumers everywhere. Nowhere is this potential more promising than in the emerging markets of Africa, where the World Bank estimates that up to 65% of adults in sub-Saharan Africa are unbanked.



To unleash the potential of open banking, banks and fintechs, with government support, need to come together to provide economic stimulus and financial inclusion opportunities to the 370 million unbanked and unserved citizens across the continent. Research has proven that financial inclusion can improve GDP by up to 30% in frontier markets like Kenya &#8211; dramatically higher than the 2% &#8211; 3% increase that most economists consider to be healthy.



<h2 class="wp-block-heading" id="h-what-is-open-banking">What is open banking?</h2>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-820x547.jpeg" alt="" class="wp-image-410634" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-120x80.jpeg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/GettyImages-1273885048-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



Open banking is a privacy-protected, data-sharing ecosystem, supported by regulators and aimed at creating competition and promoting innovation in financial services. Within an open banking ecosystem, incumbent banks and other financial institutions like digital banks and telco mobile money providers exchange consumer data with other financial services providers or third-party providers like fintechs. The data sharing takes place within a tightly regulated privacy framework centered on consumer consent.



With open banking a variety of third-party financial service providers can access the consumer financial data that is held by a bank or telco through the simple use of application programming interfaces (APIs). It increases a service provider’s go-to-market speed by eliminating the need to use back-end applications to change existing data architecture. Through the use of APIs, third parties aggregate several data sources to create more holistic customer credit profiles and more relevant financial services offerings.



Data sharing is a prerequisite for open banking products, yet most unbanked individuals have no digital financial profiles or data trails. For this reason, it is important to consider how other types of digital data from mobile phones such as social media activity, airtime purchases and utility payments could be leveraged by open banking ecosystems. Mobile money wallets are a key driving force in Africa with over 320 million users representing a single point of integration.



Sub-Saharan Africa is the most developed market for <a href="https://www.cnbcafrica.com/2021/how-mobile-money-platforms-can-help-reduce-inefficiencies-in-africas-healthcare-sector/">mobile money</a>, accounting for two-thirds of global mobile money transactions in 2020. There is a huge opportunity to leverage this growing popularity to encourage financial inclusion, with open banking as the driver.



By responsibly sharing customers’ digital financial data, fintechs and other types of financial institutions can do a better job than traditional banks of offering products and promoting financial behaviors that alleviate some of the pain points experienced by unbanked and underserved customers.



Here are a few examples of how open banking can enhance financial inclusion.



<ol class="wp-block-list" type="1"><li>Reducing barriers to access.&nbsp;Cumbersome customer sign-up/KYC procedures can result in prohibitive cost barriers for unbanked customers. By expanding open banking to include telecommunications, social media, money wallets and other types of data, a simple SIM card registration could come into play.</li></ol>



<ul class="wp-block-list"><li>Providing access to responsible credit.&nbsp;Properly designed, open banking products, through the use of alternative financial data, can expand access to credit that helps consumers accurately assess what they can afford. Such data can include mobile bill payments, rent payments, utility bill payments, etc.</li></ul>



<ul class="wp-block-list"><li>Encouraging informed financial behaviors.&nbsp;Personal finance and budgeting awareness can empower consumer&nbsp;insights generated from consumer transaction data. Consumers can put these insights into practice and develop informed financial behavior.</li></ul>



<ul class="wp-block-list"><li>Enabling participation in the global economy. By providing consumers with access to digital payment products and services such Pay-to-Person (P2P) or Pay-to-Merchant (P2M), open loop schemes such as virtual debit or credit cards from Visa or Mastercard allow the unbanked to participate in the global economy, thus spurring economic growth and driving financial inclusion.</li></ul>



<h2 class="wp-block-heading">In Africa, telcos are a key piece of the financial inclusion puzzle.</h2>



Mobile phone penetration is roughly 50% in Africa, lower than world averages, but it is growing at the fastest global pace, at over 6% annually. Smartphone penetration remains low and concentrated in certain countries such as Nigeria, Egypt and South Africa.



However, owners of feature phones can still take advantage of some of the many open banking-enabled products such as automatic savings sweeping, smart loan repayment and decentralized KYC. These types of services use data only on the backend and do not require the consumer to own a smartphone. Others, such as switching utilities or personal finance management, could work on SMS or USSD menus but with limited functionality.



Over the next 5 years, as mobile phone penetration continues to grow and open banking adoption spreads across the continent, the opportunities for new services and product offerings for the unbanked in Africa are immense. Open banking will enable the unbanked and underserved to make more informed decisions and better manage their limited resources when incomes are severely constrained. Credit products can cover immediate liquidity needs&nbsp;responsibly. Savings products can help customers prepare for hard times. Finally, enabling consumers to transact with anyone in the world opens untapped possibilities.



With open banking technology we are taking a step in the right direction toward financial inclusion. By simplifying and democratizing financial services through personalized offerings that serve a wider spectrum of individuals, a more inclusive financial culture can emerge. This is the promise of open banking in Africa and beyond.



For a deeper-dive into how open-banking can help drive financial inclusion, I found this excellent report from CGAP to be very helpful. <a href="https://www.cgap.org/research/publication/open-banking-how-design-financial-inclusion" target="_blank" rel="noreferrer noopener">https://bit.ly/3f6ZKwD</a>



<figure class="wp-block-image size-medium is-resized is-style-rounded wp-duotone-000000-ffffff-1"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-210x300.jpg" alt="native" class="wp-image-410635" width="163" height="233" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-210x300.jpg 210w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-560x800.jpg 560w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-56x80.jpg 56w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-768x1097.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-1075x1536.jpg 1075w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/Amir-pic-copy-scaled.jpg 1433w" sizes="auto, (max-width: 163px) 100vw, 163px" /><figcaption>Amir Yazdanpanah&nbsp;is the Managing Director, MEA of&nbsp;Flybits,&nbsp;a global fintech that helps banks contextualize data to deliver highly personalized customer experiences through its AI-driven personal engagement platform.&nbsp;</figcaption></figure>

Unsecure mobile phone with open lock.

The Promise of Open Banking in Driving Financial Inclusion in Africa

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b-820x547.jpg" alt="" class="wp-image-410222" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/28334431792_0f328c02ec_b.jpg 1024w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Woman Using a Hoe to Till the Soil on Small Tanzania Farm Photo: via Flickr</figcaption></figure>



Food is the most basic of needs. It decides not just the health of individuals but also the health of communities which affects the health of our economies. Underpinning the food we eat, is agriculture which accounts for at least 23% of sub-Saharan Africa’s GDP with about 40% of the workforce engaged in the sector.



At the heart of Africa’s agriculture are the smallholder farmers. These are millions of hardworking men and women typically farming on less than a hectare of land. They grow staple crops such as maize, wheat, rice, cassava and sorghum.



However, notwithstanding their significant contribution to economies across the continent, farmers in Africa continue to face significant challenges on many fronts. From climate change to shocks including droughts, floods, pests and diseases, these farmers are disproportionately affected and further, have a low capacity to adapt and mitigate. This is exacerbated by the fact that they work in a sector that gets a disproportionately low level of financing, with only 4 out of 49 African countries reaching the Comprehensive African Agriculture Development Programme (CAADP) recommended target of 10% public expenditure on agriculture.



Consequently, Africa’s full agricultural potential remains untapped. As a dynamic, forward looking Africa marches alongside the rest of the world in the Decade of Action to deliver the Sustainable Development Goals (SDGs), agriculture remains a key lever to propel African economies into a prosperous future. Growth generated by agriculture in sub-Saharan Africa is estimated to be 11 times more effective in reducing poverty than GDP growth in other sectors. The world over, major economies have used agriculture to push their economies forward. And history has shown us that no society makes the transition to a modern economy without first modernizing its agriculture.



The pathway to the bright socio-economic future that we all desire for Africa is through an inclusive agriculture transformation agenda. As such, my conviction is that driving Africa’s economic transformation through the lens of agriculture, should be a top priority that must take precedence over all other policy considerations at the continental level.



When I took over the leadership of Ghana, my country needed solutions for hunger, malnutrition, poverty and a host of other problems. Understanding the potential of agriculture to address these challenges, my administration worked to deliver a more efficient and productive agricultural base that would become the engine of the economy by providing food security, ushering in industrialization, creating jobs, and increasing export revenues.



The results speak for themselves, between 2002 and 2005, cocoa production in Ghana, the world’s second largest producer, doubled from 350,000 tons a year to 734,000 tons a year, a record in more than a century of cocoa farming in the country.



From thereon, my government successfully used many of the same techniques to improve production for food crops such as maize, yams, and plantains, as well as livestock and fish. As



a core strategy, my administration also strengthened and tasked Ghana’s Grains and Legumes Development Board with the mandate to supply quality seeds and planting materials to farmers in order to improve the quantity and quality of Ghana’s agriculture produce. Altogether, my administration worked tirelessly to support irrigation, improve seeds and crop diversification, infrastructure, storage for harvest and created an enabling environment for farmers to access mechanization like tractors.



In 2007, during my second term in office, the late Mr. Kofi Annan, launched the Alliance for a Green Revolution in Africa (AGRA), an African institution that sought to support governments to catalyse transformation of smallholder agriculture by advancing uniquely African solutions to sustainably raise farmers’ productivity and connect them to a growing marketplace. AGRA has evolved into a powerful force and tool for the transformation of our continent.



AGRA’s approach to fostering an inclusive agricultural transformation approach has been to convene, catalyse and broker local partnerships to support African governments to prioritize agriculture, allocate adequate resources to support smallholder farmers to access information, appropriate technology, and sustainable market and at the same time; creating enabling business environment to leverage private sector investment.



Over the last decade, including Mali, Rwanda, Ghana and Tanzania, I have seen countries where AGRA has been supporting governments, come through on their AUC CAADP Malabo targets by committing 10% of national expenditure to agriculture. A select number of these countries have each successfully achieved an annual growth rate of 6% with their respective agricultural sectors. A couple more are striving to achieve SDG 2 (zero hunger) by end of 2021.



With various ongoing efforts thus far at national levels in strengthening Africa’s agricultural sector, I have no doubt we could achieve a food secure Africa by 2030 if African institutions like AGRA and its partners continue to proactively double-down on their efforts to make that happen.



Given the urgency of ensuring the food security for Africa and its people, we cannot afford any delays in implementing the right policies to ensure success. Africa cannot wait. Now is the time for an African agriculture transformation. This requires an efficient eco-system that unlocks the right policies, public investments and private sector engagement; spurs rural-sector economic growth and; which can deliver broad and accelerated impacts for all.



At the level of the smallholder farmer, there is a need to develop a digitized extension system, across which the continent’s smallholder based agro-industry, can in turn, enable a seamless transition from subsistence farming to profitable agriculture.



At an infrastructure and management service level, there is an urgent need to retool the capacity of the entire sector’s value chain proposition in order to ensure fundamental, paradigm-shifting change; beginning with the provision of continuing access to development generating knowledge, which the smallholder farmer can immediately benefit from; and extending to input and output markets with the goal to ultimately ensure efficient interaction across Africa’s entire economic value chain.



At each national level this would mean sustained progress, so that both the agricultural and non-agricultural economies reach and maintain higher income, faster growth, secure access to affordable and nutritious food, and greater inclusiveness in the growth process.



Now is our moment to invest in agriculture to deliver a new era of food security and economic growth in a digital ag-eco-system that works for Africa.



H.E. John Kufuor is former President of Ghana (2001-2009) and former Chairperson of the African Union (2007–2008). In 2011, he was named joint winner of the World Food Prize for Food and Agriculture.

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Africa’s smallholder farmers are the linchpin to economic success

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="549" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-820x549.jpg" alt="" class="wp-image-410218" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-820x549.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-300x201.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-120x80.jpg 120w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-768x514.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920-1536x1028.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/portugal-1816896_1920.jpg 1920w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Image by Pascal Laurent from Pixabay</figcaption></figure>



In Africa, there’s never been a better time to be alive.



The last two decades have seen steady improvements to the extent that a child born in Africa today has a better chance of living longer, avoiding extreme poverty, receiving a primary school education and joining a growing economy, than ever before.



Yet not all the movement is in one direction. The COVID-19 pandemic is having a profound impact, forcing much of Africa into recession. While the continent’s long-term outlook for growth remains positive, too often the expansion is inconsistent, fails to create jobs and delivers benefits that don’t trickle down.



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There is inconsistency, too, when it comes to governance, the issue that sits at the heart of progress. Without good governance – without transparent, trustworthy and democratic leadership – social and economic gains are wasted. A good year can quickly be followed by setbacks and backsliding. That said, the last decade has broadly been a period of improvement. In 2019, a little over 60% of Africa’s 1.3 billion people were living in a country where overall governance, as measured by <a href="https://mo.ibrahim.foundation/news/2020/2020-ibrahim-index-african-governance-key-findings">the Ibrahim Index of African Governance</a>, was better than in 2010.



Clearly, I am an optimist and there are good reasons to be optimistic. But we must also be realists.



While some economies in Europe and the United States are already bouncing back from the pandemic, with vaccination drives that have covered 60-70% of their adult populations, Africa is still waiting. Our leaders deserve credit for enforcing lockdowns and limiting infections, but they have struggled to get hold of vaccines. By the <a href="https://www.afro.who.int/news/nine-10-african-countries-set-miss-urgent-covid-19-vaccination-goal">start of June</a> this year, only 32 million vaccine doses had been distributed across Africa. Vaccine hoarding by richer countries is a major part of the problem, but the crisis has also revealed the current chronic shortfall in Africa’s own vaccine manufacturing capacity.



