Tis the season to reconsider one’s investment portfolio for 2014. It is advisable to use a top-down approach by assessing the leading markets and then looking at emerging markets.
Most economists believe that there will be upside surprises, especially in the United States, but also in Germany and China. According to Nariman Behravesh, chief economist at IHS Global Insight, a global economic research firm, American consumers are feeling more upbeat.
“A lot of the unpleasant news is off the front page, like the government shutdown – and gasoline prices are down. The job situation is improving.&#8221; He provided a good holiday season that would build momentum going into 2014” he said. To back his theory, the Commerce Department reported that November retail sales rose by 0.7%, the biggest gain in five months. In conjunction with a revised stronger number for October, Americans had a strong start to the holiday shopping season. Some economists even upgraded their Q4 Gross Domestic Product (GDP) outlook based on the November retail sales number; Barclays raised its Q4 forecast to 2.2% from 2% and J.P. Morgan raised it to 2% from 1.5%. Consumer spending, or consumer sentiment, is the largest part of aggregate demand at the macroeconomic level. The attitudes of households towards the economy is a strong component of consumer spending. If consumers’ attitudes regarding the state of the economy is negative, they refrain from spending. Alternatively, if the state of the economy is good, people spend and invest with confidence, which makes consumer sentiment and spending a powerful predictor of the economy.
The next question is whether the Federal Reserve Bank (FRB) will taper? With the October government shutdown – where 800,000 FRB employees were told to stay at home because Congress failed to enact legislation appropriating funds for the 2014 fiscal year – a median of 40 responses in a Bloomberg News Survey of economists believe that the FRB will delay the first reduction in its bond purchases until March 2014. Because the government shutdown slowed Q4 growth and interrupted the flow of data, policymakers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting. The US government has been trying to stimulate their economy through a bond-buying program known as quantitative easing (QE). This occurs when the Federal or any central bank creates money by buying bonds or other financial assets from banks. In turn, the banks then have more money available to lend. Higher loan growth makes it easier to finance projects in which people work, thereby helping the economy to grow.
The first program of QE saw the US government inject $600 billion into their economy. In total, the FRB bought more than $2 trillion treasury bonds and mortgage-backed securities, which is nearly 10 times the annual rate of bond purchases during the previous decade. In 2012, the stock of bonds on the FRB’s balance sheet rose more than 20%.
Quantitative easing was not intended to last forever. However, Ben Bernanke, former chairman of the Federal Reserve Bank, stated that the flow of purchases will depend on the incoming data and the assessment of how the labor market and inflation is evolving in the US. Therefore, tapering quantitative easing would mean that policymakers are regaining confidence in the US economy. Though bonds sold off sharply in the wake of Bernanke’s first mention of tapering and stocks exhibited higher volatility than previously, tapering will not be an immediate or dramatic event. It is likely to take place over an extended period of time so as to create minimal market disruption. The FRB may pull back slightly if the economy continues to strengthen. It can increase the program again if the economy slows or the financial markets are shaken by an unforeseen crisis. Because the tapering threat has been ongoing for so long, I believe that the markets have now either factored in or discounted that news. Therefore, the market will most likely react marginally upon an initial tapering.
Most economists do not expect interest rates to rise until 2015. The FRB’s policymakers will not raise rates from the current 0%-0.25% range until the unemployment rate falls below 6.5% – so long as inflation is contained. A recent Producer Price Index (PPI) report showed wholesale prices fell 0.1% in November, the third consecutive drop. The PPI is up just 0.7% on a year-on-year basis, while the core rate is up 1.3%. Bernanke would have preferred the rate of inflation to be around 2%, and is hoped that more “monetary accommodation” would push inflation up and the unemployment rate down.
I forecast a stronger dollar. Though it could hurt the US economy as it makes exports more expensive for foreign consumers, it also attracts investors, which is positive for the US economy. A stronger currency will also make it easier for the US to borrow and finance its debt, all other factors being equal.
In Europe, GDP expanded by 0.3% in the first three months of 2013, which signaled the end of the longest contraction in continental Europe in over 40 years. However, unemployment remained at 12.2% in September, which means the region’s faltering economic recovery has yet to be felt in the job market. The Commission said it expected the Eurozone’s GDP to grow by 1.1% in 2014.
“There are increasing signs that the European economy has reached a turning point,” said EU Economic and Monetary Affairs Commissioner Olli Rehn.
With the majority of economists forecasting a positive change in market sentiment in leading economies, due to progressive improvement in economic data, this is bound to build momentum in the emerging markets, which will export more into the US and Europe. Africa’s stock markets should gain upside momentum in 2014 as economies steadily improve.

Where The Money Is Going In 2014

Mo Ibrahim is rich, relaxed and a lot of fun. He sees humor in the leadership of Africa as he delivers his Nelson Mandela lecture. He compares Robert Mugabe to Bill Clinton and Barack Obama who both ran the world’s biggest economy in their 40s.
“Here we have somebody in our neighboring country, who, at 90 years old, is about to start a new term. So what is wrong with us? And the other day I was thinking, ‘If Obama senior decided to take the young Obama back to Kenya, where would the young Obama be today?’ You may guess, I know, he will never be president of Kenya,” says Ibrahim to laughter from the audience in Pretoria.
Ibrahim knows Africa like the back of his hand. He was born in Sudan in 1946, the second child in a family of five. He went to school and university in Alexandria, Egypt, where his father worked as a cotton trader. After university, Ibrahim went to work for the telecommunications department in Sudan. Following training and assignments abroad, he completed his Masters and Doctorate at the University of Birmingham, in England.
It led to an opportunity to get in on the ground floor of world telecommunications. Ibrahim joined British Telecom (BT) as a technical director when it won the first license for cellular technology. He designed the first mobile network in the United Kingdom.
Ibrahim left BT to start Mobile Systems International (MSI) and founded Celtel International, one of the first mobile phone networks in Africa, in 1998. At the time, people were scrambling for licenses everywhere but Africa. The general consensus was that Africa was too difficult.
“Wherever there is a gap between perception and reality, there’s a good business opportunity,” says Ibrahim.
He sold MSI in 2000. Celtel was sold in 2005 to MTC Kuwait for $3.4 billion, making him a reported $1.4 billion. At the time, the company had six million subscribers in 13 countries.
Ibrahim hails mobile technology as an African success story, but cautions that despite the continent having more mobile phones than Europe and the United States, it makes none of them. He says African nations should sign contracts with mobile companies forcing them to set up factories here and then transfer the skills.
The leadership that could bring this about has been honored with millions of dollars by the Ibrahim Foundation, launched in October 2006, to support good governance and great leadership in Africa. The foundation publishes an annual index on the quality of governance.
The Ibrahim Prize—of $5 million-a-year for 10 years—has been awarded a mere three times and goes only to former heads of state. In 2007, it went to former president of Mozambique Joachim Chissano; in 2008, Festus Mogae of Botswana; in 2011, Pedro Pires of Cape Verde.
Ibrahim says that it’s a prize for excellence that doesn’t come easy. He adds it is a prize and not a pension. Many do not agree with the idea, but Ibrahim challenges people to name three western leaders who could have won it in the last six years.
On the business front, Ibrahim is trying to channel investment through Satya Capital, of which he is chairman.
“Business is wonderful because business means prosperity, development and jobs,” says Ibrahim.
Good business that is. Ibrahim is disturbed by fellow African businessmen whom he believes are detached from society. A closer interaction is essential because, he says, business cannot succeed if society doesn’t thrive. He also thinks that the business world is too scared to rock the boat and hold government to account, forcing transparency and good governance.
Ibrahim is a proponent of integration. He feels that achieving a central market for Africa is essential, that the continent has yet to achieve this because of a lack of political will. According to Ibrahim, an African business plan must begin with integration and that Africa needs scale that allows the development of industries to compete with India, China, Brazil, the European Union and the United States.
“We cannot really build 54 successful small economies in Africa, it’s out of the question,” says Ibrahim.
“Only 11% of our trade is amongst Africans. We refuse to let our people travel from one country to another.”
Ibrahim says Africa needs infrastructure, roads and railways, power generation and broadband.
“Africa will not develop just by accident, people need to work and see what needs to be done and work together,” he says.
Then, there is youthunemployment.
“If you are a young African person, the more educated you are the more likely you are not to get a job. Our education system is not providing the skills for the job market. We need to rethink how our schools teach,” says Ibrahim in a speech to the Economic and Social Council (ECOSOC), an organ of the United Nations.
“The future is theirs [the youth], they have a better understanding of the future than us. This continent belongs to its young people,” says Ibrahim.
Delivering the 11th Nelson Mandela Annual Lecture, Ibrahim posed a question whether young Africa can become the factory of the world when China has no youngsters to work in theirs, in 10 to 20 years time, because of the aging population.
What about the notion that China is taking over Africa? Ibrahim sees this as a healthy business relationship as long there is technological transfer, local sourcing of components, transparency, and respect for the environment and communities.
“Why are Africans poor when we have a rich continent?”
More money is lost from multinationals not paying tax, through what he calls ‘fancy accounting’, than gained from aid. He calls for a strengthening of tax institutions. Although the west has woken up to tax dodging, Africa slumbers.
Governance, according to Ibrahim, is about making difficult decisions and being judged on the numbers.
“Physics and numbers don’t lie, but people do,” he says.
Ibrahim says there is a dearth of leadership in Africa; that leadership is not about bossing people around, having a seat on the Security Council, or chairing the AU. It’s about engaging with others.
He says that the continent holds South Africa up as a role model, but that the country has become too arrogant and refuses to learn from other countries.
When the BEE policy was introduced in South Africa, Ibrahim asked his friends in the ruling party if this was not a slippery slope to corruption. He says that the policy has done nothing to keep South Africa from being at the bottom of the Gini Index scorecard, making it the most inequitable country in the world. He says there should be no “sacred cows”, including land reform. If something doesn’t work then policy makers should revisit it.
The 2013 Ibrahim Forum will be held in Addis Ababa, Ethiopia, in November and will discuss where the continent is going after 50 years of the African Union. It will focus on achievements and those that got away.
Ibrahim doesn’t know where he gets his sense of purpose from, but he simply sees things that need to be done and does them. In the end, Ibrahim just wants to be remembered as a son of Africa that made it in the west and never forgot his people.

