Anti-terrorism and transactional relationships are likely be the main features of US President Donald Trump’s Africa policy. But if Trump’s proposed cuts to the state department hold, the US will be less and less of a presence on the continent, according to Prof Gregory F Treverton, who directed the US National Intelligence Council in the Obama Administration.
Treverton, who is currently Professor of Practice at the University of Southern California, is a world authority on security and intelligence. I put a number of questions to Treverton who visited South Africa recently to deliver the keynote address at a South African Council on International Relations conference on South Africa’s relations with Africa.
Why is Donald Trump’s foreign policy so incomprehensible?
I wish I knew! It’s a continual struggle between, on the one hand, the true believers, the American firsters who are anti-trade and anti-engagement in what they see as an unfriendly world, and on the other more traditional conservative Republicans.
The pattern has been that the more traditional conservative Republicans, like the Secretaries of State and Defence, tug policy in a more familiar direction, only to have the president blow the process up with a tweet condemning the Paris climate agreement or labelling Germany an unfair trader. The intensity of the struggle is reflected in the continuing haemorrhage of leaks, all from the very top of the administration.
Didn’t the post-Second World War liberal international order need a shake up?
Yes, and perhaps in that sense we’ll end up thanking Trump, if, and this is a big if, we get through the next years without a major crisis or too much broken crockery. Some of Trump’s complaints, like (America’s Western) allies bearing too little of the burden, have been true for a long time. And the reaction by Americans to the sense that they pay too much for the “public goods” of international economics and security has been going on for a long time.
Polls routinely show that Americans think the country spends on foreign aid 20 or 30 times what it actually does. So, too, the questioning of what we all too easily call the “liberal international order” has been growing over time.
You suggested that Russia under Vladimir Putin, is a declining power. Doesn’t the evidence point in the other direction?
It surely is a declining power, though Putin has played a weak hand extraordinarily well. It is in demographic decline, and far from modernising the Russian economy, Putin has only deepened its dependence on hydrocarbons. My fear is that as the country declines, it will be all the more tempted to turn to what tools it retains – cyber attacks and nuclear sabre-rattling.
How do you think Trump’s Africa policy will turn out?
In testifying before Congress, Secretary of State Rex Tillerson probably was as clear as the administration could be given its disarray. Africa was in the “turning to other countries” category, and he began with the fight against terrorism. He did, though, mention the economic opportunities in Africa, mostly in the sense of business that might be done. I suspect those will continue to be the emphasis.
So does this mean that anti-terrorism and transactional relationships will be the main features of Trump’s Africa policy?
I think they will continue to be the main drivers, for better or worse, though not the only drivers. The country will have to respond to major humanitarian crises whether the administration wants to or not. And some of the legacy programmes of the last two administrations, like the African Growth and Opportunity Act, or the President’s Emergency Plan for AIDS Relief have had bipartisan support, so we’ll see how they fare in the congressional budget process.
And, if this is so, what are the long-term implications of this for US relations with the continent?
If Trump’s proposed cuts to the State Department and USAID hold, the US will be less and less of a presence on the continent. The main beneficiary, diplomatically, will be China, followed by the Europeans and perhaps even Russia, though it doesn’t have much to contribute except arms sales.
If there is any silver lining, perhaps it will be that Africans, and particularly South Africans, will realise they have to take more initiative on their own.
When it comes to the US itself, you raised the possibility that it might break up? Were you speaking in abstract terms, or is this a real possibility?
I meant it mostly as a metaphor and as a touchstone for thinking about the future. I don’t think it’s likely, but it does have to be considered.
What is certain is that the next few years will be a kind if a guerrilla war, one mostly fought in the courts, between the US federal government and the “blue” (read Democratic Party-controlled) states, led by California, over climate change, immigration and other issues.
What does the Trump presidency mean for these ideas?
So far it seems bound to increase the divide in America. Trump has talked and acted entirely to please his base. He has played on fear, fanning it by portraying the country in dire straits surrounded by a hostile world. So far that base – especially older and often poorer white Americans – seems to have been satisfied by word, words they see as validating them.