It’s too early to count the full cost of the pandemic for the continent. But this year’s <a href="https://mo.ibrahim.foundation/forum/downloads">Ibrahim Forum Report</a> on COVID-19 in Africa highlights how it is only likely to deepen inequalities and impose deep costs on governments ill-equipped to handle the shock. The knock-on impact will be fewer resources not only for health but also for areas like education, training and investment, which can lead to frustration and anger, and an increased risk of unrest or conflict.



In many African countries, children have missed out on months of education and social contact. At home with few resources, they have gone hungry, missed health check-ups, and been exposed to greater risk of violence and abuse. The impact on mental health and wellbeing is significant, and the consequences enduring.



It is at moments like these that governance comes to the fore. The pandemic is an unprecedented test of leadership, one which many African leaders have stepped up to. Some have acted more decisively than peers in other parts of the world. But they can’t rest on their laurels. Every day brings new, harder decisions that will shape outcomes for generations.



On public health, on education, investment and even tax policy, leaders must act intelligently at a national, regional, and continental level. They need to seize the opportunity to introduce policies that provide better protection for their populations as they weather the pandemic and emerge from it.



So how does Africa turn this crisis into a springboard for change? For me, creating opportunities for children and young people to prosper must be at centre of the response. That requires a laser focus on education, training, investment and jobs. These aren’t just warm words. All the evidence supports the case – successful societies invest in their youth, producing lifelong, intergenerational benefits for health, education and the economy.



There must be investment, the type that creates jobs and builds stronger societies. Investment is growing in Africa – from governments, public and private corporations, private equity funds and financial institutions – but it still tends to be short-term and hit hard by sudden changes in sentiment or commodity prices.



There are, however, signs of a shift. Major global economies recognise the value and importance of closer ties with the continent. They see markets like Nigeria, Ethiopia, Ghana or Kenya, with tens or hundreds of millions of citizens, bright minds and dynamic ideas. They want to invest for the long-term in infrastructure and industrial development, and they think about future consumers, too. This is critical to strengthening trade between Africa and the rest of the world, but we must also build on the success of the African Continental Free Trade Area and strengthen trade networks within the continent.



By 2030, a fifth of the world’s population will be from Africa. Every year, tens of millions more young people from our continent join the labour market. They need the skills and training that allow them to realise their potential. Young people are our continent’s greatest asset, but if we don’t create opportunities for them – to learn, to find work, to be productive &#8211; we risk losing them as they migrate to places that can deliver what they’re looking for. The pandemic is a crisis for Africa, as it is for the world. But like every challenge, it presents opportunities. With the right decision-making, the ground can be laid to strengthen education, investment, jobs and trade. Whether it’s in the digital economy, the green transition, resources, energy or infrastructure, Africans have a role to play. We must seize this opportunity to build a better Africa.







Mo Ibrahim is the Founder and Chair of the Mo Ibrahim Foundation. The 2021 <a href="https://urldefense.com/v3/__https:/mo.ibrahim.foundation/forum__;!!HhhKMSGjjQV-!unnPuNamiDJCvPT0R0iyM-bEsbnIRpk5OYAUVNvpajGcNb0OLiLNuCWLWoXK9FthFZR7K0lpaX2SwOODWw$" target="_blank" rel="noreferrer noopener">Ibrahim Forum</a> focused on the impact of COVID-19 on Africa and the continent’s path to recovery.

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The Future of Africa

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The paradox of Central Africa is that it constellates countries extremely rich in natural resources needed for global development, yet these countries cannot finance their development agendas without recourse to expensive loans and aid with attached strings. The situation becomes dire when faced with externalities such as plummeting commodity prices or a pandemic such as COVID-19. But this ought never to be so!



Among the many metaphors used to deplore the situation and reawaken the spirits of citizens of this sub-region to take their destiny in their own hands, is that of a royal personage sitting on a golden chair, but with a cap-in-hand, asking for pieces of silver and bank notes from visitors and passers-by. In this write-up, we argue that it is time for Central Africans to get up from that stool, literally count their blessings and transform their economies using those blessings. And natural capital accounting (NCA) is one major way to do this.



So, what is natural capital accounting?



Natural Capital Accounting (NCA) is a rigorous audit of the economic worth and monetary value of a country’s natural resources, to assess its real wealth, sustainably plan its development and better bargain for development finance without sinking into debt (as is currently the case with several Central African economies).



NCA is a relatively new tool in environmental management. It assesses the natural ecosystems’ contributions to a country’s economy, its level of reliance on natural systems, tracking changes in these natural systems and its impacts. It can be understood as a new (and better) way of combining existing tools used in economic analysis with environmental data. In other words, if GDP is measured in terms of the total value of goods and services produced within an economy in a year, natural resources which offer ecological and other services ought to be included in the equation in assessing the true wealth of a nation.



We contend that the gains to be made from mainstreaming NCA into national accounts and the overall scheme of wealth measurement in Central Africa are manifold. Below, the 4 issues to note:



1) NCA will enable a change of course in our development trajectory



A systematic count of a country’s natural capital and its ecological services provides solid pointers to leaders in formulating and finetuning development policies and interventions in areas such as the environment, forest management, agroindustry, local government, green and blue economy. Moreover, it can help mobilize innovative financing for a faster transition to green growth and lessen the dependence on the export of raw materials such as oil.



Let us explicate this point with a clear example.



Central African countries have a huge potential of renewable energy totalling an estimate of 16,724,190 megawatt (MW). Of this estimate, hydro takes 126,990 MW, solar 14,751,375 MW, and wind takes 1,844, 125 MW. Specifically, the Democratic Republic of the Congo (DRC) is blessed with huge hydropower potential, including the world’s second largest river by volume – the Congo River. While two dams built on



the stretch of the river more than three decades ago, Inga I and Inga II, provide most of the nation&#8217;s power, with capacities of 351 MW and 1,424 MW respectively, they are far from meeting the country’s electricity needs and far from making the most use of the Inga rapids which have an untapped hydropower potential of more than 40,000 MW. This potential could be exploited by the Inga III Project (with an estimated capacity of 4,500 MW) and the later phases of the Grand Inga scheme (with an estimated capacity of 40,000 MW). The Grand Inga, which, if materialized in six phases, would be the world’s largest hydropower project could supply Africa with an additional 40,000 megawatts of electricity.



The subregion is also home to huge potential in solar and wind energy. Particularly, Chad and the northernmost parts of Cameroon, in the same neighborhood present unmissable opportunities for solar and wind energy production as a United Nations Economic Commissions for Africa (ECA) preliminary geospatial data driven analysis on economic opportunities along Central Africa’s transport corridors has established. The area boasts an average of 22, 000 kilojoules per meter square of solar irradiation per day and a wind power density of more than 42 joules per cubic meter.



These vast renewable energy resources can be harnessed to diversify the economies away from fossil fuels and meet the increasing domestic energy needs, critical to achieving sustainable development and green growth as well as contributing to the global climate change mitigation efforts. And to do so, Central Africa can take advantage of climate change investments.



In the same vein, Central Africa can take advantage of the global race to zero emissions for climate change mitigation to climb the global value chain. Truly, the net-zero carbon pledges require significant quantities of critical minerals such as cobalt, lithium, copper and manganese and various rare earth metals whose production is expected to grow nearly sevenfold between 2020 and 2030 in the net zero pathway. In this context, and with its 2/3 of the identified world reserves of cobalt (more than 25 million tons), the DRC has a unique opportunity of being at the heart of the dynamic battery value chain and the electric vehicle- (BEV)- revolution, and renewable energy deployment. Unfortunately, the DRC is still locked in the mining and mineral processing stage, and at the bottom of the global value chain, currently capturing only 3% of a total global value that is expected to reach US$ 8.8 trillion by 2025. To break this vicious cycle, the country has to improve the linkages between the extractive sector and other sectors of the local economy. Through natural capital accounting, such explicit linkages would have been established to give to the DRC, the subregion and Africa as a whole a leverage to integrate the global supply chain of BEV critically needed to feed the world’s race to net-zero emissions.



The above examples don’t tell the whole story, there are many other areas in the subregion where similar huge potentials are sitting, unknown, and therefore not accounted for in development planning. NCA will help identify and value these potentials, providing baseline data and practical frameworks that can be used to formulate and implement policies and strategies to accelerate the attainment of the SDGs and Agenda 2063, at country or subregional level.



2) NCA can enhance sustainable development and greatly expand fiscal space for development



Central Africa’s wealth will be better known by correctly measuring and valuing its natural capital and associated services and activities that were previously unrecorded or undervalued. A better valuation of the natural capital of a country will increase its reported net wealth and will open the way for its inclusion in GDP, and rebasing of national wealth. Not to mention that, if a country can continuously measure its stock



of renewable resources, it can monitor their use and therefore design policies that will result in higher well-being without destroying irreplaceable assets such as the stock of biodiversity.



&#8220;GDP tells you nothing about sustainability&#8221;, said Joseph Stiglitz. However, with a reliable natural capital accounting system, a country can produce a set of indicators that will efficiently complement GDP to monitor its sustainable development. Appetite and political commitment for this is not huge yet…



Even so, and as said earlier, Central African countries can also leverage their natural capital to mobilize innovative financing and expand the fiscal space necessary for adopting counter-cyclical measures to accelerate economic diversification and build forward better, which is important to do, in times of crisis such as the COVID-19 pandemic, which has aggravated the already precarious debt situation of the subregion in particular, and Africa in general.



While liquidity-richer countries have kept their economies afloat in spite of lockdowns through stimulus packages, Central Africa, like the rest of the continent, has not been able to provide such incentives to businesses and citizens, resulting in a 6.6% loss of GDP. It is a double jeopardy of economic and health service decline, which a broader fiscal space would have cushioned.



From simulations by ECA showing that debt servicing obligations may mean many African countries devote more than half of their GDP to debt-servicing in the early 2020’s, there must be a way out with NCA. The ecological services provided to the rest of the world by the Congo Basin Forests (considered the second biosphere and lung of the planet) must be quantified and monetized to expand such a fiscal space. ECA, UNEP and UNDP are currently working with the Government of Gabon to use NCA to audit its forests and determine the exact value of the carbon sink they provide to help store greenhouse gases from worsening the global climate challenge. Less than 1% of the country’s 230,000 square km of forest has been depleted. This is natural capital that should be paid for via innovative green and climate financing mechanisms such as the Green Funds, and Green and Blue Bonds, as well as debt-for-climate adaption swaps.



Next door, the Republic of Congo and the Democratic Republic of Congo do not only equally hold vast swathes of forests canopy but jointly possess a powerful source of carbon sequestration – a 245,000 km square peatland belt. The peatlands trap 30 billion tons of greenhouse gases equivalent to three years of global carbon emissions. Central African countries should clearly flag this natural ecological support to the rest of the world, monetize it and demand payments. The demarche will spare them from making the painful choice between short-term objectives of restoring macroeconomic equilibrium and the long-term objective of placing their economies on a trajectory of sustained and inclusive growth through economic diversification and structural transformation, during crises periods as the COVID-19 pandemic. Now is the time to do it.



3) Where should we start from?



Of course, the first thing to do is to map, delineate and evaluate all the natural resources (renewable and non-renewable) assets available in the sub-region. If we don’t know what we have and where we have it, we can’t get the most out of natural resources.



We also need to build register or cadastral systems, and make relevant information, including licenses, publicly available and accessible online in open data format, in line with EITI1 requirements of full disclosure of information. This will improve governance and transparency in the management of the sector.



We also must address the technical and institutional barriers to the establishment of routinely produced environmental-economic accounts at the national levels, focusing on: 1) building the institutional framework in support of the NCA implementation; 2) training of local technical experts (including scientists, economists, statisticians, policy specialists) to compile priority accounts on a regular basis and to strengthen their capacity in negotiating new licensing schemes, in which, for example, preserving natural capital could be part of the biddable factors; 3) fostering inter-institutional relationships to promote collaboration and data-sharing; and 4) promoting the effective communication and use of NCA in supporting evidence-based policy and the SDGs. We have started doing this in Gabon. We must do it systematically across the entire sub-region.



4) We need a new and green deal



The recent external shocks that many Central African countries have suffered due to the sharp drop in world oil prices and the need to finance development in the post-Covid-19 era should be a wakening call for our sleeping king. Central Africa needs to move from a brown growth which has sunk the sub-region to a vicious cycle of booms and busts, to a green growth model which harnesses the full potential of the sub-region natural capital and its ecological services. We need to move from the resource for infrastructure model, to a resource for industrialization and sustainable development pathway. This is a compact that requires the involvement of several stakeholders including governments, financial institutions, local and international communities, large and small companies, and ordinary citizens.



Natural capital accounting is central to this transition! With it, we must rebase key indicators of wealth, and rightfully press for payments for the ecological services provided by the subregion in its forest, subterranean and submarine carbon sinks to expand fiscal space.



In line with the Decade of Economic Diversification in Central Africa declared in November 2020, our Decade of Action in Central Africa must contribute to rapid economic diversification and structural transformation of economies, moving up Central Africa’s participation in global chains, including in the battery, electric vehicle and renewable energy industry. This is the objective of the DRC-Africa Business Forum on “Fostering the development of a battery, electric vehicle, and renewable energy industry value chain and market in Africa, which the government of DRC, ECA, Afreximbank, Africa Finance Corporation, and BADEA are organizing in Kinshasa, DRC in September 2021. See you in Kinshasa. 