The World According To Mo And  Why An ObamaWill Never Lead Kenya

Strikes have hit Africa’s biggest economy with a vengeance and the losses are high.
Hundreds of thousands of South African employees went on strike, crippling the gold mines, car factories, petrol forecourts, and the national airline South African Airways (SAA) in August and September.
Towards the beginning of September, the National Union of Metalworkers of South Africa (Numsa) ended a three-week strike of around 30,000 workers in the motor manufacturing industry, after accepting a revised wage offer from  Volkswagen, Nissan, Ford and Toyota.
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However, as car manufacturers returned to work, thousands of petrol station attendants, affiliated to Numsa, downed tools after serving a 48-hour notice of strike action.
Their demands included a R30 ($3) per hour increase and that maternity leave be paid in full.
The SAA employees, affiliated to the South African Transport and Allied Workers Union (Satawu), ended a 15-day strike a day later.
By far the most expensive strike was the one organized by the National Union of Mineworkers (NUM) in the gold mining industry, which was reported to have cost R32 million ($3.2 million) per day. In 2012, similar strikes cost companies R349 million ($35 million) a day and employees lost a total of R100 million ($10 million) in salaries each day.
The strike was effectively ended when NUM, the United Association of South Africa (Uasa) and Solidarity accepted an 8% wage hike, backing off from its initial demand of 15%.
In addition to the wage increase, the monthly living allowance of miners was raised from R1,640 ($164) to R2,000 ($200).
The Association of Mineworkers and Construction Union (Amcu), however, refused to accept the pay deal. The mining companies were taking a hard-line stance and refusing to give in to the demands while the union was threatening a second strike.
The morning after the strike began, when FORBES AFRICA visited the mining area in Carletonville, Johannesburg, a handful of NUM members gathered outside the union’s office at Sibanye Gold mine in Driefontein, as rival union members reported for work.
“An estimated 14,000 miners had downed tools in the area of Carletonville on Tuesday evening. Our members have not clocked in for the night shift at several mines. The strike is on,” says Mbuyiseli Hibana, NUM regional secretary.
Amcu spokesperson, Jimmy Gama, tells FORBES AFRICA the union had not been given a mandate and was considering strike action.
“We remain unchanged to our wage increase demands. We rejected the offered 6.5%. Amcu demands a living wage of R12,500 ($1,250) and R11,500 ($1,150) for underground and surface employees respectively,” says Gama.
All labor unions in the gold mining sector, besides Amcu, have accepted the revised offer and operations at the mines are back to normal.
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The Chamber of Mines had confirmed that it would continue to talk with Amcu in an attempt to get everyone back to work.
“This tentative agreement is encouraging because it signals a number of important developments for an industry battered by labor instability, fast rising costs, declining market conditions, and continued regulatory uncertainty,” says mining analyst and Eunomix managing director, Claude Baissac.
“Unions have been forced to change their strategy from one of expecting large increases to one that is more achievable. If initial demands were completely unrealistic, these demands were largely part of the posturing unions are doing in relation to one another, notably NUM, and Amcu, the disruptive newcomer. They needed to show their members and each other that they will fight on for the best deal.”
That fight is far from over.

Strikes Strafe  Africa’s Biggest Economy

Annual meetings of the African Development Bank (AfDB), Africa’s premier financial institution, are no longer what they used to be. While Africa remains the world’s poorest continent, the narrative and attention it receives has changed in the past decade. And nowhere is this more visible than in the conversations at the annual meetings of the AfDB, rated AAA by all the major rating agencies—Standard &amp; Poor’s, Moody’s and Fitch. 
In Marrakesh, Morocco, this year, a record 3,000 delegates showed up, ranging from the owners of the bank—the finance ministers of the 53 African countries—to non-governmental organizations and the ubiquitous consultants from around the world. Africa’s newest country, South Sudan, is not yet a member. 
The mood was buoyant, as befitting a continent that is growing faster than any other. The bank forecasts economic expansion across Africa will average 4.8% this year and climb to 5.3% next year. If you exclude South Africa, the continent’s largest economy, the advance tops 7% at a time when most of Europe is in recession, the United States is battling anemic growth at around 2% and the Chinese locomotive is slowing. 
“Now is the time. After 10 years of improved stability, sound macroeconomic policies and blossoming trade links, growth has made African nations freer than ever to choose their own development paths and implement active policies for economic transformation,” says the bank’s vice president and chief economist Mthuli Ncube. 
This is a far cry from the doom and gloom of the two decades ending in the 1990s, when the London-based Economist published its now infamous `Hopeless Continent’ cover, which to be fair, was recanted years later. 
According to the International Monetary Fund, seven of the 10 fastest-growing economies are African—Mozambique, Zambia, Ethiopia, Nigeria, Ghana, the Democratic Republic of the Congo and Tanzania. Growth has been broad-based, with 27 of the region’s 30 largest economies expanding since 2000. Mckinsey &amp; Co. notes that Africa already has a bigger middle class than India. 
While some suggest this is due to China’s resurgence, there is little doubt that painful economic and political reforms carried out in the 1990s and Africa’s new leaders are responsible. 
The private sector believes in the reforms and sustainability of the continent’s new growth path and is, in many instances, outpacing government initiatives through investments on the ground. Aliko Dangote, Africa’s richest man, is pouring $7.5 billion in his businesses in the next four years. 
Acha Leke, a director at Mckinsey &amp; Co. in Johannesburg, says that Africa has gone from battling to generate growth, to the challenge of how to improve the quality of jobs and ensure that the rising tide carries all boats. 
This was reflected at this year’s meeting, the theme of which was Africa’s Structural Transformation; it aimed to ensure that future growth is equitable and sustainable. While economic expansion has lifted some people out of poverty, the majority of Africans remain desperately poor, according to AfDB. 
“Structural transformation is about improving the quality of African growth by diversifying the sources of that growth, and expanding economic opportunities for all. In many ways it is about turning natural wealth into created wealth,” says AfDB president Donald Kaberuka. 
The governors, economists and other delegates addressed how to use wisely the continent’s vast natural resources; how Africa’s cities of the future might look and strategies to take advantage of the world’s youngest population. 
To ensure the current economic growth is sustained, the AfDB approved a 10-year strategy, built on infrastructure development, regional economic integration, private sector development, skills, technology and improved governance and accountability. 
“The strategy reaffirms the bank’s strategic choices around infrastructure, economic integration and the private sector. It charts the way towards inclusive growth that spans age, gender and geography,” says Kaberuka, who is in his second and final term. 
The 2013 meetings were also notable for the launch of the bank’s Africa50 fund. It will address Africa’s infrastructure funding gap, which is estimated at more than $50 billion annually. 
Africa’s positive economic outlook is set to further improve, especially with new mineral discoveries. But some warn that Africa must guard itself against the Dutch disease, a conflict fuelled by the fight for resources, which would set it back and dash both Kaberuka and Ncube’s dreams of making Africa the new workshop of the world.

hopeless no more

It’s the three-letter acronym, with a sting, that few can ignore. BEE—Black Economic Empowerment—is a decade old this year and has rarely been free of controversy.
Questions are being asked about whether BEE has brought more people of color into the South African economy or reached its expiry date.
There are many critics of the ruling African National Congress’ (ANC) policies. They claim that BEE has far from closed the gap between rich and poor, despite South Africa’s solid economic infrastructure and increased social welfare spending. South Africa’s GINI co-efficient numbers—the global measurement of inequality—remain among the highest in the world.
Professor Adam Habib, political commentator and new vice-chancellor of the University of Witwatersrand in Johannesburg, says BEE was never intended to be a policy to bring previously disadvantaged South Africans into the economic mainstream, even though it was presented as such. For him BEE was an exercise in exquisite deception.
“The ANC’s aim was not to deracialize the economy, through investing in small business or entrepreneurs, but a critical decision to deracialize the apex of white business in South Africa, which they did and created a class of capitalistic and parasitic bourgeoisie,” says Habib.
Habib uses the word “parasitic” because he says the BEE super elite have not created new business, promoted Greenfield projects or stimulated job creation or entrepreneurship that’s sustainable or meaningful.
“The irony is, it’s easier to get a tender worth R250 million ($25 million) than it is to get R25,000 ($2,500) to start a small business,” he says.
Habib says, the policy needs a complete overhaul. As he puts it: “Pigmentation becomes a tradable commodity in South Africa.”
His three checkboxes to justify BEE are: for small business development to be prioritized; a “one bite at the cherry” clause to apply for those who benefit from BEE deals; and firm action to stimulate new enterprise.
Moeletsi Mbeki is less confident that there is anything worth salvaging from the policy enacted during his brother, Thabo Mbeki’s, presidential tenure. He says BEE has not benefitted the majority of South Africans, black or white.
“In the 10 years of BEE, what we’ve learnt was that it was an important device to create an economic oligarchy for the politically connected, which was always the aim. The majority of South Africans, black or whites, are no better off because of policies like BEE or affirmative action,” says Mbeki.
“The ANC needs BEE to continue to perpetuate the illusion that everyone can enter into this circle of wealth.”
BEE has come with a complex system of scorecards, codes and charters that cut across two broad aims of skills development and employment equity. It is broken down into additional categories and indicators so government can assess companies for BEE compliance.
The ANC’s man on economic transformation is Enoch Gondongwana, who failed to respond to FORBES AFRICA’s requests for comment.
The party’s secretary general, Gwede Mantashe, has criticized BEE, saying he has “serious grievances with BEE focusing on shareholding rather helping beneficiaries gain a deeper understanding of business”.
Mantashe has slated a lack of transformation, saying the new breed of black CEOs is mere window dressing. He has also criticized growing wastage as BEE companies use the state as a cash cow, by providing poor quality goods at inflated prices.
The Black Management Forum (BMF) disagrees and says BEE has to continue because it serves the country’s growth and development needs.
“BEE is a moral initiative to redress the wrongs of the past. It’s also a pragmatic growth strategy that aims to realize the country’s full economic potential, while helping to bring the black majority into the economic mainstream. Given the fact that the economy has not transformed to encourage participation, which reflects the demographics of South Africa, makes talk of a ‘sunset clause’ irrelevant and premature,” says Rowena Baird of BMF.
Baird argues that BEE is not a racially divisive policy because its aim is not to take wealth from one group to give to another.
There are lessons from countries such as Malaysia that embarked on a 20-year-long National Economic Policy (NEP) in 1970. It was meant to eradicate poverty and restructure society, to eliminate the identification of race in economic life. It promoted affirmative action in favor of Malays but also had the effect of pushing Chinese economic, educational and cultural life to society’s periphery, leading many Chinese to feel like second-class citizens.
For Mamphela Ramphele, former managing director of the World Bank and leader of new political party Agang, the Malaysian story should be a warning to South Africa that making citizens feel alienated is a recipe for disaster.
“BEE can only work if it has real intentions to redress the legacy of the past that systematically disadvantaged black people,” she says.
Ramphele says that more structured programs need to be in place. She says well planned employee share schemes can mean money in the pockets of a wider range of previously disadvantaged individuals.
The South African Institute of Race Relations (SAIRR) says racial inequality has been declining, but it’s not because of the post-apartheid policies.
Anthea Jeffrey, head of special research at the SAIRR, says: “Such inequality has been declining steadily since 1970 and started under the Nationalist Party.”
Factors she cites include rising skills, unionization, and better paid jobs for Africans.
“Redistribution via the budget has played a vital part; 16 million people are now on social grants. The government also provides free RDP houses, free schooling in 60 percent of schools, free healthcare to many, and free basic water and electricity to the indigent. In addition, public sector employment has been steadily expanding, while average wages in the public sector, where Africans predominate, outstrip those in the private sector by around 40 percent,” she says.
“Despite its evident successes, racial inequality remains stark. The poor are far from being content as rising social and labor unrest makes clear. The number one aspiration of adults living in relative poverty is to get a job,” says Jeffrey.
Unequal skills and a lack of opportunity divide; makes policies like BEE and employment equity irrelevant to the poor because legislation doesn’t bring them in from the cold.