But we’ve known from the beginning that Trump can’t deliver on his promises: those “good” low-skilled jobs in manufacturing or mining (as he has portrayed them) aren’t coming back. So we’ll see, but I expect that realisation to only deepen the anger and disaffection. – Written by Peter Vale
Originally published by The Conversation
Chilling Words From The Man Who Broke The Bank Of England
The multimillion-dollar circus called Davos rolled into the Swiss ski-resort yet again, in January, in all its big deal bombast and bean counting glory. This year, African debate was scant: the man who broke the Bank of England foretold of a broken world laden with fear and doom; there was scary talk of cyber terrorism; just another day, another Davos, for the World Economic Forum.
If you want an example of how the dash of Davos can descend into self-parody, you should have taken a look at the huge banner draped across the posh Belvedere Hotel throughout the World Economic Forum in the mountain ski-resort.
It was on the main street through Davos where thousands of delegates slip and slide to scores of functions – with at least one or two slipping over every day – along a line of shops taken over by big money corporate sponsors.
Much more money is being made elsewhere in this ski-resort: the people who live here go away for the week and let out their homes for a king’s ransom; $30,000 for the week is nothing unusual.
Most people saw an irony in the banner, yet clearly the people who spent a fortune on putting it up there couldn’t have.
“Free trade is great,” says the banner on behalf of Brexit-bound Great Britain.
“Didn’t someone tell them they were about to leave one of the greatest free trade zones in the world?” says one passer-by with a cynical chuckle.
The crack summed up some of the irony that swirls around when cohorts of bean counters, highly-paid administrators and bosses gather in an Alpine icebox to solve the problems of the world.
The bigwigs weren’t there and this year, there was less buzz and fewer queues outside the briefing rooms.
Donald Trump, who made a big splash at Davos last year, stayed at home trying to figure out his government shutdown. The four ‘Ms’ – May, Modi, Macron and Mnangagwa weren’t there either; at least two of them tied up with fighting fires, from Brexit to economic meltdown, in their own backyards.
Empty hot seats, at Davos, at a time when the world is crying out for the wisdom of sage leaders.
Instead, it was left to business leaders, like the Australian-born CEO of billion-dollar turnover infrastructure giant Arup, Greg Hodkinson, to cut to the chase.
“We need clear political leadership in this fractured world… otherwise we are going to get easy political leadership preying on people’s fears,” says Hodkinson at one of the first panels of WEF 2019, on infrastructure.
READ MORE | Why The Richest And Most Powerful Go To Davos
Hodkinson, who has worked in infrastructure for 40 years, also said investment in infrastructure could no longer ignore the future, or the deteriorating environment.
“Carbon should be priced into infrastructure projects and that will act as an economic trigger for private money to come in because not only will it mean more revenue, it will help us put more money into saving the environment,” says Hodkinson.
According to the WEF Global Risks Report for 2018, some of the top risks by impact are posed by the elements: floods and storms; water crisis, plus earthquakes, tsunamis, volcanos and electric storms.
“By 2040, the investment gap in global infrastructure is forecast to reach $18 trillion against a projected requirement of $97 trillion. Against this backdrop, we strongly recommend that businesses develop a climate resilience adaptation strategy and act on it now,” warns Alison Martin, Group Chief Risk Officer, Zurich Insurance Group, in the report.
The money is there, according to Hodkinson, but needs to be channeled with foresight.
“Even if someone is building a car parking garage, I ask what else can they do with it because they won’t need it one day,” says Hodkinson.
“The money is there. Investors sank six trillion dollars into United States junk bonds last year; if investors are prepared to roll the dice on junk bonds, what about infrastructure investment?”
Investors, on this day at Davos, heard that 65% of world infrastructure projects are unbankable without government guarantees. Private money is needed to fill the gaping infrastructure gap, yet negotiations between investor and government officials can prove difficult.
READ MORE | World Bank Sees Global Growth Slowing In 2019
Just ask Heng Swee Keat, the Cambridge-educated finance minister of Singapore, the former Parliamentary Private Secretary to the father of infrastructure on the industrious little island who harnessed private money for public good – the legendary late premier Lee Kuan Yew.
The finance minister warned relationships between public and private sectors could be “lumpy”.
“I remember a man coming to me and saying he was never going to invest in infrastructure in your country again, I asked him ‘why’ and he said, because the last time we invested and made money the government came back to us and asked ‘why are you making so much money’,’’ chuckled Swee Keat.
Africa In The Alps
Fancy a cup of coffee? How about a chocolate? Or a fresh cream waffle with syrup?
These were some of the treats offered to delegates on the Davos promenade, enroute the congress center of the World Economic Forum’s (WEF) 31st annual meeting in January.