<a href="https://www.uneca.org/events/central-africa/drc-business-forum">https://www.uneca.org/events/central-africa/drc-business-forum</a>



===============



*Antonio Pedro heads the Subregional Office for Central Africa of the United nations Economic Commission for Africa (ECA). Nadia Ouedraogo and Issoufou Seidou are economists in that Office while Abel Akara Ticha is the Office’s communication Officer

Bonobo,On,The,Branch,Of,The,Tree,In,Natural,Habitat.

Using what you have to get what you want: why Central African countries must put natural capital accounting at the centre of their development

*This analysis was produced by the team at Signal Risk 



On 10 July, the NEBE electoral body announced the results of the first round of general elections which occurred on 21 June.



In a widely expected turn of events, the ruling Prosperity Party (PP) won 410 parliamentary constituencies, out of a possible 436. The opposition NAMA party claimed five seats and the EZEMA coalition won four. The remaining seats were shared by smaller parties and independent candidates. Results for the country’s state councils have not been released; however, local reports indicate that the PP is also on track to claim a significant majority.



NEBE confirmed that voter turnout stood at more than 90 percent of the 37 million people who were registered to vote. This, according to the body, was an unprecedented turnout and an indication of Ethiopians’ “thirst for democracy” despite the many concerns leading up to the election.



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



Unsurprisingly, Prime Minister Abiy Ahmed has been the most vocal, after his party swept to an overwhelming victory. In a statement on 10 July, Ahmed hailed the conduct and inclusivity of the election, along with the fact that the PP has been chosen “by the will of the people to administer the country”.



At the time of writing, the opposition had yet to formally comment on the outcome; however, local reports indicate that the EZEMA party has filed as many as 200 complaints after local officials and militiamen allegedly blocked observers in several regions, including Amhara and the Southern Nations, Nationalities, and Peoples&#8217; Region (SNNPR). NEBE has acknowledged receipt of these complaints and is currently investigating them.



Externally, the responses – which came before the 10 July announcement – have been mixed. In its preliminary assessment on 23 June, the African Union (AU) observer mission, which was led by former Nigerian president Olusegun Obasanjo, noted that: “Overall the election and election day processes were conducted in an orderly, peaceful and credible manner”.



The AU’s position differs quite significantly from that of the United States. In a statement on 24 June, Secretary of State, Antony Blinken, labelled the election as neither free nor fair. Blinken cited the opposition boycott, the detention of political rivals, and violence in multiple parts of the country as factors that undermined the credibility of the polls. To address these issues and to ensure the long-term stability of the Ethiopian state, Blinken called for the initiation of political dialogue.



<h2 class="wp-block-heading" id="h-the-evolving-context">The evolving context</h2>



The announcement of results comes amid an evolving conflict landscape in Ethiopia’s Tigray region.



This follows the launch of Operation Alula by the TDF (the militant arm of the dissident TPLF party) around 18 June. After capturing as many as six towns between 18 and 24 June, the TDF secured the regional capital of Mekele on 28 June. Details of the battle for Mekele have not been disclosed; however, international media outlets have shown thousands of captured federal, Amharan and Eritrean soldiers.



<h2 class="wp-block-heading" id="h-the-federal-account">The federal account</h2>



On 29 June, the prime minister formally acknowledged that the federal army had withdrawn from Mekele. According to Ahmed, this was a strategic withdrawal based on the fact that the city has “lost its centre of gravity in the current context”. His spokesman, Redwan Hussein, elaborated on this on 30 June. According to Hussein, the government’s withdrawal came after it “weighed the costs of humanitarian and reconstruction expenses, immense, though unfair, pressures by the international organizations and NGOs and the threat building up on the country’s western border”. According to Hussein, joint military drills between Sudan and Egypt are “indicative of the need to get prepared for any eventualities along the western border”. Hussein also echoed Ahmed’s call for an immediate and unconditional ceasefire in Tigray.



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



The comments by Ahmed were immediately disputed by the spokesman of the TPLF, Getachew Reda, who suggested on 30 June that federal troops were forced out of Mekele. Reda also noted that the TPLF would not stop its campaign until it has recaptured the whole of Tigray region.



Nevertheless, Reda did stipulate the TPLF’s conditions for a ceasefire. These include the legitimisation of TPLF rule in Tigray region; the immediate withdrawal of Amharan and Eritrean forces; procedures to hold Prime Minister Ahmed and Eritrean president, Isaias Afwerki, to account for the damage caused in Tigray; an independent probe by the United Nations; and the distribution of aid and safe return of displaced Tigray people.



<h2 class="wp-block-heading" id="h-assessment">Assessment</h2>



The outcome of the first round of general elections means that the ruling PP already has an unassailable absolute majority in the 547-member parliament going into the September round of elections. The present outcome also means that Abiy Ahmed will be reappointed as prime minister when parliament is constituted after the September ballots. At this juncture, voting in 73 constituencies that was deferred due to security-related concerns is scheduled to take place. This includes constituencies in the Somali, Oromia, SNNPR, Benishangul-Gumuz and Harari regions. A new timeline for elections in Tigray region – which has 38 parliamentary constituencies – has yet to be provided. Nevertheless, the ruling party is expected to claim the majority of votes in the constituencies outside Tigray come September.



The PP’s effective victory was largely expected. Apart from the fact that the PP was intent to win at all costs – including by utilising undemocratic means – several factors worked to its advantage and ultimately guaranteed the party an electoral majority. The first is cross-sectional appeal. Unlike the majority of its rivals which count on support from singular ethnic groupings, the PP draws significant support from a plurality of regions. Second, despite being maligned by ethno-nationalist figures, the PP’s brand of pan-Ethiopianism does have some broad appeal; Abiy Ahmed also carries an unparalleled appeal in Ethiopia. This is particularly the case among urban and educated youths and middle-aged individuals whose ethnic allegiances are not as rigid as their elderly and rural counterparts. Third, the fragmentation of the political opposition (including the apparent unwillingness by the likes of the OFC and OLF to encourage their supporters to back other opposition candidates) minimised the opposition’s electoral support.



Concerns around the conduct of the election are seemingly legitimate; however, they are unlikely to fuel any anti-government protests in the immediate term. The complaints by EZEMA and the remarks by the United States underscore broad consensus that the election was neither free nor fair. However, EZEMA has not demonstrated any intent to arrange demonstrations in support of its electoral contestations; nor has any other party signalled any intent to initiate any anti-government unrest following the elections. Nonetheless, sentiments that the election was neither free nor fair will sour general perceptions towards the government, especially in Oromia, where two of the region’s largest parties did not participate. This will increase the baseline risk of anti-government demonstrations in Oromia, with potential catalysts being the ongoing trial of key Oromo leaders, such as Jawar Mohamed.



With his stay in power effectively secure, Ahmed is expected to continue his economic, diplomatic, and political agenda. No new major policy announcements are expected until parliament is constituted in September/October; however, Ahmed may expedite ongoing developments surrounding the telecommunications sector. Diplomatically, he will continue to engage with Egypt and Sudan with regard to an agreement on the Grand Ethiopian Renaissance Dam. In this case, Ahmed will avoid any concrete agreement that halts the ongoing second-stage filling of the dam until after the second round of elections. Despite talk of potential conflict with Sudan and Egypt, this is highly unlikely as it is not in the interests of either party to engage in war. Sudan also has a vested interest in the dam, due to the fact that it intends to acquire affordable electricity generated from the reservoir. Politically, there is an outside chance that Ahmed may pursue measures aimed at stabilising the landscape, especially in Oromia. Here, he may pursue dialogue with parties like the OFC and OLF, and possibly extend clemency to figures such as Jawar Mohammed and others who have been arrested for subversive activity, in exchange for their compliance with the PP’s political programme.



Conflict in Tigray region is likely to continue in the immediate term; however, there is an increasing likelihood that the federal government may seek to negotiate a more concrete ceasefire with the TPLF. On 12 July, the TPLF confirmed that its forces were continuing their advance in the hopes of ousting federal, Amharan and Eritrean forces and restoring the pre-war borders of the region. It also confirmed on the day that its forces seized the town of Korem, 170 kilometres south of the regional capital of Mekele, and are pushing to seize control of the town of Alamata, 20 kilometres south of Korem. More importantly, it is becoming increasingly apparent that the government is struggling to maintain the current invasion of Tigray, given security issues in other regions, the TPLF’s combat capabilities, and a relatively hostile Tigray population. Each of these factors and their capacity to impair the federal government’s operations in Tigray were severely understated. Going forward, these factors may prompt the federal government to soften its position on the TPLF and agree to a negotiated ceasefire. Any formal ceasefire could lay the groundwork for a more comprehensive political agreement and an election in Tigray, or some arrangement that could see the inclusion of Tigray stakeholders in federal structures.

Abiy Ahmed

Signal Risk on Ethiopia – Pyrrhic prosperity

The recent G7 Summit recognised the vital importance of ﬁnancing infrastructure projects in low- and middle-income countries across the world. Trains, roads, and ports will be ﬁnanced through the US led&nbsp;Build&nbsp;Back&nbsp;Better&nbsp;World&nbsp;Partnership&nbsp;(B3W),&nbsp;an&nbsp;alternative&nbsp;to&nbsp;China’s&nbsp;controversial&nbsp;Belt&nbsp;and&nbsp;Road&nbsp;initiative&nbsp;(BRI).



High quality, high performing, eﬃcient infrastructure is crucial to economic growth and an improved&nbsp;quality&nbsp;of&nbsp;life&nbsp;for&nbsp;any&nbsp;population.&nbsp;B3W&nbsp;represents&nbsp;a&nbsp;signiﬁcant&nbsp;opportunity&nbsp;for&nbsp;the&nbsp;democracies&nbsp;of&nbsp;the&nbsp;G7&nbsp;to narrow the $40+ trillion infrastructure gap. It is aimed at unlocking private capital to invest in projects&nbsp;to reduce the risks of climate change as well as promoting improvements in healthcare and digital&nbsp;technology.



Nigeria will be a critical test case for the B3W initiative. As Africa’s largest economy and most populous&nbsp;nation, Nigeria is potentially a super-power of the future. With more children born in Nigeria every day&nbsp;than in the whole of Western Europe combined, its already 200 million-strong population could well&nbsp;double by 2050, becoming the world’s second largest democracy. Based on these demographics, it is&nbsp;often thought of as a future giant of the global economy. Given that the G7 sees itself as the leading&nbsp;alliance&nbsp;of&nbsp;democracies,&nbsp;it should&nbsp;be&nbsp;supporting&nbsp;Nigeria’s economic&nbsp;growth.



Infrastructure projects are crucial to Nigeria’s economic future. They have necessarily been at the heart&nbsp;of&nbsp;President&nbsp;Muhammadu&nbsp;Buhari’s&nbsp;policy&nbsp;agenda.&nbsp;A&nbsp;wave&nbsp;of&nbsp;infrastructure&nbsp;projects&nbsp;have&nbsp;been&nbsp;completed,&nbsp;from&nbsp;the&nbsp;Kaduna&nbsp;to&nbsp;Abuja&nbsp;rail&nbsp;service,&nbsp;to additional&nbsp;terminals&nbsp;at&nbsp;the&nbsp;Nnamdi&nbsp;Azikiwe International&nbsp;Airport&nbsp;in&nbsp;the&nbsp;capital&nbsp;Abuja,&nbsp;as&nbsp;well&nbsp;as&nbsp;the&nbsp;Port&nbsp;Harcourt&nbsp;International&nbsp;Airport.



The&nbsp;Nigerian&nbsp;government&nbsp;has&nbsp;sought&nbsp;to&nbsp;leverage&nbsp;a&nbsp;range&nbsp;of&nbsp;international&nbsp;investment&nbsp;to&nbsp;promote&nbsp;industrial&nbsp;and&nbsp;structural&nbsp;change.&nbsp;The&nbsp;ambition&nbsp;is&nbsp;to&nbsp;develop&nbsp;and&nbsp;grow&nbsp;the&nbsp;Nigerian&nbsp;economy,&nbsp;modernising for the global energy transition away from its reliance on the oil industry. In particular, the&nbsp;government has secured Chinese investment in supporting job creation, none more so than the Lagos –&nbsp;Ibadan railway line, a $1.5bn scheme built by the China Civil Engineering Construction Corporation&nbsp;(CCECC).



China’s Belt and Road initiative has targeted the economies of Africa. The ostensible goal of the BRI is to&nbsp;connect a broad range of geographical regions by way of construction projects, including transport and&nbsp;economic corridors, to better connect the world’s second largest economy with the rest of the world.&nbsp;From the early 2000s onwards, China’s role in Africa has grown rapidly in respect of trade, investment&nbsp;and the ﬁnancing of infrastructure projects. There are now more than 40 African countries signed up to&nbsp;memorandums of understanding with China. Given this level of ﬁnancial support and the consequential&nbsp;political inﬂuence that follows, it is hardly surprising that the G7 countries should want to emulate&nbsp;China’s&nbsp;success.



Too often in the past, investment from Europe or the United States has focussed on longer term ﬁnancial&nbsp;services.&nbsp;In&nbsp;contrast&nbsp;China&nbsp;and&nbsp;Chinese&nbsp;companies&nbsp;have&nbsp;invested&nbsp;in&nbsp;practical&nbsp;projects,&nbsp;including&nbsp;transport&nbsp;infrastructure and manufacturing, involving immediate beneﬁts to the countries concerned. African&nbsp;countries will therefore be looking to the B3W to follow and compete with the Chinese model of&nbsp;investment in critical infrastructure. Moreover, in regions where the G7 countries are already heavily&nbsp;involved, such as the Sahel, developing core infrastructure will be a vital component in ensuring the&nbsp;long-term&nbsp;political stability&nbsp;of&nbsp;the region. This is the driving principle behind a 283km rail route between Nigeria and Niger commenced earlier this&nbsp;year,&nbsp;spearheaded&nbsp;by&nbsp;Nigeria’s&nbsp;Transport&nbsp;Minister&nbsp;and&nbsp;the&nbsp;Portuguese&nbsp;construction&nbsp;company,&nbsp;Mota-Engil – helping increase commercial activity in the region while aiming to establish Nigeria as the region’s&nbsp;central&nbsp;export hub.



