In the recent report by the National Bureau of Statistics (NBS) in Nigeria, the Consumer Price Index (CPI) for December reveals an increase, with the headline inflation rate rising to 28.92% compared to November&#8217;s 28.20%. The report indicates a 0.72% point uptick.



In an analysis by financial services provider CardinalStone, titled Sailing Through Troubled Waters—Nigeria: 2024 Economic Outlook, the effects of economic reforms, including subsidy removal and efforts to harmonize exchange rates, have left a lasting impact on Nigeria&#8217;s economic landscape. The report highlights a trend as inflation soared to a 27-year high, triggering a decline in economic activities throughout last year.



Analyzing the year-on-year data, December&#8217;s headline inflation rate was 7.58% points higher than the same month in 2022. This surge signifies a deviation from the 21.34% recorded in December 2022.



Notably, both urban and rural inflation rates witnessed significant spikes, with urban inflation reaching 31.00% (8.98% points higher than December 2022) and rural inflation hitting 27.10% (6.38% points higher than December 2022).



The food inflation rate for December surged to 33.93% on a year-on-year basis, driven by increases in prices of various essentials. Notably, the report pinpoints price rises for bread and cereal, oil and fat, potatoes, yam and other tubers, fish, meat, fruit, milk, cheese, and egg.



Core inflation, excluding volatile items like farm produce and energy, stood at 23.06% in December, marking a 4.85% increase compared to December 2022. The highest spikes were observed in prices of passenger transport by road, medical services, actual and imputed rentals for housing, passenger transport by air, pharmaceutical products, and accommodation services.



Geographically, Kogi, Lagos, and Rivers experienced the highest year-on-year inflation rates in December 2023, while Borno, Taraba, and Katsina recorded the slowest rise. On a month-on-month basis, Bayelsa, Bauchi, and Oyo saw the highest increases, while Nasarawa, Delta, and Sokoto reported the slowest rise.



In the context of food inflation, Kogi, Kwara, and Imo led the year-on-year surge, whereas Bauchi, Jigawa, and Sokoto recorded the slowest rise. On a month-on-month basis, Bayelsa, Ogun, and Enugu witnessed the highest increases, contrasting with Nasarawa, Delta, and Niger reporting the slowest rise.



According to the analysis by CardinalStone, the repercussions of policies by the new government were felt most significantly in domestic consumption, which accounts for approximately 60% of the economy. The decline in domestic consumption reached a 10.6% last year, surpassing the contractions experienced during both the Covid period and the 2016 recession. CardinalStone experts emphasize the severity of the situation, stating, &#8220;Materially weaker than the 2.0% and 5.3% contractions during the Covid period and 2016 recession, respectively.&#8221;



Despite government efforts to mitigate the impacts on the cost and standard of living, the report reveals that the country&#8217;s poverty level worsened last year. The sluggish economic growth became more entrenched, attributed to flat investments and low unemployment, further burdening individuals responsible for dependents.



The report sheds light on the ripple effects of material currency devaluation, leading to foreign exchange losses for exposed businesses and higher import duties for companies reliant on imported raw materials. Consequently, this currency depreciation resulted in weaker manufacturing growth, compounding the economic challenges faced by businesses.



In the words of the CardinalStone report, &#8220;Even though the weaker currency appeared to have had a positive impact on exports, available data still suggested that overall 2023 growth averaged 2.5% (versus 3.1% for 2022).&#8221;



Nigerian exporter Oluwaseun Obilana expresses concerns over the escalating costs of doing business.



&#8220;I bought dollars for freight at ₦1,470 in the parallel market today. And this has been like that for some time due to the scarcity of the dollar, and it is really affecting the economy,&#8221; Obilana shares with FORBES AFRICA.



Despite the anticipation surrounding the naira exchange rates’ unification policy announced in June, Obilana remains skeptical about its impact, noting the need for tangible solutions to address the scarcity of the dollar and its effects on businesses.



&#8220;We need swift and effective measures to stabilize the economy, ensuring a sustainable environment for businesses to thrive in the face of these challenging economic times,&#8221; says Obilana.

Nigerian Economy Ahead of Rate Decision

On The Difficult Path To Growth:Nigeria’s Inflation Surges To 27-Year Peak Post Economic Reforms

IMF acknowledges Nigeria&#8217;s economic challenges: 26% inflation, naira pressure. CBN lifts forex ban, but concerns persist over exchange rate unification. Analysts weigh in on potential dollar loan effects. Swift government action is urged to clear outstanding forwards amid rising demand for dollars.



Responding to recent economic challenges in Nigeria, the International Monetary Fund (IMF) has acknowledged the country&#8217;s 26% year-on-year inflation rate in August and pressure on the naira.



&#8220;As with every member country of the IMF, Nigeria can seek IMF financing if they see this as helpful to address external imbalances,&#8221; the IMF told The Punch.