With temperatures plunging below -17° in Switzerland, it was hard for many to say no to the delights.
The promenade is a stretch of road where residents of the town located in the Swiss Alps, go about their everyday activities of shopping, banking and socializing.
This would be the case any other time but not in the month of January, when the high street is overhauled into one of the most important and richest in the world.
Book stores and coffee shops are shut and hired out to corporates with deep pockets.
Multinational heavyweights like Microsoft, Facebook, Amazon and Tata are intent on showcasing their products to the thousands of delegates that attend the forum.
WEF is regarded the most prestigious gathering of global leaders in business, government and society, who meet each year to discuss the world’s biggest threats and ways to neutralize them.
This year’s theme was Globalisation 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution.
What better way to tackle such a daunting task than with some steaming hot chocolate to invigorate the mind?
Back to the promenade.
The long stretch is carpeted by ice that mirrors the thick blanket of snow enveloping rooftops and walls.
Among the heavyweights battling it out to attract potential new clients, I see an African company.
It’s South Africa’s Absa bank; the only African company on the high street.
Ironically, like the promenade, which has been overhauled into a corporate marketing hunting ground, the African bank has completed its own makeover.
It was formerly known as Barclays Africa, a subsidiary of the London-based Barclays PLC.
“This year is the first time Absa comes to the World Economic Forum as a standalone entity,” the bank’s outgoing CEO Maria Ramos said.
“We’ve had a lot of our own meetings here. We’ve been able, I believe, to demonstrate that as a bank we are able to be at the cutting edge of what global financial markets are about.
“We have also demonstrated that as an African continent, not only do we have phenomenal sunshine, which we have been able to bring to Davos with technology into this fantastic space, but we’ve also got great financial institutions.”
It seemed Africa’s warmth followed relentlessly even in sub-zero climes.
Other action that took place on the sidelines of WEF included bilateral engagements between business and government.
Old Mutual CEO Peter Moyo told me of his private meeting with Zimbabwe’s Finance Minister, Mthuli Ncube.
Ncube had to lead the Zimbabwe delegation after President Emmerson Mnangagwa ditched plans to attend WEF at the eleventh hour to deal with the latest crisis in Zimbabwe.
Videos of deadly protests in Zimbabwe over the doubling of fuel prices overnight had gone viral.
“I was pleading with the Minister of Finance for him to take us into his confidence so we can actually work together with them and see how we deploy the capital that we have for the benefit of our customers and we protect value for shareholders,” Moyo said.
Old Mutual is the largest listed company on the Zimbabwe Stock Exchange.
For MTN CEO Rob Shuter, the sideline meetings at WEF provided a platform to deal with a crisis in Uganda with speed.
News broke that three MTN Uganda managers had been deported for allegedly compromising national security.
Shuter told me he met with Ugandan President, Yoweri Museveni, to address the matter.
“We had a cordial meeting. We assured [President Museveni] of MTN’s commitment to Uganda. We have been 20 years in the country and we are in the process of renewing the license,” he said.
Shuter also met with Oscar Onyema, CEO of the Nigerian Stock Exchange.
I asked if this was to discuss the much-anticipated listing of MTN on Nigeria’s stock exchange but he declined to comment.
It was time for another cup of steaming hot coffee.
– The writer is a presenter-producer on CNBC Africa.
South Africa’s Precious Metal Mining Industry Is On Shaky Ground
The 1970s are known for political scandal while the 1980s are known for pop culture. They are also known for South Africa’s boom in the mining economy. I write this article from Johannesburg dubbed eGoli (the city of gold) for its once rich gold mines.
At the peak of those glory days, for every R100 the economy produced in 1980, R21 was from mining. In fact, during this boom, in 1987, the industry employed 760,000 people.
Today, the story of South Africa’s mining sector makes for grim reading. The once mighty sector is a shadow of its former self as precious metals continue to struggle. Statistics South Africa (Stats SA) reports that gold has lost ground over the last three decades. The annual production index for gold is now 46% lower than it was in 2007.
In 2016, the industry contributed only 8% to the economy. That is R8 for each R100, which is R13 less compared to the 1980s. The problem is in 2019; the mines are old, deep and lack investors.
According to Stats SA, “mining production decreased by 5.6% year-on-year in November 2018”.
The largest let-downs were the once flourishing gold and diamonds.