Revitalising infrastructure links across West Africa and the Sahel is not only essential from a security&nbsp;standpoint, it is also an imperative for youthful population looking to develop and diversify their&nbsp;economic ambitions. Harnessing the potential of young people to play their part in promoting economic&nbsp;growth&nbsp;cannot&nbsp;be&nbsp;ignored.&nbsp;Cross-cutting&nbsp;collaboration&nbsp;between national&nbsp;governments&nbsp;and&nbsp;foreign&nbsp;investors is essential to ensure that Africa’s young demographic can access the full range of high quality&nbsp;public&nbsp;services that&nbsp;are currently&nbsp;lagging far&nbsp;behind those of&nbsp;the western&nbsp;world.



Lead by the United States, motivated as much by politics as economics, the G7 countries have now&nbsp;demonstrated&nbsp;a&nbsp;considerable&nbsp;appetite&nbsp;for&nbsp;investing&nbsp;in&nbsp;African&nbsp;infrastructure&nbsp;projects,&nbsp;providing&nbsp;a&nbsp;political&nbsp;and economic alternative to Chinese loans and investments. But if B3W is to be a success, both for the&nbsp;countries of the G7 and their prospective partners, it will have to be on more transparent and mutually&nbsp;beneﬁcial terms than China currently oﬀers. Given Nigeria’s growing global importance and scale of its&nbsp;challenges, the country represents a critical test case to determine whether the B3W can deliver on its&nbsp;promises.

51240840694_90b4d989d7_b

Why the Build Back Better World Partnership Should Be Looking to Nigeria

Rebalancing Africa’s security and development objectives is a daunting task. But it is one that political leaders must seize with both hands in order to realize the enormous potential of the African Continental Free Trade Area.



CAIRO – The African Continental Free Trade Area (AfCFTA), which came into effect in January, could be a game changer in helping to lift the continent out of poverty and onto the path of long-term prosperity. The AfCFTA has the potential to accelerate and alter the composition of foreign direct investment in Africa, thereby diversifying the continent’s sources of growth and boosting its internal and external trade. And merging Africa’s relatively small markets into one of the world’s largest will enable investors to capitalize on greater economies of scale.



But Africa risks squandering this huge opportunity unless its leaders can address the continent’s unwelcome reputation as one of the world’s most conflict-prone regions. According to the World Bank,&nbsp;<a href="https://www.worldbank.org/en/topic/fragilityconflictviolence/brief/harmonized-list-of-fragile-situations" target="_blank" rel="noreferrer noopener">nine African countries</a>&nbsp;currently suffer from high institutional and social fragility; 12 are engaged in medium or high-intensity conflicts. Unsurprisingly, the number of conflict-related deaths in the region has surged from 2,200 in 2010 to an average of&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2019/04/01/sreo0419" target="_blank" rel="noreferrer noopener">14,000 per year since 2014</a>. Transnational terrorist networks have recently intensified the problem.



Besides causing untimely deaths and suffering, and destroying infrastructure, conflicts impede economic activity and undermine formal and informal cross-border trade. Informal trade between Mali and Algeria, for example, has fallen by <a href="https://afr-corp-media-prod.s3-eu-west-1.amazonaws.com/afrexim/African-Trade-Report-2020.pdf" target="_blank" rel="noreferrer noopener">more than 64%</a> since 2011, largely owing to the conflict in northern Mali and the closure of the two countries’ border.



The negative impact of wars on trade can be long-lasting. Globally, violent conflict is estimated to cause a&nbsp;<a href="https://www.sciencedirect.com/science/article/abs/pii/S016407042100001X" target="_blank" rel="noreferrer noopener">26% reduction in exports</a>&nbsp;in the year that hostilities begin, rising to 35% five years later and 58% after a decade. Across Africa, where the median duration of conflict is about four years, the negative spillovers of wars on trade could persist in the medium and long term.



High-intensity conflicts also hinder trade and economic integration indirectly by triggering a sharp rise in military expenditures. African military spending grew by 17% over the last decade, to <a href="https://www.sipri.org/media/press-release/2020/global-military-expenditure-sees-largest-annual-increase-decade-says-sipri-reaching-1917-billion" target="_blank" rel="noreferrer noopener">$41.2 billion in 2019</a>, according to the Stockholm International Peace Research Institute. In a region where large government financing gaps already inhibit investment in productivity-enhancing infrastructure, this diversion of scarce resources can have a significant adverse long-term impact on economic development, because it undermines the diversification of sources of growth needed to alleviate supply-side constraints and to align domestic production and demand.



In recent years, especially in the Sahel, governments have shifted their resource allocation markedly from development to security. While that swing can be explained by the frequency of high-intensity conflict, sluggish development can itself stir up grievances that undermine security. The subordination of development goals to short-term security considerations also fuels corruption, which in turn drives horizontal inequality and intensifies resentment, creating conditions in which conflict and deprivation lock countries into a downward spiral of intergenerational poverty.



Most would attribute China’s four decades of rapid growth and poverty reduction primarily to successful economic reforms, but these achievements can also be viewed as the dividends of a peaceful and secure domestic environment. Likewise, Ethiopia’s <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ET" target="_blank" rel="noreferrer noopener">strong economic growth</a> since the mid-2000s has shown that mutually reinforcing defense and development objectives in Africa can attract both domestic and foreign private capital, helping to overcome the supply-side constraints that currently dog many of the region’s economies.



One great benefit of a more peaceful Africa would be increased continental trade, which currently accounts for only&nbsp;<a href="https://www.brookings.edu/wp-content/uploads/2020/12/20.12.28-AfCFTA_Fofack.pdf" target="_blank" rel="noreferrer noopener">15% of the region’s total trade</a>&nbsp;and is dominated by scarce manufactured goods, owing to most countries’ continuing dependence on commodity exports. In addition, sustained long-term investment will accelerate the diversification of sources of growth and trade to mitigate the risk of recurrent balance-of-payments crises associated with commodity-price cycles.



The AfCFTA’s success in deepening African economic integration thus hinges on creating the right conditions for long-term security. Only lasting peace will guarantee lasting prosperity. If policymakers can complement economic and democratic governance reforms with similar improvements to the judicial system and security sector, emphasizing accountability and the protection of citizens, then the dividends in terms of conflict prevention will be even higher.



Encouragingly, a growing number of African countries are settling their political differences through diplomacy and the rule of law, not the barrel of a gun. Some judiciaries have been greatly empowered and are increasingly exercising their independence. One noteworthy example was the <a href="https://www.project-syndicate.org/commentary/africa-presidential-election-reruns-four-lessons-by-bob-baulch-and-danielle-resnick-2020-02">decision</a> by Malawi’s constitutional court to annul the result of the country’s 2019 presidential election in light of substantial poll irregularities; the rerun in June 2020 resulted in a victory for the opposition candidate.



Governance reforms are also likely to have positive spillover effects for Africa’s institutional stability and regional integration. Although integration is, at its core, a political project, its success is contingent on policymakers recognizing that the process is too important to be politicized. Greater institutional stability and predictability will curtail the risk of disruption to and discontinuity in regional integration during political transitions.



“There will be no development without security and no security without development,” the late, great former United Nations Secretary-General and Nobel Peace Prize winner&nbsp;<a href="https://www.project-syndicate.org/columnist/kofi-a-annan">Kofi Annan</a>&nbsp;once&nbsp;<a href="http://undocs.org/A/59/2005" target="_blank" rel="noreferrer noopener">said</a>. “And both development and security also depend on respect for human rights and the rule of law.”



Rebalancing Africa’s security and development objectives is a daunting task. But it is one the region’s leaders must seize with both hands in order to realize the AfCFTA’s enormous potential.

Various traders and money changers do their business as a truck leaves the border post at Machipand

Africa’s Trade Revolution Needs Peace

Covid-19 has cast a long shadow over global dialogues around food and nutrition security bringing into sharp focus the relationship between public health, poverty and hunger.



In addition to the pandemic, other&nbsp;<a href="http://www.fao.org/publications/sofi/2020/en/" target="_blank" rel="noreferrer noopener">threats</a>&nbsp;to food and nutrition security loom large, from climate change and biodiversity loss to trade wars.



But there is&nbsp;one single threat that poses a danger above all others and which must be at the top of the international development agenda because it impacts every aspect of the food system everywhere: risks to and from&nbsp;water.



Access to supplies of&nbsp;water, or an overabundance, can make or break food production and consumption systems. In sub-Saharan Africa for instance,&nbsp;<a href="http://www.fao.org/documents/card/en/c/cb1447en/" target="_blank" rel="noreferrer noopener">50 million people</a>&nbsp;live in areas where severe drought has catastrophic effects on farmland. As climate change often manifests itself through increasing floods and droughts, the situation is likely to worsen unless drastic action is taken to mitigate the continent’s – and the world’s –&nbsp;water&nbsp;risks.&nbsp;



Yet while climate change is an important factor in growing&nbsp;water&nbsp;risks, poor management of&nbsp;water&nbsp;resources can also have a significant impact on food security. Investing in&nbsp;water&nbsp;management and infrastructure, both natural and engineered, offers important protection against future food crises and can increase yields under normal conditions.



Many countries are already gearing up to invest in better ways to manage&nbsp;water&nbsp;and shore up their reserves, including in the US, where&nbsp;<a href="https://waterfm.com/biden-unveils-2-trillion-infrastructure-plan-water-sector-reacts/" target="_blank" rel="noreferrer noopener">$100 billion</a>&nbsp;is earmarked to upgrade&nbsp;water&nbsp;infrastructure to build resilience and create jobs.&nbsp;And in Ethiopia, which is no stranger to&nbsp;<a href="https://reliefweb.int/disaster/dr-2015-000109-eth" target="_blank" rel="noreferrer noopener">water&nbsp;risks</a>, the&nbsp;<a href="https://www.water-technology.net/projects/grand-ethiopian-renaissance-dam-africa/" target="_blank" rel="noreferrer noopener">Grand Ethiopian Renaissance Dam (GERD)</a>&nbsp;is intended to improve regional energy supply, while at the same time managing the risks of floods and droughts and improving irrigation.



Countries also need to be able to account for their&nbsp;water&nbsp;resources. By&nbsp;monitoring flows and reserves more accurately, governments will be able to identify shortages and better direct&nbsp;water&nbsp;according to need. And this is key to building more resilient food systems.



Take the International&nbsp;Water&nbsp;Management Institute’s collaboration with&nbsp;<a href="https://www.iwmi.cgiar.org/2020/03/press-release-iwmi-project-enables-fast-access-to-petabytes-of-analysis-ready-water-data-in-africa/" target="_blank" rel="noreferrer noopener">Digital Earth Africa</a>,&nbsp;for example, which leverages decades of satellite data to create an open-sourced database and applications to help governments, communities and companies to better manage their&nbsp;water.



The project has already helped farmers with flood and drought mapping, and has the potential to&nbsp;strengthen food systems, build resilient economies and reduce vulnerabilities to climate change.&nbsp;Every country would benefit from collating and leveraging information that is already available, yet too often out of reach.



Enabling more open data about&nbsp;water&nbsp;supplies and needs will also help better manage&nbsp;water&nbsp;allocations to different sectors and regions. Competing and growing demands for&nbsp;water&nbsp;from sectors such as agriculture, energy, industry, domestic use and sanitation and hygiene, will always result in trade-offs, winners and losers.



For instance, agriculture is responsible for&nbsp;<a href="https://blogs.worldbank.org/opendata/chart-globally-70-freshwater-used-agriculture" target="_blank" rel="noreferrer noopener">70 per cent</a>&nbsp;of global freshwater withdrawals, and more than 90 per cent in agrarian economies, yet the pandemic has reiterated the importance of&nbsp;water&nbsp;for hygiene, adding even more pressure on demand. Countries need support to move away from such competition towards better management of the&nbsp;whole&nbsp;water&nbsp;system with all uses and users, thus encouraging cooperation and coordination.



One solution can be found in the form of&nbsp;multiple-use&nbsp;water&nbsp;services (MUS) projects, whereby local communities become the drivers of decision-making on&nbsp;water&nbsp;use. For instance, in South Africa, an&nbsp;<a href="https://www.iwmi.cgiar.org/2020/12/how-sharing-water-management-benefits-south-african-villages/" target="_blank" rel="noreferrer noopener">MUS project</a>&nbsp;is fostering new forms of&nbsp;water&nbsp;co-management to allocate&nbsp;water&nbsp;in a way that allows families to irrigate, cook, drink and wash.&nbsp;&nbsp;



The way that we store&nbsp;water&nbsp;using engineered “grey” infrastructure, such as dams, or nature-based “green” infrastructure, like wetlands or groundwater, is also critical. In fact, integrated solutions are necessary to counter the increasing&nbsp;<a href="https://www.gwp.org/globalassets/global/toolbox/publications/perspective-papers/perspectives-paper-on-water-storage.pdf" target="_blank" rel="noreferrer noopener">global&nbsp;water&nbsp;storage gap</a>&nbsp;that seriously hampers sustainable development and resilience.