The IMF also welcomed the Central Bank of Nigeria’s (CBN) recent decision to lift the ban on the 43 items previously restricted from accessing foreign exchange from the official window. &#8220;This is a positive step in the direction of a shift to a market-determined exchange rate regime.&#8221;



FORBES AFRICA&#8217;s investigation reveals the naira is trading at ₦1,186 to the dollar in the parallel market, while the official Investors and Exporters (I&amp;E) window closed at ₦808 on Friday. Concerns arise about the effectiveness of the new free-floating system in response to President Bola Tinubu&#8217;s commitment to unify exchange rates.



Minister of Finance Wale Edun, in a conversation with Bloomberg, attributed the naira&#8217;s decline to overdue forward payments of $6.8 billion, suggesting the use of forward payments in the forex market played a role. The IMF urged Nigerian authorities to urgently tighten monetary policy, recommending measures like raising the Monetary Policy Rate and addressing excess naira liquidity. The IMF emphasized that clarity on the CBN&#8217;s dollar obligations would boost market confidence.



Despite challenges, the IMF expressed confidence in the abilities of Edun, and the new CBN governor, Olayemi Cardoso, believing they can make informed decisions to enhance the country&#8217;s economic fortunes.



Analysts speculate that a potential dollar loan could have mixed effects on the Nigerian economy. While it might offer short-term financial support, concerns about increased debt levels and the ability to meet repayment obligations linger.



Nigerian exporter Oluwaseun Obilana expresses concerns about the potential impact on the country&#8217;s business landscape.



Obilana highlights the challenges that a devalued naira could pose to businesses reliant on international trade. He states to FORBES AFRICA, &#8220;The stability of the naira is crucial for us exporters. Any depreciation adds uncertainty and affects our competitiveness in the global market.&#8221;



He acknowledges the need for solutions but emphasizes the importance of considering the implications for businesses. &#8220;While seeking a dollar loan might provide temporary relief, we must carefully weigh the long-term consequences on businesses like ours,&#8221; he remarks.



The exporter urges the government to explore comprehensive measures to stabilize the naira and boost the economy without compromising the interests of the business community. &#8220;A collaborative approach between the government and the private sector is essential to navigate these economic challenges effectively,&#8221; Obilana emphasizes.



Obilana remains cautiously optimistic, calling for transparent communication between the government and the business sector. &#8220;Clarity on economic policies and their anticipated impacts will help businesses adapt and make informed decisions,&#8221; he adds.



Also speaking with FORBES AFRICA, Nigerian economist Kelvin Emmanuel highlights that while borrowing against the special drawing rights (SDR) might appear reasonable for a low-income country like Nigeria, there are concerns about the associated conditions.



&#8220;The government is also concerned about the optics of using IMF, especially considering the conditions that will preclude such a facility,&#8221; remarks Emmanuel. He suggests an alternative approach, speculating that the Nigerian government might opt for a resource-backed loan from a global bank serving as an official external asset manager of the CBN.



Emmanuel further elaborates on the potential strategy, stating, &#8220;My best guess is that the Nigerian government will tap into this resource-backed loan and utilize the existing line of external reserves as an unsecured line of credit.&#8221; This approach, he believes, could offer a more flexible solution while avoiding some of the conditions attached to an IMF facility.



Highlighting the urgency of the situation, Emmanuel emphasizes the need for swift action by the government. He points out the necessity to clear outstanding forwards, especially with the demand for dollar expected to be at its peak in the fourth quarter.

Nigeria’s Economic Turbulence: Soaring Inflation And Naira Woes

Inflation in South Africa spikes to 5.4% year-on-year, intensifying economic pressures. As food and fuel prices soar, the Reserve Bank considers interest rate adjustments, potentially deepening consumer debt. Dawie Roodt, renowned economist, breaks down the challenges and offers insights into the nation&#8217;s economic trajectory.



South Africa, a nation already grappling with economic challenges, now confronts another hurdle: an accelerated inflation rate, as announced by the government’s Statistics South Africa yesterday. This month&#8217;s inflation rate has spiked to 5.4%, marking a surge when compared to the same month a year ago. But what does this increase truly mean for the average South African and the broader economic landscape?



The Inflation Breakdown



Inflation&#8217;s abstract nature often masks its tangible impact on everyday lives. When economists say that the inflation rate has risen by 5.4% year-on-year for the same month, they&#8217;re indicating that the average price of goods and services is now 5.4% higher than what it was precisely a year ago in the same month.



According to Dawie Roodt, founder, Director, and Chief Economist of the Efficient Group, two main culprits are responsible for driving this acceleration: food prices and transport costs. &#8220;Certain prices continued to go up, food prices and transport costs being some of the reasons why [there&#8217;s an] acceleration,&#8221; notes Roodt to FORBES AFRICA. An additional driver of these costs is what Roodt terms ‘base reasons’, namely that the rate of inflation rate increases is hastening. “A year ago, inflation was going up, but at a lower rate, now we see that this is accelerating.&#8221;



Food and Fuel



South Africans, especially those from lower-income households, are feeling the most hard-hit, with basic food goods and fuel price increases some of the hardest hit. The soaring food prices are partially dictated by international markets, says Roodt, and also strongly affected by a weakening rand, which he accounts for due to a lack of investor confidence within South Africa.