Paragons Or Parasites?

Foreign-owned banks in Zimbabwe are prepared to brave the current wave of uncertainty emanating from the country’s controversial indigenization policy which could lead to “significant changes” in the shareholding structure of the banks as they are also under pressure to raise $100 million in statutory capital.
“The new capitalization requirements and compliance with indigenization will likely result in major changes in the structure of the banking sector as players try to comply with those two requirements,” says Willard Zireva, the chairman of MBCA Bank, the Zimbabwean unit of Nedbank.
The indigenization policy, which was promulgated in 2008, requires that foreign-owned companies cede 51% of their shares into the hands of black Zimbabwean groups. President Robert Mugabe and his Zanu-PF party are apparently pushing for the policy ahead of elections expected in July this year, while Prime Minister Morgan Tsvangirai and his MDC party will try to reverse the policy, saying it is not investor-friendly.
The government has, however, not swiftly moved in on the banks as Reserve Bank of Zimbabwe governor, Dr Gideon Gono, insists that forcing the banks to cede 51% shares will destabilize the already fragile banking sector. More than three locally-owned banks have already collapsed in the past year after succumbing to operational constraints, low liquidity levels and low capital bases.
It is the larger, foreign-owned banks—Barclays, Standard Chartered and the Zimbabwe units of Standard Bank and Nedbank—that have brought stability to the banking sector. Only about three local banks are considered stable and these include CBZ, FBC and ZB banks. Zimbabwe has 22 banks, most of them commercial.
“The smaller, locally-owned banks are less stable than the larger, more established foreign banks. We have… 22 banks functioning in an economy which is much too small for that number of banks,” says Zimbabwean economist John Robertson.
While economists and investment fund managers have warned that the indigenization policy and the placid nature of Zimbabwe’s regulatory framework may push investors out of the country, foreign banks are prepared to brave the current chill in Zimbabwe’s operating environment.
Dennis Mambure, the spokesperson at Barclays Zimbabwe, which has been left out of a deal that saw Barclays Africa operations merge with South Africa’s Absa Bank, says the bank is keen to comply with Zimbabwe’s policies. He insists that the bank had made submissions to the government and that negotiations are ongoing.
“Barclays operates within the confines of the legal and regulatory framework of the country. At no time has the bank disregarded any regulatory directive or obligation. Barclays Bank has made all submissions required by the laws on indigenization to the relevant authorities. Engagement with authorities on these submissions is on-going and Barclays is not at liberty to disclose the content of those confidential discussions,” says Mambure.
Interestingly, Mugabe has called for lower indigenization compliance thresholds for the foreign banks. He said in a televised interview, ahead of his 89th birthday celebrations, that the 51% threshold was not rigid, adding that the banking sector could be considered for lower thresholds, further complicating the placid nature of the regulatory environment in Zimbabwe.
This has been interpreted as a victory for the banks who had earlier argued against the 51% compliance thresholds. But youth development, indigenization and empowerment minister, Saviour Kasukuwere, appears to have the final say as to what thresholds the banks will have to comply with. He told FORBES AFRICA in an interview this month that the banks have to show willingness to comply.
“The minister can use his powers to consider variations. The banks have to come forward and submit their plans and we can even consider different timeframes for compliance,” he says.
Gono called for flexibility in implementation of the empowerment policy in the banking sector. “You need to be flexible when you come to the banking sector… because you cannot indigenize technology. You cannot apply the same rules that you are applying everywhere to the banking sector. I am going to defend that position,” he told a breakfast meeting of industrialists
Despite the earlier softening in the government’s stance regarding indigenization compliance for foreign banks in Zimbabwe, Kasukuwere in March wrote to the foreign banks asking them to be fully compliant with the contentious policy by the end of June.
The new directive by Kasukuwere stokes up the fight between him, the central bank governor and finance minister, Tendai Biti. Gono says that he will defend Mugabe’s reasoning in calling for compliance variations below the mandatory 51%.
However, the Zimbabwean unit of Standard Chartered has welcomed Mugabe’s statement, saying the bank is committed to its employees and clients in Zimbabwe, hence the bank’s willingness to comply with the indigenization policy.
“We remain committed to the long-term interests of our staff and customers in Zimbabwe, and to continuing to facilitate the development and growth of the economy. We welcome President Robert Mugabe’s comments. Standard Chartered has taken the conscious decision to continue to maintain our long-standing commitment to doing business in Zimbabwe,” says the bank’s spokesperson, Lillian Hapanyengwi.
Economists say that Zimbabwe’s regulatory framework is uncertain as regulations change without notice while there are always variations in how the laws are implemented. The Bankers Association of Zimbabwe say the banks are engaging the government on their own while the association’s president, George Guvamatanga, the head of Barclays in Zimbabwe, says he is still weighing the implications of Mugabe’s statement.

BRAVING THE INDIGENIZATION CHILL

Guinea, a mining capital in West Africa, faces great economic problems as it heads into parliamentary elections next month. The country faces ethnic tensions, threats to democracy and economic instability.
When it comes to resources, Guinea could be regarded as one of Africa’s richest countries. Rich in minerals, hydropower and agriculture, Guinea also holds almost half of the world’s bauxite as well as substantial amounts of iron ore, gold and diamonds. These resources remain under exploited.
Reforms are underway with tighter monetary policy and budget. According to the African Economic Outlook, in 2011 the Guinean economy progressed after the return to constitutional government. This saw real GDP peak at 4%. Despite government’s strict budget policy and determination to curb credit, inflation remained at a high of 21.2% in 2011. It is predicted to drop to 10.1% in 2013.
The International Monetary Fund (IMF) and World Bank’s International Development Association (IDA) have supported Guinea in its effort to gain debt relief. Combined, the IMF and IDA contributed $2.1 billion to the country in 2012.
In October 2011, the African Development Bank (AfDB) backed 77 Guinea operations which were worth approximately $818 million. These operations included: 58 projects, nine studies, seven institutional support operations and three non-project loans.
With the economic challenges faced by Guinea, this year’s elections will be regarded as a beacon of light for the country and will hopefully bring change to the nation. The eyes of the world will be on the country as they vote for their president.
President Alpha Condé, 75, was elected in 2010 in the first credible democratic elections since the West African nation gained independence from French rule in 1958, but parliamentary elections that would see Guinea’s full transition to civilian rule have been delayed for almost two years. The vote was originally scheduled for May 12 but elections have now been delayed until June 30, 2013.
In late February thousands of supporters of the leading opposition party, Union des Forces Démocratiques de Guinée (UFDG), took to the streets accusing Condé and his ruling Rassemblement du Peuple Guinéen (RPG) of attempting to rig the vote. Nine were killed in clashes with security forces and hundreds injured in the riots. The UFDG is backed by the Peul, the largest ethnic group in Guinea, whose supporters accuse Condé’s government of politically favoring the Malinke, the second largest ethnic group in the country.
With the opposition walking out of talks with the government that were organized in the aftermath of the violence, and calling for further protests and strikes, international observers are concerned that Guinea could further descend into violence and derail the nation’s journey to democratic rule.
Guinea’s main opposition leader, Cellou Dalein Diallo, who lost to Condé in a tight presidential run-off in November 2010, said the opposition would do everything to stop the election if it was held without them, according to a report by Reuters. Analysts say this is a troubling sign.
Vincent Foucher, a senior analyst for West Africa at International Crisis Group told FORBES AFRICA that the political standoff could setback Guinea’s economic gains.
“If they blow this one there is a very serious possibility that people in the armed forces could say, ‘You politicians are not able to handle those democracy things so we [will] step back in,’ and that would bring us back to 2008 which would be a real shame,” says Foucher.
He adds that basic consensus on the electoral process must be achieved for the elections to go ahead.
“The situation is so tense that I do not believe that full consensus is possible.”
Ahmed Sékou Touré, Guinea’s first president, was a firebrand socialist who rejected Charles de Gaulle’s offer of integration into the Franco-African community. Touré ran an authoritarian government for over 20 years in which torture, arrests and executions were commonplace.
After an unsuccessful invasion led by Portuguese Guinea, now Guinea-Bissau, Touré became increasingly paranoid, accusing the Peul population of attempting to overthrow the government. After his death in 1984, a group of army generals staged a military coup and Lansana Conté became president, and was followed by Moussa Dadis Camara in 2008.
Guinea came into the international spotlight in the aftermath of the September 28, 2009 massacre of some 150 opposition protestors and the rape of more than 100 women by security forces during the military regime of Dadis Camara. The International Criminal Court is currently investigating the case but Human Rights Watch has said the government needs to do more to bring those responsible to justice.
Due to mounting international pressure, Guinea held its first democratic presidential election in 2010. International observers deemed the elections free and fair but they were marred by ethnic rivalry and clashes between civilians and security forces.
Foucher says there have been significant moves away from the tyranny and turmoil of the past but that Guinea still has a long way to go.
“There are some interesting developments and you could say there is a dialog about electoral institutions.”
In addition to its bauxite reserves, Guinea has large iron ore, gold and diamond deposits and has long been on the radar for international investors and multinational mining companies. Upon taking office, Condé promised to redevelop the mining sector and review existing mining contracts signed under previous military dictatorships.
In 2011, Condé revised Guinea’s mining code to allow the government to take a minimum of 15% of shares in mining companies operating on its soil, with an option to buy a further 20%. The government has set up a review body to look into previous mining contracts and overhaul the mining code that determines the role the state plays in governing the industry.
Resources watchdog Revenue Watch Institute, funded by billionaire George Soros, is advising the Guinean government on transparency and how to better negotiate with large mining companies. Leading development economist Paul Collier is also an advisor to the government and Tony Blair’s Africa Governance Initiative has a presence in the country.
In an interview last year with The Guardian, president Condé, a former pro-democracy activist, said he would be “The Obama and Mandela of Guinea” and that he would transform the nation into a stable and developed democracy. But analysts say Guinea’s future stability will largely depend on his ability to negotiate with the opposition and build trust around the electoral process.
Guinea is emerging from a long period of political instability and the socio-political situation remains uncertain. Political differences concern the future of the electoral process and financial and logistical problems.