Further innovation is needed to sustainably provide&nbsp;water&nbsp;services that reflect the multiple&nbsp;water&nbsp;needs of households, various sectors, and industries now and under future conditions.



Yet lack of access to finance &#8211; and subsequently new technologies, integrated solutions and capacity &#8211; hamper&nbsp;water&nbsp;management efforts across sectors and communities. Bringing down these barriers with greater investment and novel financing mechanisms will help unlock greater efficiencies and deliver better&nbsp;water&nbsp;management and conserve environmental resources.



Governments must work with partners in research and the private sector to enable funding both for the development and deployment of sustainable&nbsp;water&nbsp;solutions like&nbsp;<a href="https://www.iwmi.cgiar.org/2020/02/press-release-project-makes-water-from-the-sun-for-climate-smart-farming/" target="_blank" rel="noreferrer noopener">solar-powered irrigation systems</a>, monitoring of&nbsp;water&nbsp;use through&nbsp;<a href="http://www.fao.org/land-water/databases-and-software/wapor/en/" target="_blank" rel="noreferrer noopener">Earth observation technology</a>, or&nbsp;<a href="https://www.iwmi.cgiar.org/2021/03/moroccos-decision-to-publish-drought-maps-could-benefit-the-whole-mena-region/" target="_blank" rel="noreferrer noopener">better forecasting systems</a>&nbsp;for floods and droughts.



Earlier this year&nbsp;<a href="https://summitdialogues.org/dialogue/7541/" target="_blank" rel="noreferrer noopener">the Food Systems Summit Global Dialogue on&nbsp;Water</a>&nbsp;underlined&nbsp;why&nbsp;water&nbsp;has to be a key issue at the critical&nbsp;<a href="https://www.un.org/en/food-systems-summit" target="_blank" rel="noreferrer noopener">UN Food Systems Summit</a>&nbsp;in September.&nbsp;Participants agreed that&nbsp;water&nbsp;plays an essential role in future-proofing food systems against climate shocks and pandemics, making them more inclusive and healthier, ending hunger and malnutrition and safeguarding the health of our planet.



Not&nbsp;preparing for and managing&nbsp;water&nbsp;scarcity in our food systems is a risk the world cannot afford to take. Far better to prepare for the threat of&nbsp;water&nbsp;scarcity and manage the risks, than to be complacent and see our very food systems dry up.

the-food market-3147758_1920

Count on water to disaster-proof global food systems

In recent&nbsp;years, there&nbsp;has been growing debate and calls for more diversity in international funding destined for Africa as well as how the continent can encourage more local African asset owners to&nbsp;invest in impactful, sustainable and profitable sectors of the productive economy like its burgeoning Tech ecosystem. According to DEVEX, &#8216;Organisations led by Africans tend to get less money &#8211; with more strings attached &#8211; compared&nbsp;with those led by others.&#8217;&nbsp; For the African Tech sector alone, insights from TechCabal illustrate that &#8220;only 2 out of 10 investors who participated in VC deals in Africa between 2014 and 2019 were local.&#8221; This rolling conversation has been sparked by the notoriously high proportion of venture capital that goes to white founders operating in Kenya in particular, for example, and due to the controversial positioning of companies like Jumia, as &#8216;African&#8217;.&nbsp; Furthermore, there has been a lot of push back against a heavy-handed reporting culture of mistrust,&nbsp; which, in practice, constraints rather than enables the recipients of international grant funding from&nbsp;big Philanthropy, hindering their ability to run their innovative initiatives and social enterprises. Despite the essential nature of the services provided by NGOs, which themselves often lack the capacity to execute projects, and private sector intermediary firms to Development Financiers and governments, such organizations are often exposed to highly politicized bid processes which result in applications that have little chance of succeeding; what we see is a huge disparity of funding in favor of advisory firms from the Global North to the detriment of local expertise from the Global South with a clear proximity advantage.&nbsp;&nbsp;



During a recent DEVEX event discussing the Sustainable Development Goals and Angel Investing, African Venture Philanthropy Alliance (AVPA) CEO,&nbsp;Frank Aswani&nbsp;made a case for foundations and donor agencies to change their approach to become more &#8220;innovative, catalytic investors &#8211; instead of just giving money away as grants.&#8221;&nbsp; &nbsp;AVPA has been at the forefront of promoting innovative new approaches to Development Finance such as venture philanthropy and blended finance.&nbsp;



It&#8217;s also worth adding that many organizations in the &#8216;West&#8217; and &#8216;Global South&#8217; have made pledges to support diversity and racial equity but have failed to deliver.&nbsp;



Funders including Philanthropy, VCs, DFIs and Corporate Sustainability leaders are under pressure to be seen to be directing resources to those on the ground and not thousands of miles away from developing regions. 



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/d5fd8664-3553-e57c-44f0-391fb3f8887b.png" alt="" class="wp-image-407027" width="497" height="497" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/d5fd8664-3553-e57c-44f0-391fb3f8887b.png 390w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/d5fd8664-3553-e57c-44f0-391fb3f8887b-300x300.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/d5fd8664-3553-e57c-44f0-391fb3f8887b-80x80.png 80w" sizes="auto, (max-width: 497px) 100vw, 497px" /><figcaption>Amma Gyampo, Co-Founder of ScaleUp Africa</figcaption></figure>



In a recent TEDx talk, African Entrepreneurship, Gender Lens Investing, and Board Advisor,&nbsp;Amma Gyampo&nbsp;ended her segment with a rallying cry for &#8220;a more connected development&#8221;. She urges donors, DFIs and philanthropists to re-examine their biases and relationships with intermediaries from Africa. Gyampo is Co-Founder of the social enterprise, ScaleUp Africa, a female-led consulting firm based in Accra deploying innovative Corporate ESG, Innovation and Entrepreneurship services, capacity building initiatives to benefit women in the Tech, Agriculture and Creative industries in particular. The firm is one of the implementation partners for&nbsp;Mastercard Foundation&#8217;s&nbsp;COVID Resilience and Recovery Programme in Ghana charged with supporting SMEs with&nbsp;training and market access linkages.&nbsp;&#8220;In this post-Floyd and COVID world, African owned advisory firms play a critical role to&nbsp;tackle Racial Bias in the allocation of funding to Africans for the benefit of African ecosystems. These are all major security risks to the world at large. Africa is the youngest, most dynamic region in the world; as such, progressive boards, social investors and grantmakers can no longer overlook African advisory talent with local&nbsp;socio-cultural capital.&#8221;&nbsp;&nbsp;



ScaleUp Africa is a part of the new movement advocating and executing investment for mutual good and to achieve impact in Africa.

d5fd8664-3553-e57c-44f0-391fb3f8887b

Combating NeoColonialism In African VC, International Development Financing and Philanthropy

On 12 May, Naspers/Prosus announced the next step in its plan to unlock value, with the main terms of the announcement highlighted in our report dated 25 May 2021 and entitled, Naspers/Prosus: Another difficult choice ahead for Naspers shareholders. The deal announced was probably not among the possibilities that most investors had considered likely and, judging by the widening discount at which Naspers and Prosus have traded relative to their net asset values (NAVs) since, investors have been distinctly underwhelmed. In this note, we discuss how Naspers/Prosus shares have been performing of late, update investors on where things currently stand with the two companies’ respective discounts, and we look at Prosus’ trading update released on Thursday (10 June).



At present, we put the discount to NAV at 51% for Naspers and at 36% for Prosus. That is relatively wide compared to their respective histories but still some way off the widest the respective discounts have ever been. In Figure 1 below, we show a black dotted line where the recent share-swap offer was announced (12 May). Since then, the Naspers discount has tracked pretty much sideways, while Prosus’ discount has narrowed slightly.



Figure 1: Naspers and Prosus’ historic discounts to NAV



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image001.png" alt="" class="wp-image-406803" width="570" height="414" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image001.png 601w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image001-300x218.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image001-110x80.png 110w" sizes="auto, (max-width: 570px) 100vw, 570px" /><figcaption>Source: Anchor, Bloomberg</figcaption></figure>



Looking at the gap between the two discounts in Figure 2 below, we see that for a long time before the deal was announced, the gap was narrowing (in other words, Naspers was outperforming Prosus). This was exactly in line with our expectation that the next step to unlock value would most likely favour Naspers shareholders rather than Prosus – recall that the move most of us were expecting was for Naspers to distribute more Prosus shares to its shareholders and reduce its stake in Prosus from 72% to 50.1%.



Figure 2: The spread between Naspers and Prosus’ discount to NAV



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="601" height="437" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image002.png" alt="" class="wp-image-406804" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image002.png 601w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image002-300x218.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/thumbnail_image002-110x80.png 110w" sizes="auto, (max-width: 601px) 100vw, 601px" /><figcaption>Source: Anchor, Bloomberg</figcaption></figure>



In summary, we note that investors have had a bit of outperformance from Prosus since the announcement. Although the poor absolute performance of these shares has made it feel like the discount must be blowing out, it has possibly been a bit more moderate than investors might think – Naspers has gone from a 47.5% discount the day before the announcement to 51% currently (most of that decline occurred on the day of the announcement), while Prosus’ discount has gone from 39.9% on 11 May to 36.3% as at 10 June. This price action could imply that investors that have been holding Naspers in anticipation of a big value unlock have sold their shares and given up on that trade (as highlighted in our note&nbsp;<a href="https://anchorcapital.co.za/article/?naspers-prosus-another-difficult-choice-ahead-for-naspers-shareholders" target="_blank" rel="noreferrer noopener">Naspers/Prosus: Another difficult choice ahead for Naspers shareholders</a>).



Once this deal is done, it is very difficult to anticipate what corporate action comes next from these companies without significant tax/excon implications. If the deal does go through, as we pointed out, shareholders in Prosus get a c. 6% NAV uplift and Naspers shareholders, who opt to tender part of their stake, get close to a 10% NAV uplift. It is interesting that the current share price action suggests to us that none of this is currently being priced into their respective share prices. The next catalyst for these counters will be the release of FY21 results from Naspers/Prosus on 21 June. Given the decidedly underwhelming response to the announcement, it will be very interesting to see what management have to say at that point.



Regarding progress on the share buyback, as a reminder, the Prosus portion was completed in February 2021. In recent months, Naspers has been spending between US$100mn to US$150mn/week on the share buybacks. By the week ended 4 June 2021, it had US$238mn left to complete the US$5bn programme. According to our calculations, this share buyback should be done by the time Naspers announces its results. Keep in mind that, along with the share swap, the Group has announced another US$5bn share buyback. Given how little impact the last one had, however, it is probably not altogether surprising that this is being largely ignored by the market.



It is clear to us that sentiment around this Group is very negative at present. Given the way events have unfolded for tech companies during the COVID-19 pandemic, the company’s sales of Allegro (a Polish ecommerce marketplace), and Flipkart (an e-commerce company in India) are not looking so smart right now – admittedly, this is easy to say with hindsight, but the jury is also out on how well Naspers’ push into fintech, food delivery, and online classifieds is going. Certainly, pressure is mounting on management, and it will be interesting to see what management’s message to the market is when the company reports its results.



At present, our view is that we are close to maximum pessimism in terms of Naspers/Prosus – their discounts to NAVs are wide, the rand is strong, and recent weakness in Tencent means its valuation is much less demanding than it was in the past (if you strip out the tech investments that are not contributing to earnings, it is on a forward PE of c. 22x [or closer to 30x if you do not strip out these investments]). Assuming the share exchange does go ahead on 16 August, there is a NAV uplift that is not completely insignificant. It is proving very frustrating to have such large exposure to this Group when other SA Inc-related shares have been rallying, but we nevertheless believe it will be a senseless move to capitulate and sell the shares at this point.



In other Naspers/ Prosus-related news, Prosus came out with a trading update on Thursday (10 June) ahead of the release of its FY21 results (to end March) on 21 June. The most relevant number, in our view, is core headline earnings, which Prosus is guiding will be up by between 41.1% and 47.9% YoY in US dollar terms. This implies an earnings range of between USc292 and USc306/share.&nbsp;Bloomberg&nbsp;consensus analyst estimates are currently forecasting USc306.5/share &#8211; so not a major surprise. We continue to see Naspers/Prosus as more of a venture capital fund and we think it is not really fair to look at earnings when its business model is one in which it is investing in early stage (usually loss-making) internet businesses and then selling them when they have scaled, and the market is prepared to pay a full valuation for them.



Still, we believe that investors have also become tired of the never-ending losses in the rump and the inferior growth that Naspers has delivered vs investing directly in Tencent. While it looks to us like earnings are going to come in a touch below expectations, we think it is encouraging that the growth rate is well ahead of what Tencent is delivering. If Prosus can develop a track record where this remains the case, maybe it will start to build an investment following interested in the company for its own sake rather than just as a proxy for Tencent. The absolute growth which Prosus is set to report is impressive but, given where consensus analyst expectations are at, we are not sure this is likely to be market moving.



The other announcement on 10 June is what it called an “update” on the share exchange offer, having no doubt been fending off a few questions from investors since the initial announcement of the terms of the share exchange offer. In this regard, Prosus highlighted the following:



·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prosus is pushing the narrative that the shareholder agreement being put in place, which effectively creates a situation where the shares that each entity holds in the other are treated as if they do not exist (meaning all the economics go to the external shareholders), means that it is not complicated at all. It remains to be seen whether shareholders will believe this argument – we expect it to be approached with considerable caution.