Fuel costs, intertwined with global oil prices and domestic taxation, further amplify the inflationary pressure. As transport costs rise, the effects ripple through the economy, affecting everything from the price of daily commodities to the operational costs of businesses.



Reserve Bank&#8217;s Potential Response



The South African Reserve Bank (SARB), which governs the regulation of interest rates, is currently attempting to maintain inflation between 3% and 6%. With the current rate at 5.4%, it&#8217;s hovering just below the upper limit, which could prompt a response from SARB.



&#8220;The Reserve Bank might increase rates again” says Roodt. “The reason being, inflation is the price of the economy, and if prices keep rising, increasing rates can slow down demand,&#8221; By making borrowing more expensive and saving more attractive, interest rate hikes aim to temper inflation.



A Debt-Driven Dilemma



However, for many South Africans, an interest rate hike can exacerbate already challenging financial situations. Roodt highlights a troubling trend: &#8220;Many households are quite deep in debt, and you have to pay interest on that debt.&#8221; With increased rates, the burden of servicing this debt becomes even heavier, inevitably impacting the standard of living, particularly for those who are already struggling. Roodt notes that over the last three years, and indeed the last decade, South Africans have become markedly poorer in terms of the practical buying power they have.



Forecasting the Future



The recent spike in inflation underscores South Africa&#8217;s intricate economic challenges, with food and fuel prices playing a pivotal role in the everyday struggles of its citizens. As SARB contemplates interest rate adjustments, consumers, especially those burdened with debt, face the prospect of heavier financial strains. As Roodt points out, while potential solutions exist to alleviate these pressures, political complexities render their implementation challenging. Amidst these economic tremors, the road ahead for South African consumers seems fraught with further obstacles, emphasizing the pressing need for comprehensive solutions.

Shopping, basket and woman in supermarket aisle with products in retail store on sale, inflation or discount. Customer, grocery and shelf in shop, choice and. searching for item or groceries to buy

South Africa’s 5.4% Inflation Surge: Consumers Continue To Feel The Pinch

Nigeria faces its highest inflation rate in approximately two decades, with the last instance of such soaring inflation recorded back in September 2005, when the rate touched 24.3%.



Nigeria faces its highest inflation rate in approximately two decades, with the last instance of such soaring inflation recorded back in September 2005, when the rate touched 24.3%.



The National Bureau of Statistics (NBS) reported that the headline inflation rate in July reached 24.08%, marking a significant increase from the June rate of 22.79%.



Analyzing the data, it becomes apparent that the month of July witnessed a noteworthy 1.29% point rise in the headline inflation rate when compared to the previous month.



Comparing July to the same month the preceding year, the headline inflation rate on a year-on-year basis surged by 4.44% points. This substantial increase in inflation rate, when juxtaposed with July 2022&#8217;s rate of 19.64%, reveals the escalating inflationary pressures that the Nigerian economy currently grapples with.



This recent development raises concerns and calls for a comprehensive understanding of its implications on the nation&#8217;s economy and its citizens&#8217; livelihoods.



According to Iheakanwah Felix Arinzeh, a financial expert and doctor of business administration, the current inflationary surge was not unforeseen.



Arinzeh tells FORBES AFRICA: &#8220;The July inflation rate is not a shock to financial experts. Believe me, the inflationary pressure was expected, considering the tough policy decisions of the President Bola Tinubu-led administration.&#8221;



He attributes the upward inflationary pressure to a combination of factors, including the removal of the fuel subsidy, the depreciation of the Naira, and the global food crisis. He also points out the impact of the ongoing conflict in Ukraine, which has disrupted global supply chains and subsequently led to increased energy and food prices.



However, Arinzeh advocates for further devaluation of the Naira to enhance export competitiveness, especially for non-oil exports, which could bolster foreign exchange earnings and reserves.



While acknowledging the positive potential of recent government policies to revive the economy, Arinzeh highlights the importance of effective communication. He believes that proper sensitization about the implications of policies to the populace would have alleviated concerns and prepared citizens for the outcomes.



&#8220;I suggest the provision of financial assistance to vulnerable households via a social intervention program will go a long way in alleviating the excruciating impact of the high inflationary pressure on essential commodities.



&#8220;I believe we can recover well, but slowly from the current situation,&#8221; says Arinzeh.

Inflation Concept

Nigeria Confronts Highest Inflation Rate In Nearly Two Decades, Eclipsing 2005 Record

<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



As rapid inflation fuels growing recession fears, new data showed consumer prices rose 9.1% in the 12 months ending in June, hitting a worse-than-expected 40-year high after an unprecedented surge in gas prices.



<h2 class="wp-block-heading">KEY FACTS</h2>



Overall prices rose 1.3% from May—surpassing the 1.1% economists were expecting and much higher than the previous month’s increase of 1%, according to&nbsp;<a href="https://www.bls.gov/news.release/pdf/cpi.pdf" target="_blank" rel="noreferrer noopener">data</a>&nbsp;released by the Labor Department on Wednesday.