A Test For  Guinea’s  Fledgling  Democracy

In the last decade, Zimbabwe’s economy has twisted slowly in the wind. It has broken records for all the wrong reasons: the highest inflation the world has ever seen and 80% unemployment.
After a disputed 2008 election, a creaky political agreement ushered in a power sharing government. In this brave new world the task of running treasury was given to a man, who calls himself a poor constitutional lawyer; an Arsenal fan, who thinks Arsene Wenger’s time is up.
Tendai Biti, 47, is a workaholic who without education would be a demon. They called him Bismarck at university—after the iron-fisted military founder of a united Germany—because of his uncompromising approach to debate. Bismarck is bitter about Wenger: “He has been torturing us with poor results. He must do the right thing”. The analogy is irresistible and perhaps Wenger would feel the same way in return.
<div id="attachment_1578" style="width: 210px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-1578" class="size-medium wp-image-1578" src="/wp-content/uploads/2017/04/Tendai-Biti5-200x300.jpg" alt="" width="200" height="300" />Zimbabwe Minister of Finance and Economic Development Tendai Biti</div>
The main entrance to the seat of power has tinted windows and an intercom. It is possibly the only office at the new government complex offices, in the capital of Harare, with such an electronic device. The voice of the security guard asks politely: “How can I help you?” These security measures are not surprising—a group of war veterans once threatened to throw Biti from his sixth floor office.
Inside, his desk is full of paperwork. Biti wears a blunt face as he speaks to a mystified office aide who is handed back a file.
“He doesn’t want this and that signature. I don’t need to sign this paper. Where is he? He should be doing this and that. I don’t like that. This is nonsense,” says Biti.
Suddenly, I’m told: “Let’s do the interview now, I have no time.” No smile. No greeting. He starts swiping across his iPad and ignores several incoming phone calls.
Biti has been at the helm of the leaky financial ship that is Zimbabwe for years. He took the job in 2009, in the midst of the global financial crisis, with the aim of achieving a tough balancing act for a nation floundering in a dreadful recession. For a country with a power-sharing government and several power centers wanting money, especially state security, Biti is also in the midst of ugly politics. It is a job that needs guts, patience and the gonads of an elephant.
He stormed out of a cabinet meeting, which until then was unheard of in conservative Zimbabwe, stunning both President Robert Mugabe and prime minister Morgan Tsvangirai.
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I ask him how he manages his emotions, after telling him he can be very difficult.
“Yes, I do have mood swings but I’m a very vulnerable person. I hide in a shell of machoism. I’m very emotional, too emotional. I think and act with my heart. I know I can be a disaster. I get so angry and I speak my mind. What affects me are the tiny little things. People who are late; people who are sloppy; typographical errors kill me; bad English; bad grammar,” he says.
But why did he storm out of a cabinet meeting in July 2010?
“The discussions were going nowhere and I knew I was right so I just expressed my right of disassociation. I don’t like people who are dishonest. I also feel that I don’t owe you, so let’s be objective, let’s be impartial,” he says.
This year could make or break it for Zimbabwe. If the elections go ahead, with violence along the way, the country could go off the rails, taking investment hopes with it.
“Zimbabwe has been scuffled so much, suffocated so much by mediocrity, dictatorship and mendacity when other countries are moving. The election in 2013 must make a distinction. It’s a vote between the past and the future; it’s a vote between opportunity and the liquidation of opportunity,” he says, with a stern face.
Investors are apprehensive about elections. Like eagles, they are keeping an eye on the country from a distance. Biti has been wooing European investors but the odds are against him. His boss is a hard sell abroad. And what more can he expect, he doesn’t like him either but is managing him in a fragile coalition government in which the right hand, doesn’t know what the left hand is doing.
So far, the economy is fairly stable but the manufacturing sector is dead and investors are still watching, reluctant to walk through the open door.
Biti says they should get a bit of credit for cutting half a trillion percent inflation to 7% in a matter of months.
“What we did bordered on the miraculous… It has never been done; I don’t think it will ever be done again. You wear and tear, the arrows are thrown at you, pressure is like a tornado, it affects even your marriage and it’s phenomenal,” he says.
The Zimbabwe Accelerated Debt Arrears Clearance Debt and Development Strategy (ZAADDS) has been crafted to deal with the extensive debt. It is just as well as the country has a staggering $10 billion foreign debt, and will be negotiating its arrears with a visiting IMF team this quarter. Biti says they will try to negotiate out the arrears but the debt remains a structural issue dependent on elections.
“The country has two choices: the crocodile scenario and the cheetah scenario. I don’t want to be a crocodile… I want to be a cheetah. I want to sprint,” he says.
African Investment Markets’ Farai Dyirakumunda says Zimbabwe is on the radar.
“A lot of investors gave a wide array of investment opportunities with good upside potential. Some will sit on the fence during the election year due to uncertainties but there will be an eventual influx of foreign capital under the right conditions,” he says.
Hope pales in the face of reality.
The Confederation of Zimbabwe Industries (CZI) painted a desperate country teetering on the brink, late last year. Several banks have closed, the liquidity crunch is stalling domestic investment and the CZI has called it an economic emergency. Many people, who elbowed out of the formal sector, are selling goods by the roadside, with little or no manufacturing in the heavy industrial sites, which means that fewer taxes flow into the fiscus.
After paying January’s salaries, the government was left with just $217 in its coffers, just about enough for dinner at a posh restaurant. Luckily, $30 million flowed into the fiscus the following day; it highlighted the paucity of government coffers.
“It’s basically a cash economy,” says Biti.
Dyirakumunda says Biti is a practical minister.
“He has done reasonably in controlling government spending so that it is fully funded by tax revenue and government income. There have been funding constraints to what he could do to stimulate the economy through fiscal policy,” he says.
No wonder Biti has been tasked to beg for $200 million for the next referendum and elections.
In the retail sector, the painful reality is that most products in supermarkets are foreign-owned. The country suffers from a huge current account deficient. The imports amount to $7 billion, with exports a mere $3.5 billion, a gap the treasury wants to narrow. Zimbabwe is placed 132nd of 144 countries in the Global Competitiveness Report 2012-2013.
“There is still a lot to be done… and some of us we will look the beast in the eye and we will not blink,” he says.
Biti says his wife, Charity, is his rock. She couldn’t understand why someone had thrown a bomb at their house in order to, in her own words, “stress a point” but it was her unruffled demeanor, which helped Biti cope with the trauma.
Economist John Robertson, who has been studying Zimbabwe’s economy for nearly half a century, says that Biti’s opponents in government made promises about civil service salary increases, which they knew Biti could not keep.
“They pilloried him through the press for failing to keep the government’s promise. The intention was to force his resignation but all attempts failed,” says Robertson.
Biti describes his party boss, Tsvangirai, as the most open and humane person he has ever met. He wonders how after having emerged from one of the poorest villages in Zimbabwe, without a university education he has managed to achieve such great heights against the odds.
At home, he reads at lot about economics and philosophy. Perhaps it was this thirst for knowledge, which helped Biti become the youngest partner at a top Harare law firm Honey and Blackenberg at the age of 26.
“I can take the bull by the horns and I’m not afraid of work.”
He is inspired by biblical prophets and is fascinated by the books of Jeremiah, Judges and Solomon—“a fascinating collection of stories about cruelty, blood, murder, love and commitment,” he says. Biti also draws inspiration from American politicians, musicians, footballers and Nelson Mandela. He admires how, “You stay in prison for 27 years and walk out without bitterness”. And Thomas Jefferson amuses him.
“What did he mean by crafting in pursuit of happiness?” he asks with a chuckle.
As he warms up he reveals that he is in awe of how Barcelona’s Lionel Messi weaves his magic on the field. His love-hate relationship with Mugabe has defined his career but he doesn’t mince his words. Take a recent interview with state newspaper, Sunday Mail: “I’m still critical of him. I think if he had resigned many years ago a lot of the problems that are happening in this country would not be happening. I have a problem with people who are not democratic. How can someone sit in one position for 32 years? He belongs to a generation that is history, that is in the archives.”
After years of debate, the draft for the new Zimbabwean constitution was drafted on February 6. Both the ZANU-PF and Movement for Democratic Change put forward their interests. Tsvangirai tried to reduce the power of the presidential office, while Mugabe tried to include clauses that would help him maintain power. Once the draft is passed by Senate, Mugabe will set the date for the 2013 elections, which are tentatively scheduled for late June.
Biti said he has never been trusted by the ruling ZANU-PF because he emerged from a Movement for Democratic Change formation to run treasury.
“Some people don’t read; they are ignorant. They didn’t and some still don’t understand what we were trying to achieve. Some say education is important, I would like to submit that the cost of ignorance is incalculable.”
Zimbabwe can’t afford any more costs.
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<h4>Too Many Worries Spoil The Broth</h4>
Fine words of economic recovery may resound in government offices but they ring hollow in the battered and weary world of Zimbabwean business.
On the streets of Harare you could call supermarket chain Food World a monument to survival. For years, it suffered emptying shelves, job losses and a currency meltdown. The business kept breathing through a decade of economic disasters. Prices were pulled around by speculators and black marketeers. Then, government statutory price controls ate into its profit margins.
“We lost a lot of business in the era,” says Denford Mutashu, Food World manager.
“It’s certainly a period I don’t want to go back to, industry went to its lowest point, local supply dwindled later and we had to rely on imports. You didn’t have a strategy to implement, you could not plan.”
In 2013, Mutashu still feels his company is living on the edge. He fears the temporary stability brought by dollarization of the economy could go up in smoke if the elections turn violent.
His supermarket may be full but Mutashu feels that the finance minister isn’t helping much by imposing punitive duty on imports. Zimbabwe has bought around $7 billion worth of imports, while only exporting $3 billion worth.
“There is little production going on. We have to import 70% of the products you find here, cooking oil, flour and other products. That badly affects our profit margins… The disparity between exports and imports is worrisome; the country is facing serious challenges in terms of liquidity,” says Mutashu.
Food World imports the majority of its commodities from South Africa.
“There is quite a lot of inactivity and industrial capacity utilization has gone down. Other than looking at industry capacity, we then have to concentrate on industrial competitiveness,” he says.
Mutashu believes dollarization, which has seen dollars and rands used as legal tender, has been a salvation, saying that the worthless Zimbabwe dollar was killing business.
“The functional currency system has brought predictable prices, which rarely fluctuate, it has brought some sanity. We used to sell a loaf of bread for millions of dollars. But now there is restocking and prices have stabilized.”
On the other side of the coin, be it a dollar or a rand?
“Since we are using a currency, which we do not own and control, it is still a challenge for us to be able to control the economic pendulum. Whatever happens in South Africa also affects us because we don’t have control over the currency,” says Mutashu.
Zimbabwe used to export cooking oil, now it’s importing. As the recession heat took its toll, many companies went under. National Foods, one of the major cooking oil producers shut its plant. Household name Olivine weathered the storm but failed to cope.
At the very least the struggling supermarkets of Zimbabwe, such as Food World, are cooking but hope that the elections don’t spoil the broth.
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Bismarck Stares The Beast  In The Eye And Dares Not Blink