·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company also reiterated that management is still incentivised to continue taking action to address the discount and it believes that the proposed transaction maintains the flexibility to do that (without elaborating on why it thinks that!).



·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rest of the announcement repeats some of the same rationale for why management believe that it is a good deal for shareholders, which is not very different from what was said before.



We are not sure that this latest announcement changes much, but it does confirm that management is intent on proceeding with the deal despite the chilly reception it has received from investors.

Naspers logo is seen in Johannesburg

NASPERS/PROSUS: UPDATE ON PLANS TO UNLOCK VALUE AND PROSUS TRADING UPDATE

The development of renewable energy has evolved dramatically over the years, with sophisticated solutions, underpinned by technological advancements, becoming more readily accepted and adopted. Boitumelo Kiepile, Head of Regulatory affairs at Enel Green Power South Africa (EGP RSA), discusses these solutions, as well as trends in the renewables industry, regulatory changes, and how renewable energy can contribute to the economy.



In recent years, both developed and developing countries have been&nbsp;increasing their uptake of renewable energy sources, especially wind and solar, as preferred sources of energy. This has been driven by various factors, including&nbsp;country-level commitments to decarbonisation&nbsp;(linked largely to the Paris Agreement); decreasing technology costs leading to even lower tariffs for new solar and wind generation;&nbsp;commitment by large global corporates&nbsp;to greening their operations; and&nbsp;new and ever-changing technology&nbsp;that is making it easier to deploy renewable energy.



These trends can be grouped into four main categories, namely global climate change trends, technological trends, demand-driven trends, and the local country-specific trends. Technologically, grid&nbsp;integration of both large-scale wind and solar is reaching parity to fossil fuel generation, and the introduction of&nbsp;energy battery storage is leading to improved&nbsp;reliability&nbsp;of the power system.



Demand-driven&nbsp;trends are emerging from end-customer choices, including communities, corporations, and cities seeking reliable, clean and affordable energy supply. Lastly, at country-specific level, adoption of enabling policies and regulations is likely to further increase the uptake of renewable energy sources. Specifically, various&nbsp;countries in Sub-Saharan Africa are setting targets&nbsp;(as capacity targets or production targets) to increase the share of renewable energy sources in their respective energy mixes, and are also updating regulations to enable the achievement of these targets.



Regulatory changes



It is always argued that regulatory and policy changes lag technological changes. In South Africa, one can see how&nbsp;regulatory and policy changes have lagged the adoption, deployment and integration of solar PV embedded generation by the residential, commercial and industrial electricity-consumption segments.



The larger utility scale programme, namely&nbsp;Renewable Energy Independent Power Producer Procurement Programme (REIPPP), was established a decade ago through a supporting policy framework in the form of the Integrated Resource Plan and associated Ministerial Determinations and processes for permitting, licensing and connection to the grid fully established.



The electricity regulation framework in South Africa had previously provided for ‘own-use’ generation in the form of a Schedule to the main legislation. In this old Schedule,&nbsp;no limits were set as to the capacity that could be built for ‘own-use’ and no permitting and licensing process existed. It was only in 2016 that an amendment to the Schedule was proposed and a capacity allocation was provided for in the initial update to the Integrated Resource Plan.



Since then, the Schedule has gone through various iterations, the most recent providing that&nbsp;generation facilities not exceeding 10 MW for embedded generation will not be required to apply and hold a generation license, and the updated 2019 IRP makes an allocation of 500 MW per annum&nbsp;for these kinds of generation facilities. These updates happen on the back of a self-generation/own-use market that is estimated to have grown from 21.5 MW in 2013 to 282 MW in 2020 (according to a report by the South African Local Government Association) led by the commercial and industrial markets installing either rooftop or ground-mounted solar PV solutions. The Council for Scientific and Industrial Research estimates a total small-scale embedded generation installed capacity at about 1.2 GW.



Other areas in which&nbsp;policy and regulation could adapt to keep pace with technology&nbsp;include advancements in the areas of energy storage, off-grid systems as an option to increasing electrification rates, smart grids, green hydrogen, and the general decentralisation of energy services.



There is therefore a&nbsp;need for enabling new and updated policy&nbsp;and legislation to move to a more open business model for the electricity supply industry – a model that embraces the existence of multiple generators including independent producers, an independent systems operator, and multiple distribution entities providing a suite of electricity services to meet the needs of different classes of end-users.&nbsp;



How renewables can contribute to the economy



The role of renewables in the economy cannot be overstated. In South Africa,&nbsp;The REIPPPP attracted investment (equity and debt) of a total value of R209.7 billion (R41.8 billion: foreign investment). Since inception of REIPPPP in 2011,&nbsp;55 217 job years were created for South African citizens&nbsp;to date, the programme further contributed to socio-economic development and&nbsp;enterprise development of R1.3 billion and R402.5 million&nbsp;respectively, according to reports from the Independent Power Producer Office.



Black South Africans hold 33% of the shares&nbsp;across the entire supply chain.&nbsp;Local communities hold 9%&nbsp;equity in the IPPs who were awarded projects in the REIPPPP.&nbsp;These numbers will increase&nbsp;with the recent determination issued by the Department of Mineral Resource and Energy for the procurement of 4 800 MW of wind and 2 000 MW of solar PV between 2022 and 2024.



The future of renewables



The renewables sector holds vast opportunities for the global economy and local economies in terms of both&nbsp;transitioning to cleaner energy and also as a contributor to economic growth.&nbsp;The opportunities lie not in the end product that is clean energy, but in the entire value chain that spans manufacturing of components, to provision of supporting services, the development of power plants, and their operation and final dismantling of used assets.



In South Africa, the re-imagined industrial policy has identified the green economy, which includes renewables, as a sector that will play a key role in the industrialisation of the economy and&nbsp;contribute to the economic reconstruction and recovery plan post the Covid-19 pandemic.



Specifically, the commitment to the acceleration of the implementation of the Integrated Resource Plan (with its target of 17.7 GW of wind and 8.2 GW of solar PV installed by 2030), as well as the implementation of the now-in-bid stage&nbsp;Bid Window 5 of the Renewable Energy IPP Procurement Programme, the changes to the regulatory framework to&nbsp;facilitate further uptake of renewables by the commercial and industrial market segment, and the continuation of work for the restructuring of Eskom into three separate generation, transmission, and distribution entities, all bode well for the renewables sector in South Africa.



More specifically, amendments to electricity regulations on new generation capacity were published on 16 October 2020, which&nbsp;allow municipalities to procure their own power from IPPs. This change in regulation improves the prospect of earnings from future investment in generation capacity to meet the demand for a growing economy.&nbsp;&nbsp;



Recent efforts have been made by the government to open up the electricity-generation market, although more is needed to address the immediate challenges of security of supply and affordability of electricity. The Department of Mineral Resources &amp; Energy (DMRE) recently issued a notice that intends to lift licensing requirements for generation facilities of up to 10 MW. It is expected that the lift will boost the uptake of renewable energy in the commercial and industrial segments.



Frequent&nbsp;power outages experienced since 2015 and above-inflation electricity tariff increases have expanded the need for self-generation&nbsp;for intensive energy users. A significant increase in the number of RFI and RFP issued in 2020 indicate an increased appetite for self-generation, despite regulatory barriers.



Examples from publicly available information include: Shoprite investing in rooftop PV (12 300 MWh per year) and Sasol together with Air Liquide announcing their intentions to procure 900 MW of renewable energy. The key drivers for growth of the embedded generation segment of the market include: high tariffs, unreliable supply, and the presence of intensive energy users. It is therefore likely that, with enabling regulations,&nbsp;these end consumers will take the opportunity to procure their own electricity.



In the African context, abundant endowment in renewable energy resource, increasing population, increasing economic growth and changes to modern ways of living are driving the growth in energy demand, and thus the&nbsp;need to accelerate adoption and deployment of renewable energy technologies. The abundance of renewable energy resource in most African countries makes it economically competitive to deploy technologies such as solar, wind, and in other cases, biomass and geothermal power.



Furthermore, the&nbsp;democratisation and decentralisation of power means that local communities can be empowered to participate&nbsp;actively in the harnessing of their energy needs, thus improving their economic status. Research studies have further indicated that in Africa, about 600 million people have no access to modern electricity services – this presents an opportunity for the expanded role of renewable energy.



Renewable energy is certainly moving towards establishing itself more prominently in our future, and its value is undeniable. Increased adoption is happening at a more rapid pace, and this is opening the door to opportunities not only in terms of stable power-generation, but in terms of much-needed economic development in South Africa and the African continent.

Renewable_Energy_on_the_Grid Phot via Wikimedia Commons

Renewable energy gains momentum in Africa

As economies reopen in various parts of the world, the price of some commodities has soared, including the prices of prominent industrial metals. The extent to which the metals price rally may lose steam depends on how multiple factors will play out.



As our latest chart of the week shows, metals prices have increased by 72 percent relative to their pre-pandemic levels—reaching a nine-year high in May (in inflation adjusted terms). The increase has been broad-based across industrial metals—copper is up 89 percent in May (year-over-year), iron ore is up 116 percent, and nickel is up 41 percent. The prices of most agricultural and energy commodities are also tracking upward, but at a slower rate. Energy commodities (oil, coal, and natural gas), in particular, sit only a few percentage points above pre-pandemic levels.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="559" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original-820x559.png" alt="" class="wp-image-406264" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original-820x559.png 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original-300x204.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original-117x80.png 117w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original-768x523.png 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/06/metals-chart_original.png 1092w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



Why have metals prices increased much more than other commodities? There are four reasons:



<ol class="wp-block-list"><li>A manufacturing-based recovery: Manufacturing activity did not slump as much at the start of the pandemic and recovered more quickly than services, especially in China, which is the major user of metals. At the same time, sectors in which energy commodities feature prominently, like the transportation sector, remain depressed. For example, global road fuels consumption is still at 93 percent of pre-pandemic levels, restraining a further rebound of petroleum prices.</li><li>Supply-side factors:&nbsp;Many mining operations were temporarily disrupted by COVID-19. What’s more, freight rates for the transportation of bulk materials reached a ten-year high due to congestion in key ports, quarantine restrictions, ongoing problems staffing shipping crews, and a rebound in fuel prices from the deep troughs in Spring 2020. This all added to the cost of metals.</li><li>Expectations for faster energy transition and infrastructure spending:&nbsp;Buoyant expectations about the pace of the transition to a greener economy and ambitious infrastructure programs gave metals prices an additional boost. Both would increase the “metal intensity” of the global economy. A fast energy transition, for example, could require a 40-fold increase in the consumption of lithium for electric cars and renewables, while the consumption of graphite, cobalt, and nickel for these purposes may rise around 20 to 25 times, according to the International Energy Agency. Ambitious infrastructure programs in the European Union and the United States would drive up the demand for copper, iron ore, and other industrial metals.</li><li>Storability of metals: Metals are easier to store than crude oil or some agricultural goods, which need special facilities. This makes their pricing more forward looking and, thus, more sensitive to changes in interest rates (lower interest rates reduce the “cost of carry,” which also includes cost of storage, insurance, and other expenses, and, thus, tend to support commodity prices) and market expectations, such as the ones about a faster energy transition and infrastructure spending.</li></ol>



Will metals’ prices keep increasing or retrench? This is a challenging question.&nbsp;



Market participants seem to expect a peak in metals prices relatively soon, as factors (1) and (2) are supposedly temporary in nature. Indeed, futures markets suggest an increase of industrial metal prices by 50 percent in 2021 (year-over-year), but a decrease by 4 percent in 2022.



Still, prices are expected to remain high and could rise further, especially if demand from an energy transition accelerates. On the flip side, prices may decrease more than expected if legislative approval and government actions required for the energy transition and infrastructure programs do not materialize as expected.



<a href="https://blogs.imf.org/bloggers/martin-stuermer/?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">Martin Stuermer</a>&nbsp;is an economist in the Commodities Unit of the IMF’s Research Department.



<a href="https://blogs.imf.org/bloggers/nico-valckx/?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">Nico Valckx</a>&nbsp;is a senior economist in the Commodities Unit of the IMF&#8217;s Research Department.

istockphoto-1030477600-612×612-1

Four Factors Behind the Metals Price Rally

Cryptocurrencies such as bitcoin are unlikely to become commonplace as tender for mergers and acquisitions. Increasingly, sellers want hard cash and are not opened to listed shares as a medium of exchange never mind bitcoin.



The variability of crypto-currencies mimics listed instruments that sellers are avoiding more and more as it is their aim to control the value and price of the transaction.



Notwithstanding the massive rise in value of bitcoin since it was created at the height of the 2008/2009 financial crisis to offer an alternative to national currencies, the cryptocurrency is far from being an alternative medium of exchange partly because it lacks widespread usage and has a wildly fluctuating listed price.



The reasons behind its recent prolonged slide that turned into a selling frenzy in the past month undermine its most important investment case: that its value cannot be tampered with, especially by central banks and governments.



China’s recent announcement barring financial institutions from accepting the virtual currency for payment or to provide services such as savings and investments using them, sparked the plunge in bitcoin and others. At the same time Elon Musk backed away from a previous plan to accept payment for his electric cars in bitcoin, further putting the market under pressure.&nbsp;&nbsp;



Cryptocurrencies suffer the same defect as listed shares, so similarly we are seeing sellers not wanting to be paid in shares – with the case of Tekkie Town being a classic example of why not when the sale was funded by soon-to-collapse shares in Steinhof. Sellers cannot thereafter control the value of shares, and the same applies to cryptocurrencies to an even more exaggerated extent.&nbsp;In a matter of days, the payment might be worthless.



