A weekly electronic news briefing on African issues for the Southeast Asian community
Editor: Johan Burger
Issue 114 08 September 2017
- Africa: Africa’s farming community must turn towards climate-smart agriculture to prevent them from making any meaningful contribution to climate change. In the process, they also need to increase their productivity.
Africa contributes only 4% of global greenhouse gas emissions, while 6 of the 10 most affected countries by climate change are in Africa. There is an urgent need to scale up climate-smart agriculture, improve forestry and transform the productivity of water use. The increasing occurrence and severity of weather events such as droughts and floods, high heat and cold stress, will impact agriculture in Africa, threatening regional food systems. Smallholder farmers and those who primarily draw their incomes from agriculture value chains will be affected, which will in turn threaten the region's food security. There is a need for new tools and approaches to transform agricultural systems - including policy advice on nutrition and market development, new tools to harness satellite-based information and forecasting and new approaches to landscape-level planning. Impacts on agriculture threaten both food security and agriculture's pivotal role in rural livelihoods and broad-based development. Climate-smart solutions include practices and technologies that increase productivity in a sustainable manner, support farmers' adaptation to climate change and mitigate levels of greenhouse gas emissions. More investment is needed to help farmers produce more on their existing land using sustainable approaches. For more information, read here.
- CAS View: There are a couple of interesting points arising from this article. Africa is the victim of climate change; there is no doubt about that. Its farmers now must resort to climate-smart agriculture to prevent them from contributing to their own demise. It is bad enough that others do it to them. It would be stupid of them to do it to themselves. These techniques must not only be focused on being climate-smart, but must be guided by a business orientation, increasing the productivity and the wealth of the farming community of Africa. In this way, in addition to negating the increase in global warming, the agri sector could contribute towards making itself more attractive to the youth, and play a role in keeping the rural population in the rural areas and on the farms. While urbanisation is increasing, Africa’s cities are not ready for the large scale move of its rural communities to the cities. Also, there is a dire need for Africa to feed itself and to stop importing food from abroad. This could save Africa US$35 billion annually. It is also quite clear that technology will play a significant role in the agri sector of the future Africa. These approaches and technologies will all contribute towards the achievement of the UN’s SDGs, the AU’s Agenda 2063, and the AfDB’s “High 5 Priorities.”
- Africa: The future of Africa lies in agriculture. Huge returns are possible from investments in agriculture.
It is only through agricultural regeneration that growth, diversification and job creation can occur for Africaneconomies. However, Africa cannot develop quickly if farming remains largely a subsistence activity. Agriculture employs 60% of the population, but contributes for less than one seventh of its GDP. Africa’s agricultural yield is the lowest in the world. These challenges present an opportunity for international investors and big-ticket entrepreneurs. Africa needs between $30 and $40 billion a year over the next 10 years to transform its agriculture. Such investments will create new markets worth at least $85 billion per year in added revenue by 2025, a potential return of at least 100%. Africa must stop importing food. Other related measures would deliver similarly impressive financial impacts: fiscal inclusion, tax reform, domestic revenue mobilization, higher remittances, reduced corruption and better governance. The technologies to feed Africa exist already and must be scaled up for widespread adoption. The AfDB and the World Bank plan to jointly provide $800 million for the scaling up of agricultural technologies to reach millions of farmers in Africa over the next 10 years. The AfDB has also committed $24 billion to agriculture over the next 10 years, with a sharp focus on food self-sufficiency and agro-industrialization. For more information, read here.
- CAS View: This article by the president of the AfDB emphasizes the importance of the agriculture sector. This is a message that has been characterised by a formidable consistency over the past few years. Africa’s future lies in its agriculture sector. It is the largest employer by far. Its contribution to GDP is not up to scratch, however. The returns Adesina is envisaging is staggering. This makes it clear that agriculture is a phenomenal business opportunity. And the beauty of it all is that Africa’s farmers will be feeding its population, and that of a considerable portion of the rest of the world, whilst making good money. It is imperative, however, that the environment within Africa is conducive to the generation of this kind of returns. This will require the eradication of corruption, the development of sound governance practices, the adoption of business-enabling policy frameworks, the development of efficient routes to market, the education of the smallholder farmers, and the adoption and use of the requisite technology. It does seem that the agri sector of the future is going to be an interesting, even fascinating, place to be. It needs to be to entice the youth to turn towards farming as a lucrative career. And to feed both Africa and lots of people outside the continent!
- Kenya: Kenya’s economy may pay the price of opposition leader Raila Odinga’s successful bid to nullify the outcome of last month’s election, as prolonged political uncertainty pending a court-ordered rerun weighs on growth and investor confidence.