The re-election of Jacob Zuma to lead the governing party of the most powerful economy on the African continent, South Africa, was never a case of ‘if’, instead it was a case of by how big a margin he would beat his reluctant challenger, Kgalema Motlanthe. What was a puzzling paradox for many opinion makers though, was how Zuma got more than 70% of the vote when the African National Congress (ANC) gathered for its elective conference in Mangaung on December 16-20.
Were those 4,500 voting delegates so dumb and ignorant? Could they have been bought or lulled to ignore the stuff that filled newspaper columns, radio and television programs and social networks? How on earth did they miss the groundswell of indignation towards their supposedly highly unpopular and bungling president? In which South Africa did those delegates live, that they could not see what the political analysts, commentators, journalists and opposition politicians saw?
Part of the problem is the fact that the ANC still follows an archaic system of electing its leaders. No ANC leader gets to openly contest, so that they could tell why they believe they deserve the top position. As a result, s/he who controls the levers of power during party election time gets to have an upper hand and, depending on how skillful or cunning they may or may not be, the ANC leadership race is always for them to lose. This is only a small part of the problem. Those chosen become the country’s leaders by virtue of the party’s domination of the political landscape. The bigger problem has everything to do with what has become of the over 51 million people that constitute the population of South Africa.
Greed, self-centeredness and dishonesty have become only some of the defining characteristics of South Africans as wealth accumulation, getting plum positions or ensuring they keep their jobs becomes more important than anything else. In the process they’ve become meek and timid, in many ways a defeated people, blaming everything and everybody other than themselves for crises they find ourselves in. They tend to let their attitudes and emotions, prejudices and prescriptions, stand in the way of appreciating the best that there is.
Take the media and political analysts’ reaction to the election of Cyril Ramaphosa as ANC deputy president. When it became apparent that the billionaire businessman was to become the ANC’s number two, pages of newspapers and magazines, as well as hours of airtime were dedicated to full-blown ‘analysis’ of what he is going to do.
While there’s nothing wrong with someone wishing to communicate their wishes on how the ANC can best utilize Ramaphosa; the most interesting aspect of ‘Cyrilmania’ has been how glibly many have come to pronounce it, without any due regard to both the history of his re-emergence and the inner workings of the ANC.
Business and the elite media’s warmth to Ramaphosa seems to have everything to do with the fact that he represents that acceptable, affable face of the ANC—the one that fits the stereotypical image of a suave, sophisticated, articulate leader who will not embarrass. He is the welcome opposite to the polygamist country bumpkin they see in Zuma.
Almost without questioning, business and rest of the elite seem to think that finally, there’ll be a clever black at ANC headquarters where the party’s top six officials meet every Monday. Ramaphosa, the thinking seems to go, will tell Zuma what no one has hitherto had the guts to tell the 70-year-old struggle veteran about such things as inspiring investor confidence or catering to the sophisticated voter.
The truth is that not only is Ramaphosa nothing more than a benefactor of Zuma’s generosity, he is also a crowning success of his deft strategy. What is forgotten is that Zuma preferred to keep Motlanthe and that it was only after Motlanthe spurned the effort, choosing to stand against Zuma instead, that Ramaphosa came into the picture.
But simply because Ramaphosa was second choice does not mean that he cannot achieve the things that many now think he will be best-placed to accomplish. That’s not to say that Zuma is now suddenly in a mood, through Ramaphosa, to pacify constituencies he considers disdainful and unreservedly hostile. Correctly in some instances, incorrectly in others, Zuma’s comments often suggest a firm belief that most media are hell bent to destroy or undermine him.
What’s habitually forgotten is that only one man has a final say in the ANC and that’s its president. Given the way the ANC operates, the more firmly that person is in charge, as Zuma is now, the more people like Ramaphosa will have little option but to tow the line. The only time Ramaphosa will get reprieve, is if Zuma decides to anoint him. That’s if Zuma won’t seek a third term as ANC president.
In interviews with both men, Zuma insisted that he “definitely won’t seek a third term”. He did not wait for me to point out that after his election in 2007, he said he would serve only one term. Ramaphosa would not be drawn into whether he was keen on the top position. For now its “outside of my wish and imagination,” he told me. When I asked what he thought about the attitude of business towards the ANC, he replied: “The business community has not stepped up to the plate. It has held back”.
In five years’ time Ramaphosa will have the option to challenge Zuma, in the same way Zuma challenged Mbeki in 2007 and won, and Motlanthe challenged Zuma and lost.
While post-apartheid ANC leaders contested positions, often fiercely; they hardly represented fundamentally distinct visions of the ANC and the country.
One is tempted to conclude that ‘Cyrilmania’ is a clumsy, if not hopelessly inadequate effort, largely by those who disapprove of Zuma’s rule. As history has proven, the problem with that practice is that it almost always guarantees that such a move won’t be taken seriously, for ANC leaders don’t take kindly to being told by the media.
Another problem with ‘the government must do this, must do that’ tendency of South Africans is that it also serves to hide the inefficiencies of others who have the power and resources that can move the nation forward, like the country’s business and worker leadership.
Sick and tired, South Africa’s stubborn and resilient workers showed up the country’s lack of, not only political, but also business and labor leadership. Though rudderless, the workers successfully organized a massive wave of sporadic, unprotected, often violent and suicidal strikes. Although the workers lost wages and many lose jobs in the aftermath, they made their point. The ultimate loser, though, is the country’s economy.
Has organized business and labor taken the responsibility they always demand of government? No.
Hopefully South Africans will learn—and that includes the Ramaphosa fan club, which holds influential positions in the media and business—that it takes a lot more to exert real influence in their political economy and to build a nation that will be the envy of the continent. Creating heroes and villains is not the answer but a sure way to failure and disappointment.
Tempting as it might be for everyone to engage in the sport of exposing every wrong about him and blaming Zuma for all of South Africa’s ills, he is definitely not the root cause and the delegates to the ANC conference knew that. Blameless, yes, but he is at best a symbol of what is manifestly wrong with South Africans as a whole.
If there’s a lesson that history should have taught South Africans in the past 18 years of democracy, it should be that their nation stands to gain a lot more if they put themselves to the very test they put their leaders to. Everybody—including business, civil society, labor, opposition politicians, journalists, commentators and analysts—should wake up to the reality that they need to use their energies and the platforms they each have, a little more wisely and creatively. There’s nothing wrong with engaging, a lot more rigorously, but also truthfully.