If you look at the primary motives for a sale as being value and risk, then clearly the seller is going to want cash in hand rather than accept the risk of a material fluctuation in the value of a listed share price, or bitcoin, or any other cryptocurrency. The risk of that market dynamic is just too great for a seller. Instead of offering investors stability as a form of payment that can be used globally, cryptocurrencies promise wild gyrations. This factor makes it impossible for a seller to take them as a medium of exchange.



Although cash is the preferred medium of exchange, if the acquirer is a listed company, it will frequently offer a share swap as its first choice. This is because, unlike a cash transaction in a share swap transaction the risk is shared by shareholders of both acquiring and target companies. There is some logic to this in a share swap as it shares the synergy risk, but the downside risk exists with a Bitcoin purchase without it benefiting the synergy.



The strategy behind a share swap is often that there will be a recovery in the share price of the listed buyer which wants to diversify but does not have the cash. In 99% of the cases as the seller’s sell-side advisor we would reject a share swap or bitcoin consideration, and so would our clients, because the payment instrument is so fickle.



A primary reason for the shift to cash is the value destruction seen on the JSE of some companies – such as Steinhof. While this may not be significant to the overall performance of the JSE’s ALSI it has had a “ripple effect” in terms of confidence of valuations. The market goes in cycles: when there is buoyancy in the market a share swap might be an easier sell, but at times of value loss it is much less attractive. It is a hard sell now with a lot of listed companies not doing particularly well in the current environment. Gone are the days when a private company being bought by a listed company was a symbol of confidence and prestige.



There is a material increase in the governance and compliance requirements for a privately-owned business that enters the ‘listed’ fold through an acquisition. With the increased compliance reporting and compliance costs, process red tape and public scrutiny, the sacrifices made by the entrepreneur must be compensated through a robust deal value and structure.



Business owners, when selling, need to maximise value and de-risk their current exposure to their business. Why would you hand the value of your life’s investment over to an acquiring company’s stock exchange traded instrument over which its management team has no control over its market value?&nbsp;



ABOUT&nbsp;DEAL LEADERS INTERNATIONAL



Deal Leaders International (DLI) is a specialist M&amp;A advisory firm that offers strategic sell-side solutions to both owners and shareholders of companies with turnovers in excess of R100million per annum.



As the African alliance partner to the Pandea Global M&amp;A Network, the company can unlock extensive local and international acquirer and investor networks.&nbsp;



DLI Corporate and Advisory, headed up by Andrew Bahlmann, partners with large privately-owned, corporate, listed and private equity-owned businesses to grow, extract value and ultimately exit through a successful equity transaction. Working with both South African, and internationally, owned business with a transaction value in excess of R250 million, the Corporate &amp; Advisory business unit is able to offer very niche value proposition to its clients.



DLI’s Owner-Managed business unit is headed up by Rick Grantham and leverages its core focus and competencies to work with privately-owned business with a transaction value up to R250million.&nbsp;By bringing on only two to three new clients a month, a professional and experienced team supports and guides the seller – and the seller only – along the daunting and challenging path of selling a business successfully.



The Sandton-based advisory firm is currently managing several transactions in multiple industries, successfully attracting both local and international acquirers to its clients’ businesses. By focusing on businesses with turnovers more than R100 million per annum, the Deal Leaders International portfolio aligns to most local and international investment strategies.&nbsp;&nbsp;

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Deal Leaders International Advises Clients to Avoid ‘Fickle’ Bitcoin Deals

Although the light at the end of the COVID-19 pandemic tunnel is visible in certain parts of the world, it remains dim across much of Africa. Vaccine availability ranges from severely lacking to nonexistent—even for priority groups such as health care workers. COVID-19 surges in places such as India, where the dominance of new, more dangerous variants has had devastating consequences, are cause for concern in many countries in Africa.



It is likely that cases have been underestimated across much of Africa since the start of the pandemic, contributing to a dangerous global myth that the continent has escaped the most devastating effects from the virus. Limitations on testing capacity and surveillance make it difficult for governments to properly track the virus, although countries have made great strides in testing capacity. In the past six months, tests per 10,000 people have doubled.



More than one year into the pandemic, we are contending with the threat of the virus itself and the threats associated with pandemic fatigue. To combat the latter, governments must be smart about balancing the use of public health measures to stop the spread of COVID-19 with the impact these measures have on lives and livelihoods.



A group of organizations including Resolve to Save Lives, an initiative of Vital Strategies, and the World Health Organisation formed a public-private partnership* to compile and analyze data to provide African Union Member States insight into the direct and indirect effects of COVID-19 in Africa, including the acceptability, impact and effectiveness of public health measures to combat COVID-19. The Partnership for Evidence-Based Response to COVID-19 recently released its third report based on data compiled in February 2021 from more than 24,000 surveys, data from social and news media and trend analysis with the previous report. The findings speak to a real and immediate need for us, as part of the global community, to increase support to country leadership as they work to prevent further spread of COVID-19 in Africa, lest another, deadlier wave sweep across the continent.



Here’s what we learned from our recent survey:



COVID-19 has become more prevalent across Member States, although this varies from country to country. The percentage of respondents reporting they or someone in their household had COVID-19 more than doubled from our previous survey fielded in August 2020: from 3 percent to 7 percent in February 2021. And people may not be seeking care for potential COVID-19 symptoms; more than 20 percent of respondents that reported missing health care services said they did not seek care despite experiencing symptoms which may overlap with COVID-19.



There has been significant disruption to health service delivery since the start of the pandemic. Among respondents that reported they or someone in their household required a health care visit, almost one in four (23 percent) reported missing or skipping services since November 2020, and 43 percent reported difficulty obtaining medication in the same timeframe.



Income loss and food insecurity continue to increase, particularly among the most vulnerable. More than three quarters of all respondents (77 percent) reported losing some or all of their income since the start of the pandemic. More than 80 percent of respondents reported challenges accessing food in the previous week, an increase of 8 percentage points since August 2020. Lower-income households reported higher rates of complete income loss and barriers to accessing food.



Overall, respondents reported high adherence to individual measures to prevent COVID-19, particularly face mask use—an encouraging finding, because masks are low-cost and high-impact. However, adherence to measures restricting social gatherings and mobility decreased between August 2020 and February 2021 in most Member States surveyed, in line with governments loosening public health measures.



What can we do now to prevent another India?



Africa needs more vaccines as quickly as possible, and the global community must step up to increase production, ensure equitable allocation and rapidly share technology and expertise with Member States to allow long-term regional production. That said, vaccination is not a panacea; Member States should take urgent steps to increase capacity to detect, test, sequence and trace cases and new variants to mount effective COVID-19 responses and implement targeted public health measures.



With vaccine rollout proceeding slowly, targeting public health measures to the areas most affected by COVID-19 will be vital to ensuring continued adherence in the coming months and years. Continued emphasis on individual measures—mask-wearing, hand-washing and maintaining physical distance—will be necessary for keeping transmission low while economies remain open. Focused public health measures will maximize adherence for the long haul, while minimizing their secondary burdens—allowing governments to prevent surges before they start and limit the need for the most restrictive measures.



Transparency in decision-making and community engagement are key to convincing people to adhere to public health measures and receive the vaccine if offered. Respondents who were satisfied with their government were more likely to report adhering to public health restrictions and express interest in vaccination (for the latter, 71 percent versus 50 percent). With this in mind, the slow vaccine rollout across Africa offers the opportunity for governments to craft targeted information campaigns. Health literacy will be the vaccination against misinformation.



Relief for high-risk populations will offset at least some of the crushing indirect burdens cascading from the pandemic such as income loss, food insecurity and access to essential health services. Such burdens were more likely to be experienced by lower-income households, who were simultaneously less likely to receive government support. Only 13 percent of respondents reported receiving any government support in the past month; within this number, a higher percentage was from higher-income households, which indicates that the communities in most need are, dismayingly, receiving the least support. Governments must use evidence-based and targeted strategies to identify and offer relief to their most vulnerable populations.



This relief also applies to essential health services. COVID-19 threatens to undo decades-long progress in strengthening health systems and improving access to care and treatment. Fear of catching COVID-19, health facility disruptions or closures and affordability were the top three reasons for missing care. To mitigate these factors, governments must prioritize vaccinating and otherwise protecting health care workers, as well as strategically communicate to the public that seeking care at health facilities is safe.



With the slow vaccine rollout and the threat of new variants, the African continent remains vulnerable to COVID-19. The global community must step up for vaccine manufacturing. Governments must be vigilant in their continued fight against the disease and use data to find the balance between public health measures and the indirect burdens they pose. We all—the global community, as well as country leadership—have the responsibility to protect our people in times of crisis. With targeted campaigns, community engagement and support for their country’s people, governments have the capacity to save lives.



*Resolve to Save Lives and the World Health Organisation partnered with Africa Centres for Disease Control and Prevention, the World Economic Forum, UK Public Health Rapid Response Team, the London School of Hygiene and Tropical Medicine, the National Academies of Sciences, Engineering, and Medicine, and market research firms Ipsos and Novetta Mission Analytics to produce the PERC report.

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We cannot afford another India—to prevent a catastrophic third wave of COVID-19 in Africa, look at data to drive the response

<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/Rakesh-Wahi-820x547.jpg" alt="" class="wp-image-402995" width="840" height="560" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/Rakesh-Wahi-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/Rakesh-Wahi-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/Rakesh-Wahi-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/Rakesh-Wahi.jpg 1280w" sizes="auto, (max-width: 840px) 100vw, 840px" /><figcaption>Rakesh Wahi &#8211; Founder CNBC Africa &amp; Forbes Africa</figcaption></figure>



India’s COVID catastrophe is a lesson for governments around the world to prepare for the next wave



“The pharmaceutical sector must be given incentives in Africa so that capacity to produce medicines is enhanced exponentially. Collaboration must be set up with international companies to enhance both patented and generic medicines so that developing countries are not treated with lower priority when it comes to healthcare; all human lives are equally valuable,&#8221; said Rakesh Wahi, CNBC Africa &amp; Forbes Africa Founder.



I arrived in Delhi with my wife on 15th April 2021 as the COVID-19 pandemic had started to rage through our country. Our only motivation was to be with our respective mothers who live alone in Delhi. When we landed in Delhi, things were relatively normal, and on the surface, it was almost business as usual.



The first telltale sign of the impending chaos was when we did not get our test reports from the PCR tests that were taken on arrival in Delhi. The word ‘normal’ is relative, as for most other countries in the world, 250,000 cases a day would have been catastrophic. In a matter of two weeks, and as I write this piece, the cases crossed 400,000 on 30th April 2021 with no end in sight.



Our hindsight pundits say that the peak will signal approximately 500,000 cases a day or over 3.5 million cases a week. The scale of this problem is frightening and as news has spread across the globe, people are shocked and the affected are incensed and outraged by the lack of preparedness.



There was no reason for a country like India to not be prepared. Just a few months back, we had proudly positioned ourselves as the vaccine capital of the world. How did we go from being the hunter to the haunted in three months? How did we ignore the words of the Director-General of the World Health Organization who categorically stated that the next wave was going to be deadly?



I have watched the news over the last few weeks and sadly seen that the finger-pointing does not stop even during times of calamity. With all the human suffering that we have witnessed, there is no one who has the moral courage and integrity to accept that he or she has made an error in judgement.



Our judiciary at the highest level had to point out to the Election Commission of India that they failed the people of the country by continuing with elections in three regions. The only people that have stayed the course are the frontline workers who have remained resolute in their resolve to help save human lives. The poor as always face the brunt of any calamity and this has been no different in this case. However, for once, the rich have not been spared either.



People with millions in their bank accounts have fallen prey to this pandemic as in the end all they needed was an extract from freely available air and yet it was in short supply. No amount of money could help people source oxygen or find a hospital bed. The current virus is far more contagious and spreading faster through the air. The catastrophe has seen no caste, creed or economic disparity; everyone has suffered. The agony and despair of the people of our country have been beyond any human suffering that I have witnessed during my life. And yet, we will get past even this; such is the tenacity of human beings.



The citizens of India have suffered as a consequence of serious and inexcusable omissions and negligence on the part of the national and state leadership; every one of them. However, the people of the country must take responsibility for their reckless conduct leading to this disaster that will set our country back from its path to recovery. Not adhering to social distancing and taking the vaccination drive seriously are two major errors of judgement by the people.



When disaster struck, everyone wanted to be vaccinated at the same time causing a system overload. I would like to take this opportunity to highlight some of the immediate actions that African and other governments must take. It has to be like a war footing.



The biggest failure is stakeholder communications. The people of India were given to believe that the pandemic was over in February 2021. Politicians thumped their chests as they did their victory laps taking credit for beating the virus. This gave a false sense of security and people put their guards down and started behaving like it was business as usual. Clear communication from governments must continue indicating in no uncertain terms that the crisis is far from over.



Until a majority of the population has been vaccinated, all major events (of whatsoever nature including weddings, sports, religious or political campaigning) must be cancelled or held virtually. For everything else including office and other entertainment, dining and retail activities, all social distancing protocols must be followed meticulously. We have learned from 2020 that 100% lockdowns may not be necessary and to find the right balance, where needed, consider localized restrictions in infection zones. Lockdowns should be used as a measure of last resort as they are likely to do more damage than good.



Linked to vaccinations is the importance of testing. Governments must set up more labs for testing at reasonable costs and continue testing its constituents for the infection and also determine any variations or mutations to the virus until the vaccination drive is conclusively completed.



