South Africa’s land expropriation debate continues to roil everyone from farmers to foreign investors and financial institutions. What has the government done to address land reform?
It’s a five-hour drive from Johannesburg to Smithfield in the Free State province of South Africa. As we arrive, the sun is shining its warm golden hue over 1,200 hectares of Eddie Prinsloo’s land. As we drive on the long dirt road towards the farm house, the smell of manure hangs thickly in the air. On the right is a beautiful view of the mountains towards Lesotho. It is quiet and peaceful here but debates about white-owned farms are getting louder and louder.
The issue of land in South Africa is big. Many black South Africans were pushed off commercial farms and even denied opportunities to own land during white colonial rule. In a democratic South Africa, it has caused heated debates around dinner tables, in political party headquarters, and parliament and even had United States President, Donald Trump, tweeting. It has also given birth to opposition political parties like Julius Malema’s Economic Freedom Fighters (EFF) and Andile Mngxitama’s Black First Land First (BLF).
Most black South Africans say they want land. The African National Congress (ANC) government agrees. It wants to change the Constitution to make it possible to take land from white farmers and give it back to black South Africans. It is calling it expropriation of land without compensation.
“The ANC will, through a parliamentary process, finalize a proposed amendment to the Constitution that outlines more clearly the conditions under which expropriation of land without compensation can be effected. The intention of this proposal is to promote redress, advance economic development, increase agricultural production and food security,” said South Africa’s President, Cyril Ramaphosa after the ruling party’s two-day National Executive Committee (NEC) Lekgotla in South Africa’s capital, Tshwane.
This news sent shivers down the spines of farmers, banks and some investors. The government is however adamant expropriation without compensation should happen to give opportunities to the blacks who had land unjustly taken from them.
Prinsloo, a white man who started sheep farming in 1974 when he inherited the farm from his father, says he is one of the few farmers already trying to empower blacks. We meet him in his thatched office. Awards and photographs of sheep hang on the wall.
Two years ago, he asked the government to buy one of his four farms on condition it will give it to his nine workers.
“In 1994, I wanted to give my people a farm because they sell a lot especially to the Lesotho people. That is their part of the business… In 2016, I offered the 1,500-hectare farm to the government on condition that my workers will be the new owners and they get title deeds,” says Prinsloo.
The process took two years. It worked. Currently, the farmworkers have 49% shareholding in the farm, while Prinsloo retains 51%.
“I will help them by training them on the business side of farming and letting them use my equipment for their sheep. Black farmers are good farmers, they do all the work but they don’t know about accounting and other stuff but these things can be taught. I want them to know every aspect of this business so that they are able to run their own farms,” says Prinsloo.
According to Prinsloo, who is fourth generation South African, the longest-serving workers will get more shares to the farm compared to newcomers.
“The government was very supportive. It just took too long and I almost sold the farm to another farmer who wanted to do this with my employees.”
Asked about his views on Ramaphosa’s plan for expropriation of land without compensation, Prinsloo does not appear worried.
“It has never scared me. I believe that before the elections, [the ANC] makes a lot of scary announcements but I have never been scared. I think it will just go on as we farm now. I don’t think it’s fair to expropriate land without compensation. Seventy five percent of all black people want to become a part of agriculture but only one percent wants to farm,” he says.
Prinsloo says his fear is that when people get things without paying for them, they would not value or look after them.
“The government must now give the black people who want farms a low interest rate so they can be able to buy land. In the old days, there was Agri bank. It helped poor farmers who couldn’t get a loan from the land bank. The government must bring it back.”
Prinsloo however says he is against farmers who have land here but are living overseas leaving the land unattended.
“Those farms should be taken and given to black people, like my staff members, who deserve it.”
Palesa Phantsi is one of Prinsloo’s workers set to benefit from this deal with the government. She has worked as a maid for Prinsloo since January 2012.
“I am so happy that I am getting land. I never thought this would ever happen in my life. Now, I will grow and be able to do many things I couldn’t do before,” says Phantsi.
Lebogang Phomane is another employee set to benefit from this initiative. He walks us around the sheep kraal showing us what his day-to-day work with sheep entails. He has worked for Prinsloo for 30 years and knows most of the work except the administrative side.
“I am so happy because a lot of farmers don’t do this kind of thing. When he started talking about it two years ago, I didn’t believe him. Now he is helping us create our own legacy. I stopped going to school in grade nine so this is going to be life-changing,” says Phomane.
Prinsloo says he will train these soon-to-be land owners on the business side of sheep farming and even help them with equipment and a place to sell their sheep or wool.
This initiative has won him a lot of support but also criticism. One of those against his actions is BLF, a South African political party founded in 2015.
“This is a scheme by whites to hide the fact that the likes of Prinsloo gets paid for stolen land. There is no prescription for historical land theft – and the white Prinsloo still benefited by selling the stolen land. This is a clear indication of the impunity with which whites continue to act – they will never return land without receiving payment,” says Free State Chairperson Luyolo Busakwe.
Millions of people lost land during colonisation in South Africa.
According to Professor Ruth Hall, from the University of the Western Cape’s Institute for Poverty, Land and Agrarian Studies, between 1984 and end 1993, 1,832,000 blacks were displaced from commercial farms and 737,000 were evicted from farms.
The numbers get worse. From 1994 to the end of 2004, 2,351,000 people were displaced from farms and 942,000 were evicted. After attaining democracy, the government started a land reform initiative to give land to those who had lost it. Some of the displaced were placed in other farms but 3,716,000 were permanently displaced and 1,586,000 permanently evicted.