Mangaung Unpacked

If ever there was a country that could be described as Africa for beginners, Namibia would be a strong contender: a young, but stable, democracy and an open economy in a country blessed with good mineral and natural resources; a robust financial system, good infrastructure and an independent judiciary.
In spite of the relatively small size of the economy, with a Gross Domestic Product of around $12.6 billion, Namibia has been something of a niche destination, especially for mining companies, since achieving independence in 1990. While only the eighth largest producer of diamonds, its production is 90% gem quality and a mainstay of the economy.
The country is also a popular tourism destination and has marketed itself as an up-market holiday for European clients, much like neighboring Botswana. Its fishing industry is considered a world-class resource and is the source of much of Spain’s European whitefish exports.
Over the past two decades, Namibia has recorded respectable economic growth, averaging at 5 to 6% per annum, but it has been slipping of late. According to the latest available figures for the National Accounts for 2011, growth has dropped from 6.6% in 2010 to 4.8% in 2011, largely as result of a slump in the mining sector. Inflation has remained relatively stable, although it is expected to increase from 2011’s 5% to 6.5% this year.
Historically, the mining sector—followed by agriculture, fisheries and tourism—has been the engine of the Namibian economy, with mining’s contribution peaking at 15.9% of GDP in 2008. This was largely due to an unprecedented boom in uranium exploration in 2004-2010, which saw two new uranium mines opening in addition to the 36-year-old RioTinto-owned Rössing Uranium mine.
However, the economic fall-out from the 2008 international financial crises landed in Namibia shortly afterwards as investment flows froze and mining’s share of GDP contracted by a record 45%, as the impact of the February 2011 Fukushima incident pushed uranium prices down to levels where several uranium mining projects had to be shelved. The largest of these, the Chinese-owned Swakop Uranium project, is however still on track to commence production in 2015.
This trend has been offset to some extent by growing interest in the potential for finding off-shore oil and gas deposits along the 1,200 kilometer long Atlantic coastline, which is held to be analogous to the Brazilian geology, that has in recent years yielded impressive oil fields. The Kudu gas field, a modest deposit of 5.7 Tcf, was discovered along the southern coast line in the 1970s, but because of low international prices for this commodity, was never developed due to cost considerations.
A looming, region-wide electricity shortage has however added new impetus to investment in this field, and several oil majors, including Shell and BP, have recently joined forces with Namibian investors to resume the search for the precious commodity. The government announced that it was to push ahead with the development of the Kudu gas field, in order to construct a gas-fired power station that it hopes will renew momentum in the development of other mining projects, as well as take advantage of a regional electricity shortage by selling excess power to neighboring South Africa.
A recovery in zinc and tin prices in the third quarter has seen renewed interest in exploration for these commodities, while continued global insecurity has also seen the revival of several gold-mining projects. There has also been renewed interest from Indian and Chinese investors in hitherto undeveloped iron ore deposits. A planned extension of the local railway network into Botswana to allow it to exploit and export newly discovered coal deposits, via Namibia’s Lüderitz and Walvis Bay harbors, is widely expected to help the mining sector regain its prime position in the local economy.
Namibia, however, is not without its own problems, the most obvious of which is a persistently high unemployment rate, exceeding 51% in 2011, as well as a growing corruption problem in areas of government procurement and related services.
This has brought additional pressures to bear on the ruling South West Africa Peoples Organization (SWAPO), which has been in power since 1990 and is struggling to deal with an internal transition in leadership.
To address the most pressing problem of unemployment, the government has embarked on an expansionary budget over the past three years under the so-called Targeted Intervention Program for Employment and Economic Growth (TIPEEG), a $1.5 billion stimulus program, that the government hopes would create an additional 104,000 new jobs per annum over the next five years.
Results so far have been disappointing in respect of employment creation, largely as a result of government’s insistence on making Black Economic Empowerment (BEE) the key criteria for accessing funding under this program.
This has also impacted on Namibia’s competitiveness: the most recent rankings released by the World Economic Forum’s Global Competitiveness Report showed the country has slipped nine positions to 92nd of 144 countries surveyed.
More worryingly, Namibia slipped 57 points in terms of rankings for the macro-economic environment due to the current high levels of debt—27% of GDP. Ranking of its infrastructure has also slipped by 26 points, which is of major concern to the mining industry.
Some of the concerns are being addressed: harbor facilities are currently being expanded to improve handling of bulk commodities like ore and the expansionary budgetary period is to cease by 2013-14.
As they say, ‘Watch this space’.

Mine Faith

As I left the airport I was greeted by temperatures of over 35 degrees, it was humid and uncomfortable but within minutes I was seated in an air-conditioned car. My itinerary said that Agra was 205 kilometers away, so I figured it would be a two-hour drive. I didn’t realize the speed limit was 40 kms an hour—the journey took five painful hours. Yes at that speed, I still felt as though the driver was speeding—he kept swerving to avoid the crater size potholes. Driving in India is scary—there’s no adherence to the road markings; overtaking on a solid line is common practice; drivers hoot incessantly and cut lanes. Surprisingly, no one gets upset, no one swears or raises their hands and I arrived safely.
Agra—home of the famous Taj Mahal—is a bustling town, which looks like it had been derelict for a long time and suddenly people rushed back to rebuild it. The streets are filled with rows of abandoned housing complexes, small shanty shops and tangled power lines, which are connected mostly illegally. Cattle paraded the street without a care in the world—these sacred animals are kept like pets; children play alongside them and traffic stalls until they pass. Beef products are not allowed and if you see a steak on the menu, it’s probably buffalo meat. The McDonalds menu consists of chicken, fish and paneer burgers, with the McMaharaj being the equivalent of a Big Mac.
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Another big attraction, without which a trip to India would be incomplete, is the Taj Mahal. The white marble mausoleum was completed in 1649 in honor of emperor Shah Jahan’s favorite wife.
I drove back to New Delhi—the capital of India and home to more than 20 million people. It’s a more contemporary city, which houses the Indian parliament. Beautiful parks and gardens broke the sights of the bustling traffic, which seemed to go on for the entire day.
The food was delicious, we ate like kings, but only in restaurants. The street food looked and smelt divine, with Tikka chicken and roasted paneer on most corners, but horrible stories of ‘Delhi belly’ helped me resist.
From the capital, I travelled to Chennai, formerly known as Madras, where I had more of a culture shock as motorbikes and gas-guzzling tuk-tuks filled the streets. The streets of the densely populated city are busy until late, markets offer great bargains on fabrics and gold jewelry and food stalls, on most corners, fill the pavements with brightly colored, sweet delights.
From city to countryside, I decided to drop the pace a notch and travel to Kerala, further south. I boarded a luxury houseboat, which floated along the quiet backwaters of the Alleppey River. The highlight was stopping on the banks to buy fresh fish and prawns. I had never seen such big prawns before and never had my taste buds enjoyed such flavor. The houseboat cook skillfully prepared the seafood with his special spices. Eating on a houseboat, listening to the small ripples in the water and the crickets near the banks was another highlight.
The next day I caught a flight to Goa—India’s smallest state but a very popular tourist spot. Small windy streets, forest-like vegetation and the white sandy beaches are big attractions for foreigners and Indians alike. The region is known for its large spice plantations and cashew nuts. Gambling is popular here, unlike in the rest of India.
Mumbai, the home of Bollywood, is more liberal than the other Indian states—the people speak English well and are less traditional in their dress. Fancy five star hotels line the beach front. It’s known as a commercial hub and the economic giant of India as it is home to two Indian stock exchanges. Transport services are excellent: busses run frequently; bright yellow and black cabs fill the more affluent parts of town; tuk-tuks do short runs around the market areas and three million people travel through the famous Victoria Train Station every day, which is also a UNESCO World Heritage Site.
A sharp contrast though are the huge slums deeper in the city—children ran in the streets trying to sell scarves, beautifully woven materials and miniature elephants, when they should have been at school. We visited a massive open-air laundry where 2,000 men—who have taken on laundry contracts from nearby hotels—were washing sheets and towels. The government provides them with clean water and industrial dryers. Water is not safe to drink in India, even Indians drink bottled water.
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While I was there, it was Independence Day, 65 years of independence and yet India looks like it’s battling a dilemma of moving into a new age with the rest of the world or staying with its deeply entrenched traditional and religious existence. India is not easy in many respects—it’s hot and humid, busy and noisy, but wherever I traveled I felt safe and the people were humble. So while India may not be the ideal destination to kick back and relax it is a destination that will offer you a truly unique experience. The people of India prefer quality of life with little focus on materialism. There’s a real respect for tradition and culture. The food is fantastic and the hospitality is superb. India though deserves more than just two weeks.