All governments must revert back to March 2020 and begin ramping up their healthcare infrastructure. This is the time to build additional ICU capacity in hospitals and infrastructure at several temporary purpose-built facilities that can take on overflows from hospitals. Some facilities should be built beforehand and others must be stored in semi-knocked-down condition in warehouses should the need arise. All hospitals must have adequate ambulance services available to move people as necessary.



Ramp up oxygen production capacity and ensure that the storage of 50% excess capacity than normal national utilization targets are kept in reserve. This has proven to be the lifeline for COVID patients. In the same vein, all other oxygen infrastructure should be ramped up, including concentrators and other devices that can be used at home by people. The experience in India has been that for this particular virus, home care has been far more effective for a majority of the cases. For that, freely available support systems for home use are invaluable.



The only cure to the pandemic is an aggressive vaccination policy. There is no cure other than getting vaccinated and governments must procure vaccinations and make them available at a reasonable cost (if not free) to the entire nation. Countries that are behind on the vaccination drive must ramp it up and carry out a campaign to educate people on the urgent need to get vaccinated. There is clear evidence of lower incidences in countries where the vaccination rates are high. For Africa, I believe that the DFIs must immediately look at setting up infrastructure to become self-reliant on vaccines for the future. This is not an option; if anything is to be learned, no time must be wasted on this. It’s not rocket science and immediate action must be taken to develop the pharma industry expeditiously.



The pharmaceutical sector must be given incentives in Africa so that capacity to produce medicines is enhanced exponentially. Collaboration must be set up with international companies to enhance both patented and generic medicines so that developing countries are not treated with lower priority when it comes to healthcare; all human lives are equally valuable. Capacity must also be built for other hygiene products including masks, sanitizers, PPEs and other essential items.



An area that needs attention is the training of healthcare workers. The pandemic is contagious and care-givers need to be trained to stay out of harm’s way. The only way this can be done is to improve the quality of training of all frontline workers.



My next comment is on the role of the media. Being a media owner myself, I understand the need for accurate and actionable news but there rests an enormous responsibility in finding a balance between highlighting negligence and fueling chaos. Remember one thing always, that no government or administration ever wants to harm its people; this must remain an intrinsic belief at all times.



As a case study, in India over the last two weeks, there has been a frenzy in the Indian media regarding lapses in the preparation and the state of affairs at hospitals. While on the one hand it served the very important purpose of holding public servants accountable for the absolute mismanagement of this crisis, the media created unintended fear in the public. This fear resulted in people going to hospitals the minute they tested positive thus clogging the system; there was a run on oxygen cylinders and concentrators as people began hoarding them and finally, there was a run on pharmacies that ran out of essential medicines because even people who did not need medicines, as a precaution, began storing them. What then emerged was a black market that has preyed on the sick and despondent.



It is my request to all media businesses around the world to begin devoting more than a cursory mention to the awareness campaigns around the pandemic. More inventory needs to be devoted towards educating people on the actions to be taken when the next wave arrives, the importance of vaccination and most importantly, on responsible social behavior.



The best cure still is wearing masks, social distancing and sanitizing one’s hands regularly. If and when the next wave hits, the media must spend more time on educating people on taking precautions and symptoms management so that everyone does not run to hospital. If you can educate even a few people, you would have done your duty to humanity. Remember this is far from over and the lessons from India must be taken seriously by all governments around the world.



Prepare for the next wave or history will repeat itself.

Rakesh-Wahi

From The Eye Of The Storm

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-820x461.jpg" alt="" class="wp-image-400601" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-1536x863.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/AAA_1696.1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /></figure>



I was having an engaging Zoom chat about financial inclusion last week with a senior female executive when we were interrupted by her charming toddler who had other priorities. After some on-screen introductions and my poor attempt to entertain her child, she shared a personal reflection. Despite her partner being in an adjacent room, the little one tended to knock on her door frequently.



As we are now seeing in the data, the pandemic’s effect has added to the pressures experienced by women. Often women have had to pick up more household chores and childcare duties, and many have had to face unemployment as their jobs are 1.8x more vulnerable as they tend to work in sectors that are hardest hit by the economic downturn such as retail, restaurants etc. According to the UN Women, the pandemic risked turning back the clock on gender equality by 25 years.



But, if we collectively activate the power of women’s contribution in Africa, and encourage them to reach their potential, companies log increased performance, societies become more productive, and economies thrive. In fact, Africa could add $316 billion or 10% to GDP by 2025 if each country makes advances in women’s equality to match the country in the region that has achieved the most progress towards parity (McKinsey 2019).



Amidst recovery, we now have a chance to hit the reset button in all industries – across the board, and across boards. It is time to ask ourselves if we have the balance that Africa needs – and prepare to do what it takes to get there. It will require collective action from corporates, governments, NGOs and communities to make it happen. There is much work to do. Gender inequality in work and society loom large, and interventions are critical.



<h2 class="wp-block-heading" id="h-opportunities-to-advance-gender-equality">Opportunities to Advance Gender Equality</h2>



Unleashing potential and unblocking much needed growth can be actioned across three priority areas: youth, women entrepreneurs and women in the workplace.



<ul class="wp-block-list"><li>Youth – Africa is home to 19 of 20 of the world’s youngest populations which should present a tailwind of productivity opportunity. However, with youth (15 – 24 years old) unemployment as high as <a href="https://www.enca.com/business/youth-unemployment-desperate-challenge-expert">63.2%</a> in countries like South Africa there is an urgent need to align academic and technical skills with employment realities. Encouraging girls to participate in Science Technology, Engineering and Maths (STEM) subjects is key to develop critical 21st century skills girls need for their studies and career success. Bringing more female youth into technology fields and achieving gender parity will only make companies stronger and products more relevant to women as customers.</li></ul>



<ul class="wp-block-list"><li>Women entrepreneurs – According to the 2020 Mastercard Index of Women Entrepreneurs, Africa has the world’s top three countries when it comes to women entrepreneurs (as a percentage): Uganda (39.6%), Botswana (38.5%) and Ghana (36.5%). Despite some positive trends, the report also notes the disproportionate impact of the COVID-19 pandemic on women entrepreneurs around the world, with 87% saying they have been adversely affected. Overrepresentation in sectors hardest hit by the economic downturn, the pronounced digital gender gap in an increasingly virtual world, and the mounting pressures of childcare responsibilities are only a few factors that have left women particularly vulnerable. Despite the obvious challenges, the report highlights a number of opportunities for women in the COVID-19 era, particularly in online shopping and digital commerce. As a non-exec board member of Junior Achievement South Africa – a non-profit organisation that is playing its part in preparing the youth for the 21st century through entrepreneurial training and financial literacy programmes &nbsp;&#8211; I have seen how versatile and resilient women entrepreneurs can be in the face of adversity. Shortly after the pandemic started, I had the chance to mentor a woman who pivoted her fashion business to produce face masks and set up an online store. Ensuring access to technology or digital solutions, affordable data and modern trade resources as well as business training will empower more women to succeed in business.</li></ul>



<ul class="wp-block-list"><li>Women in the workplace &#8211; While Africa has above average board representation of women at 25% (McKinsey 2019) compared to the global average, it lags in executive committee positions and women coming into middle management positions. Gender equality in the workplace requires an adjustment by all of us if it is going to become a reality in the near term. At Mastercard, we have grown our female workforce across Africa by 370% over the last 5 years and across the Middle East and Africa, our team is 42% female. While there is still room for improvement, we have made meaningful interventions:</li><li>We closed the gender pay gap to ensure that women earn $1 for every $1 earned by men.</li><li>Recognising that women may take a professional step back if they have children, we introduced 16 weeks of paid parental leave for both men and women. Eighty percent of men from across the business take their paternity leave, helping us develop a sharing environment, redress the balance between maternity and paternity leave, while also ensuring that same-sex partners aren’t left behind.&nbsp;</li><li>We have a dedicated Mastercard Women’s Leadership Network – a global network with local chapters in South Africa and Kenya that are tasked with developing and advancing women into leadership roles supported with training and mentorship opportunities.</li><li>We have evolved the recruitment process, designing 50/50 gender slates for all roles. The best person will always get the job but the process has been redesigned for greater fairness and opportunity.</li></ul>



Companies must make gender equality a priority, commit to KPIs and measure there&nbsp;progress. Much acclaimed Jane Fraser shattered the glass ceiling a few weeks ago by becoming the first women to lead a major US bank as the new CEO of Citigroup &#8211; a ceiling that has already been shattered in Africa. This is a positive step, but we can agree there is much more to do beyond these first milestones.



As we position our businesses for recovery in a post-Covid-19 world, we should be doing so with a vision and goals for gender parity. We need to provide girls with access to education from an early age so that they can develop the skills needed to be the leaders of tomorrow. We need to provide better access to financial and digital tools, support women in starting and growing their businesses, and foster a workplace where all employees feel valued, respected, and empowered to reach their greatest potential. By doing so, we can create a more equitable and prosperous future for us all.

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Women are Essential to Africa’s Recovery Plan

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-820x547.jpeg" alt="" class="wp-image-399000" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/03/GettyImages-1253792565-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Image for illustrative purposes only</figcaption></figure>



<p id="h-businesses-that-want-to-grow-sales-and-market-share-are-looking-for-ways-to-increase-their-pool-of-customers-the-good-news-is-that-there-is-a-massive-market-segment-and-resource-that-remains-under-utilized-women">Businesses that want to grow sales and market share are looking for ways to increase their pool of customers. The good news is that there is a massive market segment, and resource, that remains under-utilized: women.



Consumer product companies and marketers have long understood that women are the key decision-makers when it comes to household purchases. While they may have invested in understanding the purchasing behaviour driving sales in their markets, often, the data they rely doesn’t adequately capture women’s experiences and needs. Moving into the future, the companies that compete successfully will be those that build women’s participation into every level of their workplaces and decision-making processes, from leadership and strategy, through product design to customer-facing roles.



This need for diversity extends to the new frontier of artificial intelligence (AI). As companies are increasingly using data to drive decision-making, we have to confront the reality that women are often excluded from both the creation of AI and the data that is being collected.



There is already strong evidence that companies that have women on boards and in senior executive roles are out-performing their competitors. Studies show that businesses with diverse leadership enjoy 21 percent higher revenue than their peers and are 27 percent more likely to have long term value creation. These numbers are more significant at a time when revenues are being challenged due to the COVID-19 pandemic.



Women’s increased participation in the workforce also holds the prospect of greater economic growth. Women’s unequal participation costs the economies of sub-Saharan Africa an estimated $95 billion dollars (R1.7 trillion) every year. Women also invest more than 90 percent of their incomes back into their families and communities, further contributing to prosperity. If women participated equally in the global economy, they could add $28 trillion to global GDP by 2025, a number to consider as we look for a global recovery from the pandemic.



In a report from the UN’s International Labour Organisation (ILO), almost two-thirds (65.3 percent) of enterprises in Africa reported that initiatives on gender diversity and equality helped enhance business outcomes, including profitability and productivity. Yet inequality, exclusion and inflexibility hold women back in many aspects of their everyday lives, including at work. The challenge: how do we design workplaces that enable women’s participation at every level?



First, are you dedicated to gender balance in the workplace?



Companies must make gender equality a central, guiding theme, not only in their diversity and inclusion efforts and hiring practices, but in their business strategy and leadership. We must be committed to reshaping the way our world is designed, coded and constructed by bringing different perspectives to the table. Decision-making marked by a diversity of perspectives and experiences is stronger and companies that create diverse teams will win.



This commitment must be explicit and measurable. At Mastercard, for example, we link our management goals and KPI’s to diversity and inclusivity, creating accountability. If you believe in it, make it real.



Second, do you have expertise you can develop into a learning opportunity for women?



Examine your core business and its intangible assets. Is there knowledge that you can transfer to women in your own workplace and beyond? The key is to identify pockets of expertise core to your company and place women in those areas. They will build their knowledge and, in turn, impart that knowledge as they move to increasingly senior roles. For example, we are a diversified payments technology company that operates a global network, which I characterize as the beating heart of the company. Immediately prior to joining our South African office, I worked for 18 months in our Operations and Technology Group. I believe that all of our employees should cycle through a technology role to gain knowledge of our core business. For my part, my understanding of our company is forever changed.



Beyond our company walls, we have committed to growing financial inclusion, with a goal of bringing one billion people into the global financial system by 2025. As part of these efforts, we do extensive training around digital financial literacy, 4IR technology fields and business mentorship. We have also created Girls4Tech, which is developing a strong pipeline of talent by encouraging girls to embrace STEM subjects that will prepare them for the workforce of the future.



Third, how can we re-wire the workplace to better function for women?



Having women in your workforce is one thing, but have you examined your workplace? The upheaval of lockdowns and social distancing over the past year have made many of us rethink our idea of the ideal workplace. According to UN Global Compact, the COVID-19 pandemic has hit women disproportionately hard, as they are more likely to be in lower-paying, insecure and informal jobs. They are also more likely to be burdened with increased childcare responsibilities as schools and nurseries closed. In South Africa, two-thirds of those who lost their livelihoods are women.



How do we rebound from this? Too much of the world was not designed with women in mind, and more often than not, workplaces aren’t optimised in such a way where both men and women can be productive, contribute to success and reach their potential. Return to work programmes and flexible family-friendly environments are key, as they promote and encourage women’s participation in the workforce.



The business case, economic case, and societal case for diversity in the workplace is clear. Now, we need to devise roadmaps and act to build the workplaces that meet the challenges of the future.



Because a world that works better for women creates limitless possibilities for us all. It’s a world that gives everyone the chance to unleash their potential, pursue their passions and make extraordinary things happen.

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