In the Free State, where Prinsloo lives, there hasn’t been a lot of land redistribution. It is number three from the bottom on the list of land distribution numbers across South Africa’s nine provinces. Only about 400,000 hectares of land have been redistributed here. For some of those who received land, it ushered in years of court proceedings, pain, fear and poverty.
In QwaQwa, a part of the Free State province, 560 kilometers from Prinsloo in Smithfield, is Mmabatho Mphuthi. She is in the autumn of her life but spends her days moving from court to court trying to fight for her farm.
We meet her as the sun sinks behind the rugged mountains. Mphuthi says she fears dying without ever being able to make good money from her farm.
She was given land by the government in 1994 under the land reform program.
“The ANC said if you have 15 members, they would give you land. I organized people who were willing to join me and in total we are 17. We went to government and they gave us a big farm which was divided among us to work as small holder farmers,” recalls Mputhi.
Mputhi, and the other small holder farmers, moved into the farm on December 16, 1997. They were given title deeds to the land and were trained by the department of agriculture on how to farm and sell. They also learned how to supply milk to big dairies around the province.
“I was so happy because finally, after so many years of struggle under the white rule, we had our land back and could earn a living,” she says.
Trouble came when a white farmer moved into their property.
“One day in the year 2000, I was busy with my own work and saw trucks come in. A white man was moving into the other end of our farm. He said the department of rural development had given him a lease on the property. I don’t know how that happened because I had the title deeds to the farm and we are the rightful owners.”
Mphuthi says she tried and failed to get help from all departments in the area.
“At first, I was told that he was coming to help us while we were being educated on how to farm but that never happened. Instead, he came in and terrorized us. He closed us off from the areas around the farm that we needed… Everything we farm gets destroyed by the rain because we don’t have access to the equipped area of the farm,” she says, as tears roll down her wrinkled face.
“How can you lease someone a farm that belongs to someone else? That is wrong. I am the one getting bills for services and taxes but I can’t farm or use the land because someone else has taken it over,” she says.
Mphuthi says her efforts to seek help have been futile.
“I have paid agents thousands of rands over the years to get help and get a lawyer for this to be fixed but each time, the case gets postponed. When I go to the police, they tell me to go to the public protector but no one responds. He even got a protection order that prevents me from going to that part of the farm yet I have the title deeds of the land in my hand and it seems there is nothing I can do about it.”
Mismanagement, like this, of the redistribution processes is one of the big apprehensions.
“Over the years, the government has failed to effectively redistribute land to blacks and now they want to change the Constitution yet they have failed to use the Constitution they already have. First, government must clean out corruption and then understand what land it owns, what land has already been redistributed and iron out any ongoing cases on redistributed land before trying to change the Constitution,” says Mphuthi.
That is exactly what the government has been trying to do.
According to Professor Hall, South Africa has 122 million hectares of land and 86 million hectares of that is private commercial agricultural land. That is 67% of the land in the country held by white South Africans.
Another problem is, since 1994, the government has only redistributed 9.7% of commercial farmland to blacks under the land reform program.
“For many South Africans, this pace is too slow. There is frustration because not much land reform has happened. Land reform can and should be made to work. There is a huge demand for small holdings by black emerging farmers. To meet the demand for land, will mean the need to acquire land held by private owners,” says Hall.
It is true. During the ruling party’s public hearings on the matter, many blacks indicated they wanted land. The government says it now wants to make sure this happens faster and more effectively than it has in the past.
“We want to now work on providing greater clarity on how expropriation without compensation can be effected. The proposal (to amend the Constitution) is informed by the views of our people that have been expressed in the public hearings that have been taking place,” said President Ramaphosa in Parliament.
Currently, Section 25 of the South African Constitution allows for expropriation without compensation but says there should be an equitable balance between public interest and those affected. Ramaphosa says he has appointed an inter-ministerial committee on land reform led by the deputy president to work on clarifying how expropriation will take place and under what circumstances.
“The acceleration of land redistribution is necessary not only to redress a grave historical injustice but also to bring more producers into the agricultural sector and to make more land available for cultivation,” says Ramaphosa.
Hall is however of the opinion that the problem is not the Constitution but the failure to use the Constitution as expropriation is already allowed by the Constitution.
“This can be justified in many cases, for example, when state expropriates land, when it wants to build roads or other public infrastructure. Expropriation isn’t new. What is new is the idea that the state will take property without paying compensation. This is not likely to happen in the majority of cases. We may only see it in cases where the state can justify why there is no compensation,” says Hall.
According to Hall, the kinds of cases that would require expropriation without compensation for example would be an abandoned city building, land left unoccupied and unoccupied land where informal settlements have grown in that property.
“There are a small number of landowners who have absolutely not been using their land, who may lose out in the process of land expropriation without compensation. My view is that they are very few in number and I have no doubt they will contest each case in court,” she says.
There is also a question of motive on behalf of the ANC.
Dumisani Nyembe, an ordinary South African who wants land to farm crops, says he thinks the ruling party is only doing this now because of the upcoming 2019 elections.
“I wonder why the ANC hasn’t been doing this for the past two decades. They can see that EFF is gaining a lot of traction because they are the most vocal about the land issue and all of a sudden they are promising us land expropriation without compensation. Whatever they are trying to do is EFF policy and not ANC policy. I don’t trust them a bit and I wouldn’t be surprised if this amendment of the Constitution isn’t passed come elections,” he says.
According to Hall, another problem is money.
“The land reform process is being hampered by corruption and mismanagement. If we sort out those problems, there will be funds to provide basic support to the new farmers being given access to farmland. The land reform budget has always been a very small part of the total fiscus. Right now, the land reform budget is at 0.4% of the total budget. If money is spent well and appropriately, funding would be available,” she says.