“The bulk commodities and base metals have performed in line with the global industry. Metals like coal, manganese and chrome have performed very well for South Africa. Unfortunately precious metals haven’t performed that well,” says Andries Rossouw, partner at PwC South Africa.
In its 2017 report, PwC revealed that gold and platinum had witnessed devastating dips in market capitalization. Gold, for instance, saw a dip of a shocking 52%, which translates to R114 billion ($8 billion), while platinum’s market capitalization dropped by 21%. Last year, the market capitalization for gold dropped by 4% from 25% while platinum dropped 5% to 29%.
Rossouw, however, stresses that it is important to note that other commodities are performing well.
Coal is among them.
“The coal industry has been performing well in the last year at the back of higher coal prices. Eskom still demands a large number of coals for their coal-powered plants. So, it is important that our coal industry delivers that demand from Eskom. We are also exporting big quantities of coal mainly to India because they also need quality coal for their power generation,” Rossouw says.
The good performers helped “mineral sales increase by 8% year-on-year in November”. It’s not enough. Even so, most companies are facing a painful drop in rankings and profits.
For instance, “Impala Platinum and Sibanye-Stillwater dropped by two and four positions respectively in the top 10 companies in the country,” according to the PwC report.
In fact, Impala Platinum dropped from R27 billion ($1.9 billion) in June 2017 to R15 billion ($1.06 billion) in June last year. It is forcing the company to restructure and cut jobs.
“The only option for conventional producers today is to fundamentally restructure loss-making operations to address cash-burn and create lower-cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment,” says Impala Platinum CEO, Nico Muller.
Over the next two years, the company will downgrade from 11 to six operating shafts, reduce future production from 750,000 platinum ounces per year to 520,000 and cut jobs from 40,000 to 27,000.
Gold Fields is another company facing challenges.
Its South Deep mine, one of the biggest gold mines in the world, continues to make losses. It lost R4 billion ($283 million) over the past five years. Last year, it retrenched 1,082 employees at its South Deep mine.
“South Deep is a complex and unique mine, that has faced persistent issues that need to be addressed in a holistic manner which include, rising operating and overhead costs, consistent failure to meet mining and production targets; poor equipment reliability and productivity impacted by poor maintenance practices and operational conditions,” said the company in a statement released last year.
The problem is so big that according to a report by the Department of Mineral Resources, there are about 6,000 abandoned mines in the country and massive job cuts.
“We have about 454,000 people now employed in the industry compared to 532,000 employees when the industry was performing well. In the 2018 calendar year, it dropped about 3,000 employees and that is despite shaft closures,” Rossouw says.
This is a far cry from the industry’s heyday.
Due to global conditions, mining production reached a record low in 2016 in South Africa, but since then, other countries have enjoyed growth, while the domestic mining industry shrinks. It seems the bigger problem might be the relationship between industry and government.
Regulation is one of the major hold backs for the sector.
Until recently, the Mining Charter, which addresses the distribution of mineral wealth more equally to redress the racial injustices of apartheid, has caused courtroom battles between government and industry.
First issued in 2004 and amended in 2010, many agree the Mining Charter was a hastily and poorly written document, full of oversight, compiled without consultation with the industry. Industry heavyweights and unions disputed it, lawyers and economists argued over it and investors stayed away as a result.
“For investors to invest in the country, they would want to see a track record… We have had about 10 years of under investment, especially in our platinum sector and that will show in our lack of supply coming out of that sector in the future. Given the long-term nature of the mining investment cycle, it will impact our ability to supply in the future,” Rossouw says.
Last year, in fact, in terms of its overall investment attractiveness for mining companies, the Fraser Institute, a Canadian public policy think-tank, ranked South Africa 48 out of 91. It ranked 74 out of 104 destinations in 2016, yet in 1980, mining accounted for almost 50% of the world mining market capitalization.
“What has dropped us down the rankings in the last couple of years is the uncertainty and regulation environment largely due to the Mining Charter. Investors are cautious. They judge the government on past performance so there is still a bit of caution out there,” says Andrew Lane, Africa Energy & Resources Leader at Deloitte.
In February last year, President Cyril Ramaphosa appointed Gwede Mantashe — a former leader of the biggest union in Africa, the National Union of Mineworkers, as Mineral Resources Minister. With vast experience and trust from industry, Mantashe swooped in at the 11th hour to save the day and negotiated a new Mining Charter acceptable to industry and government.