The unexpected jump marks the largest 12-month increase since the period ending November 1981, according to the release, and comes after prices in May unexpectedly returned to a 40-year high.



The worse-than-expected increase was the result of increases across categories, with gasoline, shelter and food being the largest contributors, the government said.



The energy index rose 7.5% over the month and contributed nearly half of the overall increase, driven higher by the gasoline index, which rose 11.2%.



Core inflation, which excludes volatile food and energy prices, rose 0.7% against an expectation of 0.5%; shelter prices rose at the fastest pace in 31 years while rent prices climbed at the largest rate in more than 35 years.



Stocks <a href="https://www.forbes.com/sites/sergeiklebnikov/2022/07/13/dow-falls-300-points-after-ugly-inflation-report-adds-to-recession-fears/">plunged</a> immediately after the report, with the Dow Jones Industrial Average paring pre-market gains and trading down 308 points by 8:45 a.m. ET.



<h2 class="wp-block-heading">KEY BACKGROUND</h2>



Rising energy prices have helped push inflation readings up to the highest level in decades during the pandemic, and stocks have struggled in recent months as Federal Reserve officials work to combat the surge by unwinding the central bank’s pandemic-era stimulus measures. After rising 27% in 2021, the benchmark S&amp;P 500 has tumbled 20% this year. Meanwhile, oil prices surged back toward yearly highs of more than $120 per barrel in June amid supply concerns over the summer travel season—adding to those spurred by&nbsp;<a href="https://www.forbes.com/sites/forbesstaffreports/2022/03/09/live-ukraine-russia/">sanctions</a>&nbsp;against Russia, one of the world’s top oil-producing countries. Prices have since fallen back below $100 per barrel this month, but experts&nbsp;<a href="https://finance.yahoo.com/news/oil-prices-should-find-a-lower-home-as-market-normalizes-says-analyst-194242256.html" target="_blank" rel="noreferrer noopener">aren’t</a>&nbsp;so sure how long the reprieve will last.&nbsp;



<h2 class="wp-block-heading">WHAT TO WATCH FOR</h2>



In a note to clients Sunday night, Goldman economists said they expect consumer prices to rise more quickly this summer as&nbsp;<a href="https://morningconsult.com/2022/05/25/public-transport-spending-inflation/" target="_blank" rel="noreferrer noopener">transportation</a>&nbsp;and&nbsp;<a href="https://www.barrons.com/articles/consumers-healthcare-costs-51655319960" target="_blank" rel="noreferrer noopener">health insurance</a>&nbsp;costs continue to surge, pushing core inflation from 5.9% in June to 6.3% in September. Some experts believe the price surge could last for years. “Consumers may have to live in a world where inflation consistently runs hotter than the previous decade,” LPL Financial chief economist Jeffrey Roach said in a note this month, citing concerns from central bankers like the European Union’s Christine Lagarde, who’s&nbsp;<a href="https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220628~754ac25107.en.html" target="_blank" rel="noreferrer noopener">warned</a>there are “growing signs”—including the ongoing war in Ukraine—that suggest “supply shocks hitting the economy could linger” beyond 2024.



<h2 class="wp-block-heading">FURTHER READING</h2>



<a href="http://www.forbes.com/sites/sergeiklebnikov/2022/07/13/dow-falls-300-points-after-ugly-inflation-report-adds-to-recession-fears/">Dow Falls 300 Points After ‘Ugly’ Inflation Report Adds To Recession Fears</a>(Forbes)



<a href="https://www.forbes.com/sites/jonathanponciano/2022/07/04/inflation-may-get-much-worse-this-summer-and-could-linger-many-years-experts-warn/">Inflation May Get Much Worse This Summer—And Could Linger ‘Many Years’—Experts Warn</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/jonathanponciano/2022/06/27/unemployment-will-rise-and-extreme-price-pressures-continue-as-fed-hikes-risk-recession-sp-warns/">Unemployment Will Rise And ‘Extreme’ Price Pressures Continue As Fed Hikes Risk Recession, S&amp;P Warns</a> (Forbes)



By Jonathan Ponciano, Forbes Staff

UK Fuel Pump Prices Experience Biggest Rise In 17 Years

Inflation Spiked 9.1% In June—Hitting New 40-Year High As Price Surge Fuels Recession Fears