Ramaphosa however reiterates in most conversations about land expropriation that the intention of the proposed amendment is to strengthen the property rights of all South Africans and to provide certainty to those who own land, to those who need land to those who are considering investing in the country.
The ANC will need a two-thirds majority in parliament to be able to amend the Constitution.
“I don’t think this will be hard to get because if they join forces with the EFF, this amendment can be passed. The EFF can’t be seen going against this because it has been their main message since foundation,” says Nyembe.
Hall, however, insists that even when passed, expropriation without compensation is most likely not going to be the norm but likely applied selectively on a case-by-case basis and the courts will review every case.
Even if that is the case, another big fear with this amendment is the potential loss of Foreign Direct Investment (FDI) into the country.
According to David Nathanson, a global equity specialist at Bellwood Capital, investors are concerned.
“South African investors are really over-invested in South Africa and they are worried about many things in the country such as our debt situation, how we are very close to junk rating and the talk of expropriation without compensation. They are concerned about property rights where they are invested,” he says.
Although Nathanson says he doesn’t think investors think their houses will be confiscated in the short-term, they are worried because the country is dependent on foreign investment and when the government talks about land expropriation without compensation, it will make it more difficult to get foreign investment which will make it even more difficult to fix South Africa’s problems.
“We could see the weakening of the rand in the long-term and South Africa could find itself in a situation where it is unable to meet its obligations and we could have a crisis like a Brazil or Argentina,” he says.
South Africa is already in technical recession following two consecutive quarters of negative growth.
“The government doesn’t have a lot of flexibility to be spending money on anything other than the necessities. Things like the National Health Insurance (NHI) and other noble policies that the government is trying to implement; the question is where will the money come from? If they expropriate land, they will need to assist the farmers and maybe give some sort of guarantees to banks…We don’t know the depths of what kind of money could be required to do that but the government probably won’t afford it. We are struggling to manage our public wage bill, so it would be difficult,” says Nathanson.
Ian Matthews, Head of Business Development at Bravura, an independent investment banking firm specializing in corporate finance and structured solutions, has similar views to Nathanson. He says an uncertain regulatory landscape cannot hope to instil confidence in foreign investors. The main concern, he says, has been whether foreign investment assets could be expropriated without compensation.
According to Matthews, in this climate, there is every possibility that direct foreign investment could contract significantly.
Prior to 2018, South African Reserve Bank (SARB) statistics had shown that FDI into South Africa declined from R76 billion in 2008 to just R17.6 billion in 2017 and a UN report, Global Investment Trends Monitor indicates that in 2015, FDI into South Africa fell by 74% to $1.5 billion.
According to Matthews, banks are the biggest source of credit for farmers at 61% and about R148 billion outstanding in loans for agricultural land and R1.6 trillion in property.
“Initially playing down the risk of expropriation of property without compensation, South Africa’s banks have since proposed a fund to help accelerate land transformation. Although no amount has been suggested for the fund, the proposal signifies the banks’ intention of seeking practical solutions to protect the billions of rands in assets that are tied up in farm loans,” he says.
South African banks are worried.
Taking the same view as Hall, according to Nedbank Group, one of South Africa’s commercial banks, the government has not used its existing powers to expropriate land for land reform purposes effectively, nor has it used the provisions in the Constitution that allow compensation to be below market value in particular circumstances.
“Changing [the Constitution] would send a very strange and damaging signal to our people and potential investors. It is our view that the acquisition of land and the current Constitutional provisions have not been a key obstacle to land reform so far and that an amendment to Section 25 of the Constitution would offer little in the way of sustainable solutions in the future,” says the bank in its written submission at the Public Hearings on the review of Section 25 of the Constitution.
It says the key challenges are lack of effective implementation of current powers, lack of capacity, lack of resource allocation and lack of proper and structured support for new land owners.
“As a commercial bank, we are a key role player in funding the economy and any material impact to property prices would adversely affect confidence in the banking system and could trigger a classic banking crisis with significant negative knock-on effects on the economy,” said Nedbank CEO Mike Brown, speaking to the Constitutional Review Committee, which is investigating proposed changes to the Constitution.
Cas Coovadia, Managing Director of the Banking Association of South Africa, says there are better ways of expropriating land for blacks.
“To expropriate land with compensation without ensuring that we have the funds to support those who get the land in the way that fulfils the commitment of the president that it will not threaten food security and agricultural production is going to be a challenge,” he says.
Coovadia says the banks made it clear that the critical thing for the country right now is to get investments and create growth.
“We have been engaging government through the department of land and rural development for the past five years. We have presented projects and initiatives, we think, through a public-private partnership between the banking sector, agricultural sector, and government, can ensure people get land in a sustainable way and get commercial farmers involved to offer support,” he says.
The trick is, according to Coovadia, releasing land owned by the state first and giving it to the people.
“This is a problem that needs to be dealt with but it should be handled carefully… We don’t even know how much land is owned by who and where. We need a land audit to understand these issues. We don’t have enough issues or data on land to understand how exactly to deal with it. We need to stop pretending that having an amendment of Section 25 is going to fix our land reform issues,” he says.
On the other hand, the EFF has welcomed the government’s plans to expropriate land.
“The ANC president Cyril Ramaphosa has finally capitulated and submitted to the basic logic of amending Section 25 of South Africa’s Constitution to allow for expropriation of land without compensation,” said spokesperson Mbuyiseni Ndlozi in a statement after Ramaphosa’s announcement.
“The resolute submissions of the people on the ground and in all the public hearings exposed the ANC to the fact that an absolute majority of black people agree with the EFF’s steadfast and consistent position that the Constitution should be amended to allow for expropriation of land without compensation. This illustrates that when given an opportunity, the people of South Africa are always ready to provide resolute guidance on key economic and redress questions,” he says.