Incredible India, Flaws And All

Brazilian President Dilma Rousseff recently encountered a young couple in their 30s, with a brood of young children and a hopeful outlook on the future. Until recently the father had driven a bus in Brasília, but thanks to an expansion of electricity and irrigation infrastructure, he turned previously unusable land in the countryside into a thriving vegetable farm, along with a side business raising chickens.
“How much do you make?” Rousseff asked him.
“Four times what I used to earn as a bus driver,” the independent farmer responded. More money was coming in, and the costs of raising a family in the countryside are lower as well. His new goal for his children: degrees in agricultural science.
“We are wagering,” smiles Rousseff, sitting in her minimalist, art-filled office in the Presidential Palace in Brasília as she recalls that conversation, “that people will be able to stand up on their own feet and walk by themselves.”
Her wager—Brazil’s wager—is on entrepreneurship. The past two decades have been formidable for her country: curbing inflation (by creating the real and pegging it to the U.S. dollar), privatization (notably, the state-owned telecommunication and mining companies) and a commodities boom (soybean and iron ore). Twenty years ago Brazil’s GDP was at $358 billion and ranked 11th in the world; today, at $2.5 trillion, it’s between sixth and eighth, depending on who’s counting. No other BRIC balances democracy and widespread wealth nearly as well. Half of Brazil’s population now occupies the middle class—their output alone surpasses the entire economy of neighboring Argentina. “There has been a shift, a change in the way we are [perceived],” says Rousseff, 64, whose position atop this shift now makes her the third most powerful woman in the world, according to FORBES’ annual rankings.
Brazil has become one of the most entrepreneurial countries in the world,  with one in four adults self-employed in some manner. Small businesses create two out of three jobs in Rousseff’s private sector—Brazil’s unemployment rate is an envious 5.8%—and 49% of entrepreneurs with companies less than 42 months old are women; the global average is 37%. In bustling São Paulo alone, 1.8 million small-business owners ply their trades, wares and ideas.
Technology has been a game changer. According to Nielsen, Brazil had 82.4 million Internet users in the first quarter of 2012 compared with 62.3 million three years earlier. On Facebook, Tumblr and Twitter Brazilians are the second most active social network users behind the U.S. “Technology is democratizing entrepreneurialism,” says Bedy Yang, the founder of Brazilian Innovators, an organization helping young tech entrepreneurs. “There are 200 million people in Brazil and 250 million mobile devices.” The Brazilian-born Yang lives in Silicon Valley and travels each month to her homeland to host monthly meetups. Three years ago you couldn’t find any venture capital, says Yang, as we lurch through the clogged streets of São Paulo. “Now I’m seeing Excel Venture, Redpoint Ventures and Sequoia. It’s the formation of a new asset class.”
Rousseff, who took office early last year, has a plan to keep the good times rolling: incentivizing the kind of entrepreneur that Yang cultivates and that her farmer friend embodies. Specifically, lower interest rates, to expand capital; investing in infrastructure; and targeted tax cuts. “In others words,” says Rousseff, “pro-growth bonuses.” This on top of an already robust layer of incentives for entrepreneurs, including retirement benefits and government microloans. “The corner hairdresser, the popcorn salesperson, we also like to help them,” says Rousseff, who es­pouses a program that advances up to $500 to these kinds of small operators.
The public supports her—a June poll put her approval rating at 77%, ahead of her predecessor and mentor, Luiz Inácio Lula da Silva, at a similar point in his term. Perhaps more critically, so does Brazil’s entrepreneurial community. “Our government has made substantive reforms in recent years,” Eike Batista, Brazil’s top entrepreneur (and the world’s seventh-richest man, with an estimated net worth of $30 billion), tells FORBES, “and Dilma is building a fertile environment for investors. ”
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“I DON’T THINK I HAD A PLAN to be president,” says Rousseff. That’s an understatement: Rousseff’s route to Brazil’s entrepreneur-in-chief is as unconventional as they come.
Rousseff’s father, a Communist exile from Bulgaria, made a good living in real estate and construction. His two daughters attended boarding school, where Dilma studied piano and inhaled books, a habit to this day. (Next up: James Carville’s It’s the Middle Class, Stupid!) “I used to play volleyball,” recalls Rousseff. “My wrist is not that strong, but I could block my opponent.”
In 1964, when Rousseff turned 17, Brazil’s military overthrew the leftist government of João Goulart, the fifth political coup in 20 years. Overnight civil rights gave way to arrests, disappearances and torture. In 1967, unbeknownst to her family, Rousseff took the nom de guerre Estela and joined a radical faction of the Brazilian Socialist Party that preached revolt but settled for robberies and car-bombings.
Her first marriage lasted less than two years, but the second, to activist lawyer Carlos Araujo, a prominent member of the Brazilian Communist Party, would stick for nearly three dec­ades. Araujo and Rousseff joined an activist group responsible for stealing a safe containing $2.5 million to fund political actions. Araujo has said his wife “never took up arms.” (He also has said he didn’t know his wife’s given name until her arrest.) In early 1970 Rousseff was caught in a sting operation. Military officials tortured her for 22 days, sometimes using electric shocks, and she spent the next three years in prison.
By the time Rousseff was released in 1972, she was 20 pounds thinner and physically broken. Undaunted, she traded her radical politics for pragmatism. Rousseff pursued an economics degree, and with Araujo, now parents of a daughter, Paula, supported the Democratic Labor Party, a cooperative movement composed of leftist groups (a decade ago she jumped to the ruling Workers’ Party). As her reputation grew, Rousseff landed state-level positions as Secretary of the Treasury and Secretary of Energy before serving as chief of staff for President Lula da Silva, whom she succeeded.
Rousseff rarely discusses her days as a radical and torture victim, nor does she marvel much at her improbable journey from prisoner to president. For her time and country, she says, it’s typical, “the 1968 generation.”
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To see the challenges that Rousseff now faces—and the opportunities within her grasp—it’s instructive to relive a recent trip to Fortaleza, a city with 2.5 million people in northeastern Brazil, taken by Gary Garrabrant, CEO and cofounder of Equity International. (Garrabrant is a big believer in Brazil. His $2 billion private equity firm has half its money in local growth businesses, including homebuilding, commercial real estate, logistics and storage companies.) Rain had washed out the roads, forcing him to rent a four-wheel Jeep, which he navigated over high sand dunes (“no road, no signage”) with the help of a surfer he picked up along the way. He eventually made it to the city, where, he says, “two to three attractive investment opportunities were discovered.” Bad infrastructure; great prospects.
To increase the latter, Rousseff has decided to invest in the former. A short-term dividend of infrastructure spending: It should goose growth, which has slowed to an expected 2% this year, from a white-hot 7.5% in 2010. A medium-term advantage: Brazil will be more ready for its two-pronged coming-out party—the soccer World Cup in 2014 and the Summer Olympics in 2016. To her credit, though, Rousseff’s strategy centers mostly on long-term projects—her equivalents of the Eisenhower Interstate System—that will encourage entrepreneurial activity for decades.
Physical infrastructure is the most obvious need: As Garrabrant discovered, only 14% of the roads in the world’s fifth-largest country are paved. Of 142 countries surveyed, the World Economic Forum ranks Brazil’s quality of physical infrastructure 104th—behind fellow BRICs China, India and Russia. In August Rousseff announced plans for competitive auctions in which private contractors can bid for projects, such as the right to operate 7,500km of roads and 10,000km of railways. Total expected investment: $66 billion, with nearly half spent in the next five years.
Broadband is next. In Brazil high-speed Internet costs around $27 per month—if you can get it—versus $10 in China. To make the Web more accessible, Rousseff has allocated $500 million per year. Brazil’s mobile telecommunication plumbing needs more help. ­Connection fees are 48 cents per minute, versus an average 6.2 cents a minute in the average developed country, and the service quality is so horrendous that Brazil’s telecom regulator banned three big mobile phone operators from selling new plans in some areas until they improved. To fix the problem, Rousseff is pressuring the four foreign companies that dominate telecommunications to invest more and deliver faster. If they don’t have 4G running by the World Cup, they will face big penalties.
For Rousseff, “infrastructure” also means clearing the way for entrepreneurs to create. Starting a new business in Brazil isn’t easy. According to the World Bank, it takes up to 120 days to incorporate versus 6 in the U.S., with startup costs running ten times what they do in China. Rousseff is pushing to move business-tax payments online, which should curb the need to file with different authorities. This year Rousseff has also tried to boost smaller farmers, like the one she met outside Brasília, providing $8 billion in small, negative-interest loans.
But taxes remain her stickiest issue. “Brazil’s tax system is among the most complex in the world,” says Henry McVey, head of global and macro asset allocation at KKR, the private equity giant. These complications, which involve regional fiefdoms, make it highly difficult for Rousseff to cut Brazil’s onerous payroll tax, which is effectively 70%, across the board. Instead, she’s been content with targeted cuts to make domestic manufacturers more competitive. She’s also expanded a break for young companies with less than $1.8 million in revenues. Ultimately, she tells FORBES, she pines for a VAT-type system. “We have to change the tax structure from a payroll-based to a turnover-based taxation structure,” she says.
For all of her business-friendly policies, Rousseff also stays true to her background in social justice. She doesn’t feel these are mutually exclusive. “If you think the market alone was able to lift 70 million people out of poverty, I mean, you’re wrong,” she says.
In education, Rousseff aims to train more—and better—scientists and engineers. Until now few Brazilians have studied abroad. Last year only 9,000 Brazilians studied in the U.S. (excluding language students), compared with 260,000 from China and India. Under Rousseff’s Science Without Borders program, by 2015 that figure will jump to  100,000 (U.S. schools have already agreed to take 20,000).
Rousseff, now a grandmother, also advocates, via policy, on behalf of children. Every household with a child under age 6 gets $35—on the condition that the kids attend school and abide by a vaccination calendar. When Lula da Silva engineered the stipend in 2003, critics howled “as if we were giving hope to the beggars,” says Rousseff. The harsh truth: “The older you are the more protected you are. Stark poverty in Brazil is female and child.” Rousseff adding her own perks: 6,000 day care centers for lower- to middle-class families and free medicine for kids. Aid to children is funneled to mothers. (“Always the woman,” says Rousseff, “because the man tends to get the money and spend it in alcoholic beverage.”)
Rousseff faces major challenges. All this tax-trimming and social spending raise the prospects of a Brazilian fiscal cliff. Inflation remains a real concern. And corruption still festers nationwide and in the capital: Rousseff has already sacked six ministers and her chief of staff amid various scandals.
For what’s it’s worth, though—about $30 billion, in this case—the man with more personally at stake in Brazil than anyone, Eike Batista, is betting on ­Rousseff: “She is brave enough to carry Brazil ahead.”