It’s a business that has seen blood and conflict. It’s an industry that’s blocked the streets in anger. Yet, with more than 15 million customers a day, it can make you a fortune. That’s why people in South Africa are fighting over the taxi industry.
In Johannesburg, known as the City of Gold, the taxi business can mean gold for the grandchildren… or can it? As South Africa goes through tough economic times, the owners of this industry are also feeling the pinch. Conflict is brewing. Most drivers are angry with the threat of a strike looming nearer each day.
The customers aren’t happy either. Every day, millions of South Africans move through the thousands of taxi ranks around the country. They may struggle to do so in future. Many are struggling as the cost of using taxis keeps increasing.
“If you’re looking from one where I’m from, it’s already R18 ($1.35), so that makes it R36 ($2.70) a day just to get to Johannesburg. Sometimes I catch two taxis, so we’re talking plus minus R60 ($4.50), R70 ($5.30) a day,” says a commuter at the Noord Taxi Rank, one of South Africa’s busiest.
“If the taxi fare were to go up I would cry because that means everything will go up as well,” says another.
<a href="http://www.forbesafrica.com/focus/2017/04/01/ride-taxi-driver-legal-eagle/" target="_blank" rel="noopener">A Ride From A Taxi Driver To Legal Eagle</a>
The numbers tell the story: 40% of 56 million South Africans use public transport.
Nine million people take buses, two million use trains, and the taxis get the lion’s share, with over 15 million customers a day. Sixty nine percent of all homes use minibus taxis. That’s almost a staggering 5.5 billion taxi trips every year.
In an office far from the honking horns of the streets, Sihle Mkhize is fighting for his fellow taxi drivers. Mkhize owns six taxis and is the face of the biggest taxi association in the country, Faraday Taxi Association.
“I can’t give you the exact number but we have over 3,000 taxis, because we have 114 taxi ranks and routes. Because of the capacity of the routes we have, we are the biggest association in South Africa,” says Mkhize.
<div id="attachment_33907" style="width: 511px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-33907" class=" wp-image-33907" src="https://www.forbesafrica.com/wp-content/uploads/2017/10/Taxi-594-e1508395960509-300x199.jpg" alt="" width="501" height="332" />Toyota Quantum taxis drive through Johannesburg. (Photo by Motlabana Monnakgotla)</div>
The Toyota Quantum is a four-wheeled fly in the ointment. It came to South Africa from Japan in 2006 with its price tag around R220,000 ($16,700). The government encouraged everyone to buy them to modernize the industry. By 2008, it escalated to R300,000 ($22,800), which was a worry for drivers.
“There was a complaint that because the Quantum is too expensive at R300,000, Toyota should rather build them from scratch here in South Africa. They agreed and there was a six-month period where the Quantums were out of the market. They then came back in November 2015 at a heftier price tag of R360,000 ($27,400). At the beginning of this year, in January, it was R400,000 ($30,400),” says Mkhize.
<a href="http://www.forbesafrica.com/focus/2017/06/14/time-tax-nigerias-churches/" target="_blank" rel="noopener">Is It Time To Tax Nigeria&#8217;s Churches?</a>
It’s even worse now. The Toyota Quantum is now manufactured in Durban, with its price around R500,000 ($38,000). Not too far shy of the price of a house.
“There’s no difference now, whether they assemble it here or not. We wanted Toyota to build it here so it can be cheaper; instead it’s more expensive now. It’s a burden because it now wants a R15,000 ($1,150) instalment. In our line of work, it’s difficult to increase taxi fare because we understand that the commuters using our taxis get paid next to nothing where they work,” says Mkhize.
The organization that fields these complaints in the taxi industry is the South African National Taxi Council (SANTACO). It represents more than 100 taxi associations in the Gauteng region alone, and is the biggest taxi union in the country. Ralph Jones, its Chairman in Johannesburg, is threatening to strike.
“Let us have a strike which will target SA Taxi Finance, where they were charging a lot of interest rates at 28%. Their repayments were over six years, at R15,000 ($1,150), so when you calculate that it’s an amount over R1 million ($76,000). How can you buy an asset that costs around R500,000 for over R1 million?” says Jones.
The man whose job it is to try to help people afford these taxis is David Hurwitz, the CEO of Transaction Capital, which provides financing for the taxi industry.
“Our cost of funding to our clients is higher, our offering is higher than a bank&#8217;s. Our finance would be at about 24.9%, that would be the interest rate. We are about 6% higher than a bank,” says Hurwitz.
<div id="attachment_33908" style="width: 510px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-33908" class=" wp-image-33908" src="https://www.forbesafrica.com/wp-content/uploads/2017/10/Taxi-575-e1508396103497-300x200.jpg" alt="" width="500" height="333" />Taxis in Johannesburg. (Photo by Motlabana Monnakgotla)</div>
Hurwitz says this is due to financing people who banks wouldn’t fund, which makes the risk higher. In negotiations, lower rates will come at a cost.
“What we’ve said to the taxi industry is that we will drop our rates slightly. Unfortunately what that means is that a certain segment of our customer base that typically would be able to qualify for funding, now won’t,” says Hurwitz.
<a href="http://www.forbesafrica.com/focus/2017/08/17/boom-come-fighting/" target="_blank" rel="noopener">Boom! Come Out Fighting</a>
Then there’s government. Many claim that all of this is merely government trying to phase out taxis by the backdoor.
“At the forefront of all of these issues, we are certain that this is another way that government is trying to phase out taxis. They want us to struggle paying for these cars so they can be repossessed. In order for us to be able to afford them, we have to increase prices for our passengers, who will then run away from us and go on buses, the very buses government is introducing,” says Mkhize.
“We carry the same passengers, same as buses. But because government wants to see us defeated, it puts us together with private cars on the roads and we face heavy traffic, while buses have designated lanes. All this to take away passengers from us and send them to buses, another way of phasing us out because no passenger wants to be late to work,” says Mkhize.
FORBES AFRICA made repeated attempts to get the government’s side of the story, but unfortunately these attempts proved fruitless.
It’s the biggest mover of people in South Africa, and across the continent. Millions depend on it for transport to and from work. It could be heading for chaos and conflict. A taxi strike could halt business in South Africa, losing the country billions. If not faced head-on, the industry that moves most African people could be remembered as the industry that caused all the trouble.