Until the motion is brought to a vote in parliament, the land expropriation debate lives on.
Risks of amending the Constitution, according to Nedbank
Any changes to the Constitution, however well-intentioned, would send a negative signal to potential investors and be seen as a risk to future property rights. Should this happen, according to Nedbank at the Public Hearings on the review of Section 25 of the Constitution:
• Fixed investment spending and job creation would suffer
• Borrowing costs could rise at a time that the country – and government – could ill-afford
• Growth would remain below potential
In the unlikely event of a poorly-implemented land reform program, carried out exclusively or largely through Expropriation Without Compensation, the effects would be more structural and significant:
• Property prices would plummet along with other asset prices
• There would be large-scale defaults, with little or no collateral for the banks to offset losses
• Government may have to step in to protect depositors’ funds in the event of a banking crisis
• Borrowing costs generally would soar
• The economy would be severely depressed and unemployment would rise even further
• Food security would be impaired and food prices would increase
Djibouti: Strengthening Africa’s Passage To Prosperity
“Djibouti is in the process of becoming an essential link in the economic globalisation. We shall remain faithful to our ideals of unity, equality and peace by remaining true to our core values and our hospitality, generosity and solidarity culture that we can be proud of our identity in a world subjected to cultural standardisation.” – His Excellency President Ismaïl Omar Guelleh.
Djibouti is successfully improving its position in the global market by enacting several enterprising reforms to enhance and improve conducive business environments, property registration, credit availability, as well as empowering sectors such as infrastructure, finance and energy. These measures are all a part of His Excellency President Ismaïl Omar Guelleh’s Vision 2035, which has already demonstrated great progress, as Djibouti has leapt from the 154th in 2017 to the 99th position in the 2018 World Bank Ease of Doing Business Report. Central Bank of Djibouti Governor Ahmed Osman Ali, says, “We have worked hard to improve our investment environment. In terms of investors’ protection, Djibouti ranked second worldwide in the World Bank Doing Business 2019 ranking, gaining 94 places compared to 2018. Djibouti offers great potential to investors in various sectors, as well as an attractive fiscal environment.” The Vision 2035 is a strategy that is built through the participation of Djibouti’s youth, political parties, civil society, businesses, development partners and the international community. The vision is based on five core pillars: Peace and national unity, Good governance, a diverse economy, Investing in human capital and Regional integration.
In utilising its advantageous geographic position and strengthening its place as East Africa’s hub, the Vision 2035 recognises that Djibouti is a natural gateway for bordering and nearby countries for sea and air cargo transportation. Dabar Adaweh Ladieh, General Director of the Société International Des Hydrocarbures de Djibouti (SIHD) says, “That is why Djiboutian ports, for instance, are destined to serve the whole region. Goods from Europe, the Middle East and Asia will arrive here. We will have an exchange centre thanks to our strategic plan and the President’s vision to develop infrastructure.” In keeping with this goal, Djibouti has been investing in new port terminals, as well. “SIHD, in partnership with other companies, is building a new stocking site in the Damerjog economic zone where there are also other projects to be realised, like the port and the stocking site of natural gas,” says Ladieh. “So, we are proceeding with this global vision in mind.”
Diversifying the economy is crucial to the Vision 2035, and the government is dedicated to ensuring consistent GDP growth, which will create over 200,000 jobs in the next fifteen years. One of the means to do this is through the energy sector. Djibouti is no stranger to ambitious projects if it means improving the livelihood of its people and securing a better future. As such, the government has enacted several programmes that seek to meet 100% of the country’s energy demand with renewable resources in order to combat pollution and decrease dependence on imported energy resources. This can be done through geothermal energy, wind energy, solar energy as well as waste energy. The government is currently moving into the production phase of geothermal energy, with wind energy production set to begin in spring 2020. Ensuring the abundant availability of reliable and cheap energy puts Djibouti on the cusp of a green revolution and is a crucial step toward the achievement of Vision 2035, with positive effect on investments and employment resonating throughout the economy. The government has also invested in highly specialised programmes that are designed to nurture the thriving young population. Mr Yonis Ali Guedi, Minister of Energy, states, “All these projects are to develop Djibouti, making sure that energy is abundant and cheap, to attract investors, jobs can be created, and the prosperity of our citizens can be increased. Development always needs energy, so, the country needs to provide itself with green and clean energy.”
In accordance with the strategy mapped out in Djibouti’s Vision 2035, the government has taken on an astounding series of projects aimed at updating Djibouti’s infrastructural landscape. Part of this plan is found in the country’s new International Free Trade Zone. Opened in July 2018, the DIFTZ marked a turning point in the history of Djibouti and the entire East African market. The Zone will inevitably boost local and international trade and create employment for Djiboutians. The Free Zone clearly represents Djibouti’s rapid and impressive transformation and serves as a beacon of light for the future, positioning the country as a hub for trade, logistics and finance.
In addition to the government’s dedication and all these vast improvements across many sectors, Djibouti’s participation in the African Continental Free Trade Agreement will also create an environment where investors can thrive. The AfCFTA is meant to create a tariff-free continent that could boost intra-African trade. Governor of Central Bank of Djibouti, Ahmed Osman Ali, states, “It is a great opportunity: it will grant access to a wider market to companies operating here. To take advantage of increased regional integration. We have invested heavily in port, road, rail and telecommunications. We remain very confident about the positive effects of the African Continental Free Trade Agreement in terms of activities, growth and job creation.”