THE REAL DEAL

The South African government has taken a big step towards fracking in Africa’s biggest economy that is likely to lead to months of heated debate and court battles.
Hydraulic fracturing, or fracking, involves extracting natural gas from shale rock layers deep within the earth. The process requires vertical and horizontal drilling and the injection of pressurized fracking fluids, water and sand to extract the gas.
Oil companies see fracking as a potential boost for energy exports, jobs and foreign investment. Conservationists argue it will destroy ecosystems found in the semi-desert landscape of the Karoo, where much of the shale gas is located.
On April 29, 2011, the minister for mineral resources, Susan Shabangu, placed a moratorium on applications to explore fracking in the Karoo while her department conducted investigations. That ban on exploration was lifted on September 7 and the Investigation of Hydraulic Fracturing in the Karoo Basin of South Africa report, which the cabinet based its decision on, was released four days later.
Derek Light, an attorney for farmers in Graaff-Reinet, was unhappy with what he called a hasty decision to lift the moratorium.
“The task team could not have effectively performed its function in such a short a time. It should have performed a strategic environmental assessment in the broadest possible terms which would have enabled them to make a well-informed decision that would be in the best interests of the people of this country,” says Light.
Light was pleased to see that the report recognized the importance to revise the country’s regulatory framework, in order to control fracking.
Jonathan Deal, chairman of Treasure The Karoo Action Group—the official opposition to fracking in South Africa—says that the country’s first reaction was “let’s frack” instead of investigating other forms of energy.
“There is natural gas, offshore, in reservoirs which do not need to be fracked in order to remove it,” he says.
“We plan to lodge an appeal if and when exploration licenses are issued,” Deal says.
Ferrial Adam, a Greenpeace Africa climate and energy campaigner, also believes that the country should consider other forms of sustainable energy.
“Greenpeace’s research on ‘Advanced Energy Revolution’ scenarios shows that it is possible to create 50% of electricity from renewable energy by 2030, if we have the same political determination that government seems to put into fossil fuels,” she says.
Adam says that in a dry country like South Africa this decision by government is short-sighted.
“Contamination of groundwater aquifers and surface waters can occur due to fracking operations and through the disposal of waste waters. Small amounts of carcinogenic hydrocarbons are harmful to humans. In some cases, this waste water is minimally processed before being dumped into surface waters feeding public water supplies, or is held in ponds that may lead to releases of the chemicals into the environment.”
The head of Living Planet Unit, WWF South Africa, Saliem Fakir, says we can only see the outcome of fracking by looking at extractive industries at present. The track record for communities is rather dismal. The national coffers and private industry may benefit but the problem of impoverishment could be the inheritance of the local setting. Fakir pointed to countries like Nigeria, a country where Shell is active, to show how countries that are rich in oil can be poor.
“Extractive industries have boom and bust cycles. They often attract lots of labor and people from outside that leads to conflict, social pressure and displacement of local interests, the truth is that resource rich countries tend to have high levels of inequality. Elites tend to capture the rents and leave out the poor. We may see a similar phenomenon with shale gas if the extractive process suffers from poor governance and oversight,” says Fakir
Bonang Mohale, chairperson for Shell South Africa, was pleased with the details of the report.
“The suggestions made by the task team are in line with our exploration plans for the Karoo Basin,” says Mohale.
“South Africa needs energy now. Approximately 10 million people in South Africa do not have access to electricity. At the moment, South Africa is a net importer of energy. This means that South Africa needs the full range of energy sources. In combination with other energy sources, including renewables, gas could help secure South Africa’s energy future, while creating sustainable and permanent jobs for South Africans.”
Shell is preparing to submit a comprehensive environmental, social and health impact assessment (ESHIA) that is in line with the National Environmental Management Act. Shell promises to continue working closely with the people of the Karoo and South Africa to address concerns and ensure that they benefit from shale gas exploration.
Group Media Manager for Sasol Limited, one of the biggest energy companies on the continent, Alex Anderson, says that Sasol gave up its fracking license last year.
“We concluded an extensive technical study of the area and then decided not to pursue further exploration activities in the assigned TCP area. The decision was based on subsurface technical and operational considerations and was unanimously taken by the partnership,” said Anderson a few months back.
“Sasol has taken note of the decision by the South African government to lift the moratorium on shale gas exploration in the Karoo region. We continue to be very interested in the upstream oil and gas business landscape, which includes the shale gas in the Karoo and elsewhere. As a consequence we continue to monitor these developments with interest and if new opportunities present themselves we will actively evaluate and pursue if they are attractive from a technical and commercial perspective,” says Anderson.
The report commissioned by the department of mineral resources indicated that during the exploration phase, only normal exploration, would be allowed. This excludes hydraulic fracturing but instead includes a process whereby drilling, geophysical and geochemical mapping can take place.
The report spoke of the economic potential fracking would bring to the country. According to the United States Energy Information Administration there is an estimated 485 trillion cubic feet (Tcf) of gas in the Karoo Basin, which could reduce the national dependence on other fossil fuels. It mentioned the environmental and socio-economic implications of water use. and the disposal of the fracking fluids. The task team said that due to the high volumes of water to be used and the possible contamination of water with the fracking fluids, they would need to conduct further research into water sources.
The report called for aa re-evaluation of South Africa’s regulatory framework to ensure that any possible negative impacts would be alleviated. A monitoring committee will be appointed to ensure a comprehensive and coordinated framework and the supervision of operations.
Now the conservationist and protestors await the application for the first exploration license and will see the applicant in court.

Between A Rock  And A Hard Place

Political risk continues to remain elevated in Zimbabwe. The introduction of a government of national unity (GNU) saw a decrease in violence and human rights abuses but little else. Differences between Zimbabwe African National Union (ZANU-PF) and the two factions of the Movement for Democratic Change (MDC) are glaring and threaten the future of the government.
A key source of political risk arises from the upcoming election. Southern African Development Community (SADC) member states have reaffirmed their position that no election can take place until all conditions of the 2008 Global Political Agreement (GPA) are fulfilled.
A key condition of the GPA is the formulation of a new constitution. A draft constitution has now been completed and submitted to the GNU for comment and suggestions for amendment. The two factions of MDC have supported the draft constitution and are ready to put it to a referendum.
President Robert Mugabe, who has ruled Zimbabwe for 32 years, is adamant there should be an election this year, but reality is that it may not be before 2013. It is likely the next election will be close. ZANU-PF will be reluctant to relinquish power to the MDC, which it accuses of being sponsored by the West. The voters themselves are eager for change following years of economic stagnation.
The European Union (EU) said it was considering easing decade-long sanctions if the country implements a new constitution; a move that could encourage a free and fair poll.
Politics will undoubtedly trump any economic policy considerations. As such, Zimbabwe is unlikely to see any significant economic reforms to revive the economy of what was once Africa’s bread basket. The indigenization drive will take center stage economically especially as the election draws closer. The indigenization legislation aims to ensure that 51% of foreign-owned companies are owned by indigenous, black Zimbabweans.
The indigenization program, which is in full swing is led by indigenization minister, Saviour Kasukuwere, who is seen as a die-hard ZANU-PF loyalist. One of the thorny issues for the program is the fate of the lucrative mining industry. The government is locked in a dispute with the country’s largest foreign investor, South Africa’s Impala Platinum (Implats). The miner has complied with the law by divesting the required share of the company to indigenous, black Zimbabweans. The government is to get 31% of Implats. The miner has requested that the government pay market prices for the stake. The cash-strapped government has refused to pay. The dispute still rumbles on.
From the resources sector the zealous Kasukuwere has turned his attention to the financial sector. The target is the four foreign-owned banks. Indicative of a rift within ZANU-PF, Zimbabwe Reserve Bank governor, Gideon Gono, has warned of the implications of indigenizing the banking sector, the backbone of any modern economy. The minister of finance, Tendai Biti, also added his voice of concern to such a move. ZANU-PF is likely to disregard these voices of reason and power ahead with the indigenization campaign until the elections. Indigenization is likely to be a vote winner for ZANU-PF. Therefore, investors will remain wary of the country’s investment climate.
Zimbabwe’s political environment will weigh heavily on an already injured economy. The minister of finance in July downwardly revised growth for 2012 from 9.4% to 5.6%. The revision is on the back of a poor harvest, inadequate donor funding and incoherent policies. Zimbabwe grew 9.3% in 2011.
Political uncertainty will surely remain in place until elections are held. Until then, the economic policy will remain incoherent, which will in turn be detrimental to the economy. Zimbabwe’s economy will only show signs of sustained recovery with a democratically elected government.

A Free Vote Could Be The Best Medicine

The death of president Bingu wa Mutharika, in early April, was sudden; but it was welcomed by the majority of Malawians. Malawi’s economy under Mutharika was on the verge of oblivion—the result of poor governance and incoherent macroeconomic policies.
Malawi’s growth plummeted from an annual average of 8.3% between 2007 and 2010 to a mere 4.5% in 2011. The economy—choked by a lethal dose of chronic fuel and foreign exchange shortages, as well as persistent power outages—had nearly seized to function. The lack of social cohesion and an exodus of donors added to the crisis.
Some members of the ruling Democratic Progressive Party (DPP) unsuccessfully tried to prevent the vice president, Joyce Banda, from assuming office as stated in the constitution, in the event of the president being incapacitated. Fortunately enough, a couple of days later, Banda was sworn in as the Republic’s fourth head of state and its first female president.
Despite the fact that Malawians would have welcomed anyone as the next president, I believe it was particularly important that it was a woman; and a woman who, castigated by the Mutharika regime, had felt first-hand the plight of ordinary Malawians.
A huge part of Malawi’s social and economic ills were likely driven by pure male ego. The late president failed to heed any advice—political, economic or otherwise—contrary to his views. Such was his arrogance that Malawi veered off course the Extended Credit Facility (ECF) program provided for by the International Monetary Fund (IMF). This disengagement with the IMF led international donors to withdraw their aid commitments to the detriment of Malawi’s economy. Donations make up 40% of Malawi’s development budget.
Donor withdrawal led to the introduction of a disastrous zero deficit budget. The ambitious budget aimed to finance all recurrent expenditure through meager domestic resources. This was in the name of ‘nationalism and pan-Africanism’ and Mutharika’s way of defying the West and proving that Malawi was self-sufficient.
Since Banda assumed office, she has had the unenviable task of rebuilding the economy. A recovery program has been billed at $1 billion: an astronomical figure in these economic times. The president’s government has re-engaged the IMF and negotiated a new three-year ECF program worth $157 million. The IMF facility will ensure a return of prudent macroeconomic policies to promote price stability and growth. The international lender has also written letters of assurance to the country’s donors to release funds in support of Malawi’s recovery plan and to curtail the dwindling foreign exchange reserves.
In addition, donors and investors alike will be further assured of good governance following the repealing of several restrictive laws including the repressive media and anti-gay legislations. Other restrictive laws, enacted under the Mutharika regime, are expected to be repealed in due course. This is likely to rebuild the social cohesion which was destroyed.
Banda has also introduced a sense of accountability among public servants which had all but evaporated. Since Mutharika’s death, several revelations of looting, by him and other public officials, have surfaced. Furthermore, it has emerged that key government institutions, the Ministry of Finance and the Malawi Revenue Authority, flouted public finance regulations in a bid to cover up the deteriorating economy.
In my humble opinion, in the three months that Banda has been in office, she has steered Malawi back on course. However, it’s by no means out of the woods. Along with saving the economy, Banda has demonstrated true leadership qualities, which the country so desperately needed. She has said she’s not a ruler but a leader, which is in stark contrast to her predecessor.
Banda’s banishment from the DPP is her greatest asset. She has seen first-hand how autocratic rule can destroy a nation. With this in mind, she will probably desist from any dictatorial tendencies and maintain her consultative and pragmatic approach to leadership. This is likely to be the case at least until 2014 given the state of the economy and, more importantly, the fact that her party has no seats in parliament.
The true test will be whether she can maintain this standard beyond the 2014 election which, as the incumbent, she is likely to win.

Tag: Economy

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hopeless no more

Paragons Or Parasites?

BRAVING THE INDIGENIZATION CHILL

A Test For Guinea’s Fledgling Democracy

Bismarck Stares The Beast In The Eye And Dares Not Blink

Mangaung Unpacked

Mine Faith

Incredible India, Flaws And All

THE REAL DEAL

Between A Rock And A Hard Place

A Free Vote Could Be The Best Medicine

A Welcome Woman’s Touch At The Helm