The Taxi Tumult

What is Nigeria’s current biggest headache? Is it Nigeria’s caustic politics? Is it the faltering economy? Or, perhaps, could it be the average Nigerian’s inertia to, and apprehension of, change?
While Nigeria’s economic fortunes have dwindled drastically over the last 18 months, its political culture has remained largely unchanged, at least subliminally. Social habits have also struggled to keep up with the emerging harsh realities of the day. Consumer Price Inflation peaked at 17.6% in August, 0.5% higher than the July rate, as the naira continued its downward slide against the United States greenback.
For the first time in living memory, Nigerians are travelling less; airlines are struggling to fill their seats. The traditional summer holiday frenzy has sizzled down considerably. Multinational firms now struggle to repatriate their earnings and profits out of the country. The squeeze on the local currency and foreign exchange transactions is hurting businesses, big and small. Demand for foreign currency remains high, even as the consumption of not-made-in-Nigeria goods and services remains at an all-time high.
The capacity to make substitute products locally remains weak as manufacturing continues to suffer against the wave of cheaper Asian products and banks who struggle to gauge and hedge against small business risks in the non-oil industries. Despite the obvious need to expand the productive base of the economy, Nigerian banks still prefer to lend big to established sectors, like telecoms, oil and gas, and real estate.
As people of wealth and influence feel the economic crunch, their capacity to spend crumbles, even as they struggle to curb their appetite for lavish living. Today’s extravagance was yesterday’s normal. With thousands already withdrawing their wards from schools and boarding houses in Europe and North America, the era of ‘big men’ flying their families abroad in business or first class is over.
“My brother, money don finish, the era of government people and big men stealing our money is over… we used to see them here every day traveling; even their babies and maids were traveling in business class… ahh, yet they will not pay us our salary on time… we civil servants are suffering. I have been working for the past 22 years, my entire pension, when I eventually retire, cannot buy a first-class ticket,” an immigrations officer lamented to me at the Murtala Muhammed International Airport in Lagos in September.
If Nigeria’s big men are feeling the economic pinch, it is safe to say ordinary folks have been wounded; their pocket power decimated by spiraling prices of household consumables. Nigerians are, however, a resilient lot. They would be much happier if only their pains were shared by their political leaders. This disconnect is the real pain for many. This is where the ethos of the structure and culture of governance is cooked. This lack of an ethical ecosystem in the Nigerian polity makes nonsense of Adam Smith’s “invisible hand” metaphor, used in describing the way in which free markets spontaneously satisfy society’s needs. Nigeria’s labor and financial markets are anything but free. Or fair.
‘Budget padding’ is the latest addition to the lexicon of Nigerian politics. Governance and the economy stalled for the first half of 2016 as the Presidency and the Legislature quibbled over ostensibly illegitimate amendments to the fiscal plan. Meanwhile, a new breed of thugs, the Nigeria Delta Avengers (old militants in new uniforms more like) sprang out of the creeks, wreaking havoc to the production schedules of multinational oil companies and curtailing gas supplies to the national gas grid. So with Brent crude selling below $60 per barrel for most, the country now struggles to produce 1.3 million barrels per day (bpd), as against its OPEC-mandated quota of 1.67 million bpd that came into effect in January.
Africa’s wealthiest man, Aliko Dangote, believes political will is needed to steer Nigeria out of its first recession in 20 years. Dangote should know. He is closer to the corridors of power than perhaps any other Nigerian businessman alive. I think this is Dangote’s veiled way of saying the extant shenanigans currently associated with the managers of the state need to stop. But this is old news.
Patience is an old and scarce commodity these days in Nigeria. Until someone goes to jail for stealing public funds, only then will Nigerians agree that President Muhammadu Buhari’s vision is not a mirage.