Driving Djibouti’s Development Goals
Afreximbank Focus on Djibouti
Afreximbank has pledged to work with public and private entities in Djibouti in order to deploy the Bank’s trade finance programmes in support of the country’s economic priorities.
A small nation in the Horn of Africa, Djibouti’s location along the Gulf of Aden, its proximity to the Mandeb Strait, the southern entrance to the Suez Canal and Yemen gives the small African nation a strategic role to play along one of the world’s busiest trade routes. Ten percent of the world’s oil exports and 20% of all commercial goods traverse through the Suez Canal, passing close to Djibouti. With the vision to be the trade finance bank for Africa, Djibouti plays an increasingly bigger role within the Afreximbank portfolio.
Djibouti signed onto the African Export-Import Bank Establishment Agreement in 2016 marking the commencement of the partnership. At the signing of the agreement, President Ismaïl Omar Guelleh stated that this partnership will help the country advance its trade related infrastructure and the areas of logistics and renewable energy. The bank has also helped to promote and finance Djibouti’s industrial sector in the area of export manufacturing. With help in financing from Afreximbank, Djibouti has been able to further leverage its important geographic position to its advantage. It will also flourish in new areas of the economy such as tourism and investment.
During its partnership, Afreximbank has pledged to work with public and private entities in Djibouti and would link them with other African and international economic players in order to deploy the Bank’s trade finance programmes in support of the country’s priorities, including the development of renewal energy infrastructure through the Bank’s funding arrangement with KFW, the German development bank, construction of world-class tourism amenities under the Bank’s CONTOUR facility and expansion of Djibouti’s transport and logistics infrastructure. The trade and infrastructure development plans initiated by Djibouti are very impressive and have the potential to transform the country and to make an impact, not only in the region but across Africa, as the country moves toward becoming a key logistics hub for the continent.
Due to its location and the government’s recent policy reforms, the country is attracting more business and investment than ever. Djibouti has recently implemented a policy of international free trade zones, which enables foreigners to start business in the country easily and without paying profit taxes. These policies have been effective in recent years to attract much attention to the tiny nation as it seeks to create a conducive business environment. Already, our partnership has seen positive effects with Djibouti’s Ease of Doing Business ranking increasing in 2018 to 99 up from 154 in 2017.
Djibouti is one of the many cases in which partnering with Afreximbank has helped countries develop their trade sectors. In 2017 Afreximbank focused on a forward looking initiative called Impact 2021, Africa Transformed. This initiative is fixed on strengthening four main sectors: intra-Africa trade, industrialisation and export development, trade finance leadership and financial soundness and performance. Just in 2018, Afreximbank saw 24% overall growth with a US$55 million increase in income. Up from US$229.8 million total income in 2017, the total income for 2018 was US$285.4 million. Afreximbank also saw a 13% growth in its assets totalling US$13.42 billion for 2018 due to a rise in net loans and advances. The bank’s operating profit saw an exceptional rise in 2018 to US$394.8 million from US$109 million in 2017.
This growth is continuing into 2019 with a 59% increase in total revenues for the first three months of the year compared to the same timeframe in 2018. Though it is a small country, Djibouti’s location elevates its status in geopolitics, and it is only logical to assume that its importance will continue to grow as nations turn their attentions to Africa and the Middle East. With a positive outlook ahead and a successful year behind us, Afreximbank is well on its way of achieving its vision and assisting Djibouti in its development goals.
Footnote: The African Export-Import Bank (Afreximbank) is the foremost pan-African multilateral financial institution devoted to financing and promoting intra- and extra-African trade. The Bank was established in October 1993 by African governments, African private and institutional investors and non-African investors. Its two basic constitutive documents are the Establishment Agreement, which gives it the status of an international organisation, and the Charter, which governs its corporate structure and operations. Since 1994, it has approved more than US$67 billion in credit facilities for African businesses, including US$7.2 billion in 2018. Afreximbank had total assets of US$13.4 billion as at 31 December 2018. It is rated BBB+ (GCR), Baa1 (Moody’s), and BBB- (Fitch). The Bank is headquartered in Cairo.
The Central Bank Fights Financial Exclusion And Eases Business
Governor Osman Ali vows to do even more to attract banking activities to Djibouti and enable further growth.
Central Bank of Djibouti Governor Ahmed Osman Ali is a key player in the nation’s strategy of enabling infrastructure improvement and economy diversification to become an emerging country by 2035. Penresa sat with him to discuss the achievements of his mandate and his plans to keep supporting Djibouti’s Vision 2035
How is the Central Bank working to help Djibouti become a middle-income country by 2035?
The ambition to establish Djibouti as an emerging economy by 2035 is part of the national development strategy pursued by the government’s sectoral policies. The objective is to transform Djibouti into an international logistic and financial hub.
The Central Bank is thus working for a more dynamic, efficient, sustainable and inclusive financial sector. An initial comprehensive reform package began in the early 2000s: since then, the sector has grown from five to 36 financial institutions (including 11 banks, from two in 2006). Subsequently, to expand the financial sector, our priorities are focused on the following points: The viability of the sector with the impressive strengthening of the supervisory framework, as well as anti-money laundering and anti-terrorist financing measures. Reference texts are regularly updated according to international standards;
The promotion of financial inclusion through initiatives such as the right to an account, with banks being legally obliged to open an account for people with a minimum income of DJF 40,000 (e200). Also worth mentioning is the development of microfinance and mobile banking. To ease access to credit for SMEs/SMIs we have established a Partial Credit Guarantee Fund and initiated the necessary reforms to launch leasing activities in Djibouti;
The modernisation of the national financial infrastructure with the introduction of i) a modern national payment system taking into account the new paperless electronic payments (real-time gross settlement, automated clearing house…); and ii) a new fully automated credit information system.