“It was bad in 2017 and then we got a much positive outlook in 2018 when there was good interaction between industry, labor and all the stakeholders including government which culminated in the publication of the new Mining Charter which has gone a long way to address some of the concerns raised in the previous versions of the charter.
“It doesn’t mean that it has been completely resolved but there is good engagement between the various stakeholders that only means positives for the future in terms of the regulatory environment,” Rossouw says.
Lane believes the industry has welcomed Mantashe and it has a more positive outlook.
“The issue we have here is that most of the mines are deep and quite old. A lot of our remaining resources and reserves which are left are not safely or profitably minable with current technology. We are looking to technological advances to bring a lot of what remains in those commodities into a decently profitable environment,” Lane says.
At February’s Mining Indaba in Cape Town, President Ramaphosa, a mining man to the core, said significant work still had to be been done to remove the uncertainty that held back the development of the industry.
“As part of the package, government is reprioritizing spending, within the existing fiscal framework, towards initiatives that are aimed at driving economic activity, including financial and non-financial measures to turn around the economy,” Ramaphosa said.
Lane says there is a trust deficit which makes the investors adopt a wait-and-see attitude.
“We have further recognized the challenges raised with us by investors, among other things, administered prices for ports, rail and electricity, as well as infrastructure bottlenecks…We are working in earnest to address the constraints that were raised with us as we implement the Stimulus and Economic Recovery Plan.
“We are addressing issues that are of concern to companies such as visa regulations, reducing the cost of doing business, eliminating many bureaucratic constraints and making it a lot easier to conduct business,” Ramaphosa said.
There has been positive movement in the regulatory environment but, for companies, the cost structure is, by far, the biggest challenge especially with labor and electricity prices and shortage. In February, investors and credit rating agencies flagged Eskom’s rolling power cuts which weakened the rand. The power cuts also cost the mining industry productivity.
“We have the deepest mines in the world here. Certainly, the energy costs going up over the years have impacted productivity. Our mines are quite expensive to operate. We are not the most attractive destination for mining investment right now,” Lane says.
Ramaphosa said the government would announce its plans to stabilize and improve Eskom’s financial, operational and structural position and to ensure security of energy reserves in the country.
“Eskom’s contribution to the health of our economy is too great for it to be allowed to fail. It is too important and is too big to fail; and we will not allow it to fail. Restoring and securing energy security for the country is an absolute imperative,” he said.
Lane says government needs to continue to send a message of regulatory stability, act on Eskom and reliability of energy to start shifting the sector towards a more investor-friendly option.
There is also inadequate transportation in the industry. Some economists have said improving the costs related to exports such as port tariffs and railway costs would make the sector more profitable.
“Last year for example, we had to truck manganese to Durban which is inefficient. We should have freight rail in place to take care of those commodities,” Rossouw says.
Another concern is the socioeconomic conditions around mining companies.
“Mining companies are quite often the main providers of employment in rural areas and that means it creates expectations by community and when our economy is struggling as it is at the moment, it means the pressure of the communities around that mine provides pressure on the mine environment. We have seen mines being closed down by communities and not by employees in the last couple of years,” Rossouw says.
Minerals Council CEO Roger Baxter says the council has engaged extensively with government and other stakeholders on the challenges that have prevented mining from reaching its true potential.
“A collaborative approach is needed to develop and implement solutions that will see our industry grow and thrive in the future for the benefit of all. We need to get investment back in mining. We, as the industry, are fully committed to play our part,” he says.
There is also a push for green coal to boost the industry and according to Rossouw, however, the green economy won’t replace coal in developing regions like Africa, Southeast Asia and India.
“There is still a big increase in coal-fired power plants and generation capacity… The challenge the coal industry is facing, as a result of the green economy, has to do with the holding of new projects. A number of banks said they won’t fund any new coal projects and therefore some of these projects,” says Rossouw.
“There is potential for clean coal going forward and we need to invest in research and development to make coal work for us to provide cleaner energy from the vast coal resorts we have.”
Just over two in every three gold mining jobs in 1995 no longer exist. However, mining remains an important earner of foreign exchange for the country and employs one in every 40 working people according to Statistics SA. Love it or loathe it, if government and industry play the ball right, South Africa may reclaim a large slice of one of the world’s richest cakes.
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