A Nation’s Anxiety Paralysis

Brexit was a sharp shock for the United Kingdom (UK) – Africa will feel its shockwaves in time.
According to Irmgard Erasmus, Senior Financial Economist, NKC African Economics, the biggest impact will be on forex and financial markets.
“This will primarily filter through to the real economy via the indirect impact of global risk sentiment on commodity prices, impacting the balance of payments and the monetary system, and implying that the upside risks to inflation have increased on account of exchange rate pass-through,” says Erasmus.
According to Erasmus, the African currencies most at risk from external headwinds are the Zambian kwacha, the Angolan kwanza, and the Ghanaian cedi.
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“In turn, the CFA franc zone, under the two common monetary unions (the Central African Economic and Monetary Community, CEMAC, and the West African Economic and Monetary Union, WAEMU) is implicitly vulnerable to EU developments via the impact on the euro exchange rate. CEMAC and WAEMU peg their currencies to the euro at the same rate.”
On the markets, Brexit has been felt with share prices falling and investors rushing into safe-haven assets.
According to Rian le Roux, Chief Economist at Old Mutual Investment Group, South Africa is likely to be caught in the crossfire.
“South Africa will not escape the market or economic fallout of Brexit, although the full impact will likely only become clear over time. While our financial markets will pretty much echo global markets in the short term, the medium-term impact on South Africa will be determined by the extent to which commodity prices, South Africa’s export volumes, and capital flows to South Africa, are affected,” he says.
According to Le Roux, South Africa’s already poor growth prospects will be further undermined.
As far as the direct impact of a likely recession in the UK will have on South Africa, Le Roux estimates it would be relatively small, as the UK buys only about 4% of South Africa’s exports.
“However, one area that might be negatively affected is tourism, as the UK is responsible for about 18 percent of tourist arrivals from outside Africa,” he says.
However, Old Mutual Balanced Fund portfolio manager, Graham Tucker, says they expect their clients’ portfolios to be somewhat protected.
“Within our asset allocation funds, we have been positioned lighter than usual in South African equity and listed property (collectively known as growth assets), holding significantly more cash than normal in this volatile environment,” says Tucker.
While Old Mutual has been defensively positioned, they have holdings in counters that are attractively priced and have good fundamentals, but are exposed to Brexit risk. Within the Old Mutual Balanced Fund, these include Old Mutual, Investec and, more recently, UK property company, Intu.
“We remain comfortable with these positions on a longer-term view, but there is clearly downside risk in the short term as investors grapple with the implications of the Brexit referendum outcome.”
This fund holds about 12% in South African government bonds.
“These offer an attractive real yield and in our view should provide good medium-term returns. However, they could be impacted by a selloff in emerging market assets and currencies. The initial reaction of the bond market has however been relatively muted,” says Tucker.
According to Neil Wilson, market analyst at ETX Capital, fears that Brexit would kill off deals in the UK seems to have been overblown.
“Britain is very much open for business and the weak pound is key. A lot more British firms could become foreign-owned quite soon,” says Wilson.
Steven Gamble, a banking and finance lawyer at Norton Rose Fulbright, says given its historical trade relations with Africa, he is worried about the European Union’s (EU) instability after Brexit.
“Britain is the fifth largest economy in the world. Africa is not going to be immune to this. The UK is South Africa’s fourth largest export destination so it is important. The UK is also the largest investor in the South African economy which makes it critical,” says Gamble.
According to Gamble, Ghana is looking at short-term upsides in terms of gold and Kenya is stable.
“Every year, $21 billion is remitted from the UK to Nigeria. I am interested as to why there is a lot of anxiety there because the fact that the UK has come out of the EU shouldn’t have a direct impact on remittances,” he says.
Maybe we should take Old Mutual’s advice and take Brexit as an opportunity to put cash to work and gain exposure to quality assets that are indiscriminately sold off in the panic.

Brexit Wrecks It

What happens when the world’s mighty ratings agencies downgrade your country to a non-investment grade, the dreaded so-called junk status?
High interest rates, slow growth, capital flight and inflation are some of the problems that come with a downgrade; in short, everyone from a street vendor to a corporate executive will feel the pinch.
So how does a downgrade happen?
“Ratings agencies analyse a sovereign’s performance over past economic and political cycles, as well as factors that indicate greater or lesser economic flexibility in future economic cycles, to determine the country’s creditworthiness,” says Gardner Rusike, Sovereign Credit Analyst at Standard &amp; Poor’s, one of the three big agencies.
“Sovereign ratings can improve when a ratings agency takes a forward looking opinion that an individual country has a willingness and ability to service its debt on time and in full.”
Ratings agencies, Standard &amp; Poor’s (S&amp;P) and Fitch have South Africa at BBB–, a notch above sub-investment grade, while Moody’s has the country two notches above.
Most economists say, for South Africa, junk status is a when and not an if. But for now finance minister, Pravin Gordhan, says the country is breathing thanks to Moody’s and its two notches.
“We live in a very volatile world and for us this is coupled by our own structural concerns. We should make the right noises, building consensus and confidence to attract investment from both South Africans and international investors,” he says.
Moody’s issuing South Africa’s Baa2 long-term government bond, in May, says the first driver for the confirmation was the agency’s expectation that South Africa’s economic growth will gradually strengthen after a trough this year, as the various supply-side shocks, that have suppressed economic activity since 2014, recede.
The other two agencies, Fitch and S&amp;P are expected to report on their ratings in June.
Professor Jannie Rossouw, Head of the School of Economic and Business Sciences at the University of the Witwatersrand, says junk status for South Africa was not necessarily inevitable.
“Politicians have a tendency to make reckless statements in an election year. As for South Africa, it matters what will happen in the forthcoming municipal elections and how the Independent Electoral Commission will conduct the August 3 municipal polls. We also need the right policies, such as on immigration, media freedoms, as investors require information to make investment decisions,” says Rossouw.
Hanns Spangenberg, Senior Economist at NKC African Economics, says while a drop to junk status could have significant implications for the South African debt market, much of the damage has already been done.
“In fact, according to our model, South African bonds (rated BBB-) are currently priced between a BB+ and a BB-rated bond (i.e. one to two notches lower than its actual rating). This indicates that a downgrade to junk status has already been priced in,” he says.
He says it may not be that bad.
“While a downgrade will probably have some effects, we do not anticipate massive capital outflows from South Africa if the country’s rating is downgraded to junk status, not as a direct result of the downgrade, and not significantly more than the emerging market sphere is already facing this year.”
Rossouw says South Africa needs decisive government action.
“There has been some actions from the government that could trigger ratings downgrade, this include the cabinet reshuffle of 9 December, 2015 (when the country had three finance ministers in four days). We can’t afford such irresponsible actions. Government should stick to its budget and should not borrow more than what is budgeted for.”
South Africa’s Deputy President, Cyril Ramaphosa, warns of hard times if there is a downgrade.
“South Africans have taken the bull by the horns and they are doing as much as possible to try to move the needle in the right direction. We should not be downgraded. We are very positive and robust, clearly we are doing as much as we can,” Ramaphosa told Eyewitness News.
If downgraded, South Africa will join Russia, Brazil, Bulgaria, Greece, Indonesia, and Turkey. It will mean these countries – facing economic headwinds and struggling to lure investment – will have a new competitor from the southernmost tip of Africa.