The African Continental Free Trade Agreement is meant to create a tariff-free continent that could boost intra-African trade. Do you feel this will contribute to Djibouti’s economic growth?
It is a great opportunity: it will grant access to a wider market to companies operating here. To take advantage of increased regional integration (Djibouti is a founding member of COMESA), we invested heavily in port, road, rail and telecommunications. Djibouti is AGOA eligible, which is significant for our Indian and Chinese partners.
We remain very confident about the positive effects of the African Continental Free Trade Agreement in terms of activities, growth and job creation.
You were awarded Central Banker of the Year 2018 at the Global Islamic Finance Award. What did you do to expand Islamic Finance?
We realised that a significant portion of our population was marginalised in the financial sphere due to the lack of Shariah compliant financial products. We have made the necessary efforts to introduce and develop Islamic finance, and today the three active Islamic banks (the first of which established in 2006) represent 20% of the market. We also launched an annual Summit bringing together in Djibouti the institutions and eminent experts of International Islamic finance.
The award we received is an acknowledgement of the efforts undertaken by all stakeholders to achieve these results.
For the readers of FORBES AFRICA and the discerning investor, why is NOW the best time to invest in Djibouti?
We have worked hard to improve our investment environment. In terms of investors’ protection, Djibouti ranked second worldwide in the World Bank Doing Business 2019 ranking, gaining 94 places compared to 2018. Djibouti offers great potential to investors in various sectors, as well as an attractive fiscal environment.
Developing And Connecting Djibouti Through A World Platform
Minister’s Round Table
Penresa sat down with Hon. Youssouf, Minister of Foreign Affairs and International Cooperation, Hon. Awaleh, Minister of Agriculture, Livestock, & Fisheries, Hon. Dawaleh, Minister of Economics and Finance and Hon. Guedi, Minister Minister of Energy & Water.
What big project is your ministry focused on right now?
Hon. Youssouf: We need to speed up the process of creating job opportunities. First, in education and then in job creation. That is why we are compelled to seek opportunities for young people and women. Djibouti has signed the ICSID Convention. You need a legal framework to reassure investors that their investment is protected. We hope that it will boost the volume of the investment, because more investment means more job opportunities. Vision 2035 is our development plan over the next 20 years that will help change the livelihood of people. Djibouti has also signed the African Continental Free Trade Agreement (AfCFTA). It is vital for African countries to create that common market because trade is the engine of the economy. When you have that framework, that facility to boost and step up the intra-African trade, it creates job opportunities, wealth, rapprochement between countries, community. We believe that the bigger the market is, the bigger the opportunities to create job and wealth.
Hon. Awaleh: The Ministry is involved in several projects focused on sustainable agriculture. Djibouti has an arid ecosystem; it is more or less a desert with black stones. The rainfall is on average 150mm per year and we have no rivers. The best three activities for Djibouti (because of saline ground) are date palms, greenhouse horticulture and livestock. One example is that we have a laboratory here for date palms. There are a lot of varieties, and the best variety is called Medjool. One kg of Medjool is about $US30. It is the highest price for a fruit. It is very difficult to get this variety: California, Israel and Morocco have it. One tree takes eight years to grow, and in all its life, a date palm will give you 10-20 shoots. The problem is that we do not have date palms here in Djibouti. So, we have done the research and we have discovered that we can produce date palms from cells. It has taken us 5-6 years, and we have chosen the best varieties. In the world, we are the fourth laboratory which produces Medjool dates in this way. We are proud to have introduced date palms specific for Djibouti.
Hon. Guedi: We are working toward 100% green energy. We are developing other forms of energy like wind and geothermal energy. We never had a real project in geothermal, but at the end of April/beginning of May 2019, the presence of geothermal energy in the Fiale project was confirmed. The three drillings were done at a depth of 2,600 metres. Now, we are going to move to the next step, the production. We have signed all necessary contracts as far as wind energy is concerned after one year of negotiations to finalise the production of 60 MW of wind energy with African Financial Cooperation in Ghoubet. As of now, the windmills are already being produced, using German technology. Completion of the project is 12 months, so in April/May 2020, we will start with the production of wind energy. We have also developed solar energy. The French company Engie contacted us for a first project for solar energy. We have already signed with EngieAfrique for the development of 30 MW solar station on the site of Grand Bara. This will be the first step and we hope that we will finalise all the documents for the project in two to three months. As you can see, the energy revolution in Djibouti is coming.
Hon. Dawaleh: The growth over the past five years has been 6-7%, which is comfortable. The balance of payment is now at a good level; in the past we had a very high debt, while now it is at 70%. All the macro-economic indicators are reasonable for Djibouti. The driving force of the economy of Djibouti is the port, the air, the airport and the infrastructure. We have six ports, we have trains. We deliver the flow of goods from COMESA countries to the world. We also intend to handle the flow of information and finance, of capital between COMESA and Djibouti because we want to be a hub for money, since our currency is pegged on the dollar. All people in the Eastern African region should put their money in Djibouti. We want to be the hub of the flow of capital and information, since we have seven telecommunication submarine cables, not only for Djibouti, Somaliland and Ethiopia, since the cable encompassing Africa runs through Djibouti. So, our focus areas are transport, flow of information and capital.
Climate Explained: How Much Of Climate Change Is Natural? How Much Is Man-made?
How much climate change is natural? How much is man made?
As someone who has been working on climate change detection and its causes for over 20 years I was both surprised and not surprised that I was asked to write on this topic by The Conversation. For nearly all climate scientists, the case is proven that humans are the overwhelming cause of the long-term changes in the climate that we are observing. And that this case should be closed.