Kenya’s economy may pay the price of opposition leader Raila Odinga’s successful bid to nullify the outcome of last month’s election, as prolonged political uncertainty pending a court-ordered rerun weighs on growth and investor confidence. After the election, inquiries had shot up from private-equity firms, from foreign investors, who were holding off on investments. A lot of investors will hold off again just to see how this plays out. Odinga alleged the electoral commission’s computer systems were tampered with and vote tallies altered to hand President Kenyatta a second term. The Supreme Court upheld its complaint and ruled a new election be held within 60 days. The prospect of further political upheaval has spooked the financial markets. Last month’s vote spawned new challenges, as fears of a repetition of ethnic violence after a disputed 2007 election subdued consumer and business spending and scared off tourists.The economic impact of the rerun will largely be determined by how credible and peaceful it is. Kenyatta said that while he disagreed with the verdict, he would respect it. There’s a risk the next vote outcome will also be challenged and the new administration will only be able to get to work in January, delaying government projects and policy decisions needed to stimulate the economy. For more information, read here.
- CAS View: It is ironic that the panel of international observers were comfortable with the election results and rejected Odinga’s assertions that election fraud had been committed. Odinga had even stated before the election that there would be irregularities due to the abduction and murder of a senior executive of the Independent Electoral and Boundaries Commission (IEBC). It was shown this executive had been tortured before being murdered. There was widespread speculation that the passwords for the online election system had been compromised. It seems that the Supreme Court agrees with Odinga that there had been irregularities. Their decision shows upon the independence of the judiciary in Kenya, which is a good thing. It also shows upon the limited value of a panel of international observers who were supposed to observe and provide an opinion on whether the election had been free and fair. The decision also provides for a climate of violence, with the Odinga supporters claiming “we told you so,” and the supporters of Kenyatta feeling they are made out to be criminals, rigging the election. Given the propensity for violence in Kenya during election time, as was the case in 2007 when more than a 1000 people were killed, it is not unlikely that Kenya will experience incidences of violence running up to the election on 17 October. It seems quite a number of foreign investors and tourists, as well as local services such as banks and SMEs, are spooked by the potential for violence. This does not bode well for the Kenyan economy. It also seems Odinga is playing hardball, as he has rejected the date suggested by the IEBC, stating he had not been consulted. He has also made a range of demands, including the removal of the IEBC officials. Hopefully sanity will prevail and the rerun of the election will go down smoothly with no violence. Kenya has already lost its status as the largest economy in East Africa to Ethiopia, and its economy does not need this kind of activity.
- Rwanda: Plans to set up a Volkswagen manufacturing plant in Rwanda are in the final stages.
Plans to set up a Volkswagen manufacturing plant in Rwanda are in the final stages. VW plans to go operational by the end of 2017, by producing at least 1,000 cars annually. The car market in Rwanda is about 2,000 to 3,000 cars per year. While that was not enough for now, VW would strive to ensure that they work as a local manufacturer competing with imported cars. The agreement between the two parties permits VW to start assembling cars in Rwanda that are easy to maintain and that are low on fuel consumption and gas emission, while also making it easy for Rwandans to access and use the vehicles. The project is in line with Rwanda's policies to protect the environment, create jobs, and make Rwanda a pioneer in technology and innovation. Under the initial agreement, the VW cars will have to be entirely from local production, essentially creating jobs in the country. VW also wants to link with other German companies to establish a local technical academy to ease transfer of technology and skills. The move is also part of Volkswagen's plan to develop markets in Africa. Other VW facilities are found in South Africa, Nigeria and Kenya. For more information, read here.
- CAS View: VW is reaching out to Africa to increase its markets and to reduce its dependence on a single country for production purposes. The CEO of VW in South Africa made the point last year that the South African government’s intention to reduce the incentives for the auto-manufacturing sector, could reduce South Africa’s attraction for the auto manufacturers. They are not the only manufacturers that are targeting Africa. Kia also reported in 2016 that it would be assembling cars in Ethiopia. Various French manufacturers have targeted Morocco. Others will also be assembling in countries such as Kenya and Nigeria. This is good news for these countries, as these initiatives will be creating much needed jobs, many of them at a higher level of complexity. It is interesting to note that VW is targeting Rwanda in spite of the very small market. It says a lot about the trust it is placing in the stability and future potential of the country. Africa in general is clearly becoming more attractive, given the increase in the population and the rise in the numbers of the middle class on the continent. Their disposable income is the main driver of the moves initiated by companies such as VW.
- Nigeria: Nigeria has ended the spiral of negative growth of the last 5 quarters. Agriculture has played a significant role in this turnaround.