Despite this, climate denialists continue to receive prominence in some media which can lead people into thinking that man-made climate change is still in question. So it’s worth going back over the science to remind ourselves just how much has already been established.
Successive reports by the Intergovernmental Panel on Climate Change – mandated by the United Nations to assess scientific evidence on climate change – have evaluated the causes of climate change. The most recent special report on global warming of 1.5 degrees confirms that the observed changes in global and regional climate over the last 50 or so years are almost entirely due to human influence on the climate system and not due to natural causes.
What is climate change?
First we should perhaps ask what we mean by climate change. The Intergovernmental Panel on Climate Change defines climate change as:
a change in the state of the climate that can be identified by changes in the mean and/or the variability of its properties and that persists for an extended period, typically decades or longer.
The causes of climate change can be any combination of:
- Internal variability in the climate system, when various components of the climate system – like the atmosphere and ocean – vary on their own to cause fluctuations in climatic conditions, such as temperature or rainfall. These internally-driven changes generally happen over decades or longer; shorter variations such as those related to El Niño fall in the bracket of climate variability, not climate change.
- Natural external causes such as increases or decreases in volcanic activity or solar radiation. For example, every 11 years or so, the Sun’s magnetic field completely flips and this can cause small fluctuations in global temperature, up to about 0.2 degrees. On longer time scales – tens to hundreds of millions of years – geological processes can drive changes in the climate, due to shifting continents and mountain building.
- Human influence through greenhouse gases (gases that trap heat in the atmosphere such as carbon dioxide and methane), other particles released into the air (which absorb or reflect sunlight such as soot and aerosols) and land-use change (which affects how much sunlight is absorbed on land surfaces and also how much carbon dioxide and methane is absorbed and released by vegetation and soils).
What changes have been detected?
The Intergovernmental Panel on Climate Change’s recent report showed that, on average, the global surface air temperature has risen by 1°C since the beginning of significant industrialisation (which roughly started in the 1850s). And it is increasing at ever faster rates, currently 0.2°C per decade, because the concentrations of greenhouse gases in the atmosphere have themselves been increasing ever faster.
The oceans are warming as well. In fact, about 90% of the extra heat trapped in the atmosphere by greenhouse gases is being absorbed by the oceans.
A warmer atmosphere and oceans are causing dramatic changes, including steep decreases in Arctic summer sea ice which is profoundly impacting arctic marine ecosystems, increasing sea level rise which is inundating low lying coastal areas such as Pacific island atolls, and an increasing frequency of many climate extremes such as drought and heavy rain, as well as disasters where climate is an important driver, such as wildfire, flooding and landslides.
Multiple lines of evidence, using different methods, show that human influence is the only plausible explanation for the patterns and magnitude of changes that have been detected.
This human influence is largely due to our activities that release greenhouse gases, such as carbon dioxide and methane, as well sunlight absorbing soot. The main sources of these warming gases and particles are fossil fuel burning, cement production, land cover change (especially deforestation) and agriculture.
Most of us will struggle to pick up slow changes in the climate. We feel climate change largely through how it affects weather from day-to-day, season-to-season and year-to-year.
The weather we experience arises from dynamic processes in the atmosphere, and interactions between the atmosphere, the oceans and the land surface. Human influence on the broader climate system acts on these processes so that the weather today is different in many ways from how it would have been.
One way we can more clearly see climate change is by looking at severe weather events. A branch of climate science, called extreme event or weather attribution, looks at memorable weather events and estimates the extent of human influence on the severity of these events. It uses weather models run with and without measured greenhouse gases to estimate how individual weather events would have been different in a world without climate change.
As of early 2019, nearly 70% of weather events that have been assessed in this way were shown to have had their likelihood and/or magnitude increased by human influence on climate. In a world without global warming, these events would have been less severe. Some 10% of the studies showed a reduction in likelihood, while for the remaining 20% global warming has not had a discernible effect. For example, one study showed that human influence on climate had increased the likelihood of the 2015-2018 drought that afflicted Cape Town in South Africa by a factor of three.
Adapting to a changing climate
Weather extremes underlie many of the hazards that damage society and the natural environment we depend upon. As global warming has progressed, so have the frequency and intensity of these hazards, and the damage they cause.
Minimising the impacts of these hazards, and having mechanisms in place to recover quickly from the impacts, is the aim of climate adaptation, as recently reported by the Global Commission on Adaptation.
As the Commission explains, investing in adaptation makes sense from economic, social and ethical perspectives. And as we know that climate change is caused by humans, society cannot use “lack of evidence” on its cause as an excuse for inaction any more.
The Rage And Tears That Tore A Nation
Snapshots of the outrage against foreign nationals and protests against sexual offenders in South Africa in recent weeks, captured by FORBES AFRICA photojournalist Motlabana Monnakgotla.
As the continent’s second-biggest economy, South Africa attracts migrants from the rest of Africa. But mired in its own problems of unemployment and political instability, September saw a serious outbreak of attacks by South Africans on foreign nationals and foreign-owned businesses. And they have been ugly.
The spark that fueled the raging fire was in Pretoria, the country’s capital, when a taxi driver was shot dead by a foreign national who was selling drugs to a youngster in the central business district (CBD).
The altercation caused a riot and the taxi industry brought the CBD to a standstill, blocking intersections. It did not stop there; a week later, about 60 kilometers from the capital in Malvern, a suburb east of the Johannesburg CBD, a hijacked building caught fire, leaving three dead. As emergency services were putting out the fire, the residents took advantage and looted foreign-owned shops and burned car dealerships overnight on Jules Street.
The lootings extended to the CBD and other parts of Johannesburg.
To capture this embarrassing moment in South African history, I visited Katlehong, a township 35 kilometers east of Johannesburg, where the residents blocked roads leading to Sontonga Mall on a mission to loot the mall and the foreign-owned shops therein overnight.
Shop-owners and workers were shocked to wake up to no business.
Mfundo Maljingolo, a worker at Fish And Chips, was among the distressed.
“This thing started last night, people started looting and broke into the mall and did what they wanted to do. I couldn’t go to work today because there’s nothing to do; now, we are not going to get paid. The shop will be losing close to R10,000 ($677) today. It’s messed up,” said Maljingolo.
But South African businesses were affected too.
Among the shops at the mall is Webbers, a clothing and footwear store. Looters could not enter the shop and it was one of the few that escaped the vandalism.
Dineo Nyembe, the store’s manager, said she was in disbelief when she saw people could not enter the mall.
“We got here this morning and the ceiling was wrecked but there was no sign that the shop was entered, everything was just as we left it. Now, we are packing stock back to the warehouse, because we don’t know if they are coming back tonight,” lamented Nyembe, unsure if they would make their daily target or if they would be trading again.
Across the now-wrecked mall are small businesses that were not as fortunate as Webbers, and it was not only the shop-owners that were affected.
Emmanuel Nhlane’s home was robbed even as attackers were looting the shop outside.
“They broke into my house, I was threatened with a petrol bomb and I had to stand outside to give them a chance; they took my fridge, bed, cash and my VHS,” said Nhlane.
Nhlane had rented out his yard to foreign nationals to operate a shop. He does not comprehend why his belongings were taken because he doesn’t own a shop. Now, it means that the unemployed Nhlane will not be getting his monthly rental fee of R3,700 ($250).
Far away, the coastal KwaZulu-Natal province of South Africa, was also affected as trucks burned and a driver was killed because of his nationality. This was part of a logistics and transport industry national strike.
Back in Johannesburg, I visited the car dealerships that were a part of the burning spree on Jules Street.
The streets were still ashy and the air still smoky, two days after the unfortunate turn of events.
Muhamed Haffejee, one of the distraught businessmen there, said: “Currently, we are still not trading.”
Cape Town, in the Western Cape province of South Africa, which hosted the World Economic Forum (WEF) on Africa from September 4 to 6, was also witness to protests by women and girls from all walks of life outside the Cape Town International Convention Centre, demanding that the leadership take action to end the spate of gender-based violence (GBV) in the country.
There were protests also outside Parliament. What set off the nationwide outcry was the shocking rape and murder of Uyinene Mrwetyana, a 19-year-old film and media student at the University of Cape Town, inside a post office by a 42-year-old employee at the post office.
There was anger against the ghastly crimes and wave of GBV in the country that continues unabated. According to Stats SA, there has been a drastic increase of women-based violence in South Africa; sexual offences are up by 4.6%, from 50,108 in 2018 to 52,420 in 2019.
A week later, on a Friday, Sandton, Africa’s richest square mile and one of the biggest economic hubs, was shut down by hundreds of angry women and members of advocacy groups from across Johannesburg. They congregated by the Johannesburg Stock Exchange (JSE), the cynosure of business, singing and chanting, to demand “a 2% levy on profits of all listed entities to help fund the fight against GBV and femicide”.
Among the protesters was Cebi Ngqinanbi, holding a placard that read: “I’m not your punching bag.”
“We came here to disrupt Sandton as the heart of Johannesburg’s economic hub. We want to make everyone aware that women and children are being killed every day in South Africa and they [Sandton] continue with business as usual, sitting in their offices with air-conditioners and the stock exchange whilst people on the ground making them rich are dying. That is why we are here, to speak to those that have economic power,” said Ngqinanbi.
She added that if women can be given economic power, they will be able to fend for themselves and won’t fall prey to abusive men, since most women stay in abusive relationships because men are more financially stable.
Amid the chanting and singing of struggle songs, Nobuhle Ajiti addressed the crowd and shared her own haunting experience as a migrant in South Africa and survivor of GBV. She spoke in isiZulu, a South African language.
“I survived a gang rape; I was thrown out of a moving car and stabbed several times. I survived it, but am I going to survive xenophobia that is looming around in South Africa? Will I able to share my xenophobia story like I can share my GBV story?” questioned Ajiti.
She said as migrants, they did not wake up in the morning and decide to come to South Africa, but because of the hardships faced in their home countries, they were forced to come to what they perceived as the city of opportunities. And as a foreign national, she had to deal with both xenophobia and GBV.
“We experience institutionalized xenophobia in hospitals; we are forced to pay huge amounts for consultation. I am raped and I need medical attention and I am told I need to pay R5,000 ($250).
“As a mere migrant, where am I going to get R5,000? I get abused at home and the police officer would ask me where I’m from because of my accent, I sound Zimbabwean. What does my nationality have to do with my husband beating me at home or with the man that just raped me?” she asked.
Addressing the resolute women outside was the JSE CEO Nicky Newton-King who received the memorandum demanding business take their plight seriously, from a civil society group representing over 70 civil society organizations and individuals.
The list of demands include that at all JSE-listed companies contribute to a fund to resource the National Strategy Plan on GBV and femicide, to be launched in November; transport for employees who work night shifts or work after hours; establish workplace mechanisms to provide support to GBV survivors as part of employee wellness, and prevention programs that help make workplaces safe spaces for all women.
Newton-King assured the protestors she would address their demands in seven days. But a lot can happen in seven days. Will there be more crimes in the meantime? How many more will be raped and killed in South Africa by then?
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