Nigeria’s economy expanded in the second quarter, ending its worst slump in 25 years as agricultural and oil output increased. Its GDP grew 0.55% in the quarter through June from a year earlier compared with a revised 0.9% contraction in the first quarter. This ends 5 straight quarters of contractions that also saw the economy decline 1.6% last year, the first such drop since 1991. The IMF forecasts growth of 0.8% this year as output of oil climbs, and the supply of foreign currency, needed by manufacturers to import inputs, continues to improve. According to Razia Khan (Standard Chartered in London), while many will focus on the positive growth, it still falls far short of the growth rates the Nigerian economy should be achieving. Agriculture expanded 3% in the quarter from a year earlier. Services, the largest sector at 54%, contracted 0.9%. The oil industry climbed 1.6%. Nigeria’s budget aims at increasing the economic growth rate to 7% and creating 15 million jobs by 2020 by pumping more oil, opening farmlands and increasing infrastructure spending. For more information, read here.
- CAS View: The turnabout of the Nigerian economy is very good news for the country and the continent in general. At 3% growth, agriculture has made a significant contribution to this state of affairs. Many experts have been suggesting for quite a while that Nigeria focus on agriculture to diversify its economy and reduce its dependence on oil. This advice seems to have paid off. In the budget for 2017, Buhari’s administration did suggest they were going to do just that. Former president Obasanjo has always maintained this was the route to go. Hopefully this state of affairs will continue in future. However, getting the economy back up to a growth of 7% with 15 million jobs created by 2020, seems to be a stiff target. It remains to be seen whether a reliance on oil as one of the 3 major courses of action to obtain this growth, will pay off. OPEC is looking at cutting production still further, given the small impact on the oil price of the last cuts. Still, a return to growth is great news for Nigeria. I quoted a Nigerian at the end of last year that it was a good time to start investing in Nigeria as it was bound to return to positive territory. Let’s hope this turnaround will be sustained.
- Nigeria: In a bid to revamp the agriculture sector, create jobs and reposition the state as the palm oil hub of Nigeria, Governor Obaseki of Edo State visited Indonesia to deepen his administration's partnership with Indonesia.
In a bid to revamp the agriculture sector, create jobs and reposition the state as the palm oil hub of Nigeria, Governor Obaseki of Edo State visited Indonesia to deepen his administration's partnership with Indonesia. His administration was keen on diversifying the economy of the state by taking advantage of its oil palm industry. With the present pace of research in the agriculture sector, palm oil can replace crude oil as a major source of food, industrial materials and energy. Obaseki said the visit would explore the possibility of reaching agreements with the Indonesian Government to support the development of the oil palm sector in Edo State. Indonesia is currently the largest exporter of palm oil in the world, and the agriculture sector is the country's most valuable export sector. He promised that the visit would yield results that the state agriculture sector required to create jobs, raw materials for local industries, produce for export and time-tested research approaches to strengthen institutes in Edo State. For more information, read here.
- CAS View: The governor of Edo State is concentrating on growing the economy of his state by concentrating on growing his agri sector. This is exactly what is required for Nigeria. The industrialisation of the Nigerian agri sector is a prerequisite for it to make even more meaningful contributions than the one referred to in the article above. It is interesting to see Nigeria reaching out to ASEAN countries for support in this endeavour of Edo State. As always, growing the capacity of the Nigerian farming community is a prerequisite to grow the contribution of the agri sector to Nigeria’s GDP. Educating the country’s farming community is therefore very important as well. This is true for Africa as a general rule. As the president of the African Development bank, Akinwumi Adesina, stated, agriculture is not a life style, but a business, and must be approached as such. Kudu’s therefore to Governor Obaseki!
- Namibia: Namport is expanding the Port of Walvis Bay as part of its strategy to set itself up as a preferred logistics hub in Southern Africa.
The new container terminal and oil storage facility at the Port of Walvis Bay has been built by the Chinese company China Harbour Engineering Company (CHEC) on reclaimed land. The oil storage project includes berthing for oil tankers, a pipeline to transfer crude, and a tank farm with oil storage capacity of 75,000 cubic metres. The oil storage terminal is but one part of the huge new north port development. Subsequent phases of the north port programme will include facilities for handling liquefied natural gas (LNG) and dry bulk, ship repair yards, multi-purpose terminals and much more, all to cater for the anticipated port capacity demand over the coming decades. Namport is determined to make Walvis Bay the preferred port and logistics hub for Southern and Central Africa. Already some entities in Botswana, Zambia and Zimbabwe consider it the nearest and fastest trade gateway to global markets. Namport is expected to handle more copper from Zambia and the DRC. Namport deals with a lot of economies along the west coast of Africa. It also competes for the same hinterland business – cargo to and from Zambia, Zimbabwe, Botswana and the DRC – as other ports in the SADC region. For more information, read here.
- CAS View: The port of Walvis Bay is an excellent port in Southern Africa. Namport has upgraded it to challenge the other ports in Southern Africa, including those of South Africa. With its improved facilities, it has become a credible alternative for landlocked countries such as Zambia, Zimbabwe and Botswana. Establishing itself as a logistics hub for Southern and even some Central African states will create a sound source of revenue for Namibia, as well as a demand for higher order skills. This kind of competition will be good for the region as a while, forcing South African ports to increase the level of their service as well.