The Junk Dunk

Nigerians are currently hard at work. What sort of work, you might ask? Economic reconstruction and the quest for social and political rebirth. The new sheriff in town seeks to sweep the dregs of a shattered polity into the cesspit of history. Clearing the skeletons and cobwebs of the past is, however, proving to be a delicate dilemma for the good people and managers of the Nigerian nation.
Grappling with sluggish growth, dwindling external revenues, double-digit inflation and a prolonged currency constipation, Nigerians must now wrestle with the seen and unseen forces of corruption and ineptitude, the gods of inertia and impunity, and the innumerable anti-development demons in its social democratic space.
A nation which was once embroiled in a two-and-a-half-year civil war in the 1960s, without borrowing a dime and without experiencing a run on its national currency, now finds it difficult to maintain a healthy balance sheet in peace time. No doubt, Nigeria has earned its spot in global economics by virtue of its position as Africa’s largest economy. This status will, however, not produce social harmony, wealth and economic growth for Nigerians.
Nigeria’s one-year-old government continues its search for the Chibok girls (#BringBackOurGirls), abducted two years ago from their school in the north east of the country. President Muhammadu Buhari has embarked on a global search for the country’s missing money, embezzled by past leaders and cronies of previous governments. Currently struggling to wean itself off crude oil addiction and diversify its productive base, it’s taken almost a year for the president and his All Progressives Congress (APC) party to begin to translate their social and economic agenda into a “SMART Framework”.
In what seems to be a blueprint and agenda-setting address to selected private and public sector leaders during a National Economic Council (NEC) retreat in March, the president listed agriculture, solid minerals and infrastructure investments as the fulcrum of his agenda, with national targets for self-sufficiency in tomato paste production by 2016; rice production and milling by 2018; and wheat by 2019. He also introduced a new phrase into the lexicon of governance: “import competition”, where states focus on growing selected crops in which they have natural comparative advantage.
These confidence boosting steps notwithstanding, Nigerians are increasingly wary of the future. They have come to terms with that fact that the path to the future is riddled with dead promises.
On the political rostrum, campaigning for votes between 2014 and February 2015, APC big wigs made numerous promises to Nigerians. Granted this was all done in the heat of politicking, Nigerians now want the current Lords of Aso Villa to quit blaming previous administrations and simply execute their well-intentioned strategies.
The president has been blamed for not ‘radicalizing governance’ fast enough, which was one of the reasons Nigerians voted for his party. He has also been blamed for reneging on a campaign promise to provide a monthly allowance for unemployed youths. The APC’s manifesto also promises to: “create additional middle-class of at least two million new homeowners in our first year in government and one million annually thereafter; by enacting a national mortgage system that will lend at single digit interest rates for purchase of owner occupier houses.”
Good idea. But have two million new homes been built in the last year?
In just one year, the national mood has swung from politically-induced hope to a calm and unnerving anxiety about “personal survival in a regressive system” as it becomes increasingly clear that things will get worse – for much longer – before they become better. Thankfully, Buhari has also said this much, as he pleads for patience against the growing wave of disappointment and despondency.
So, El Nino has finally caught up with the nation’s 2016 fiscal budget, as GDP growth for the 2016-2017 period is likely to remain below 3%, according to the IMF, unless of course global crude oil prices shoot up to $100 per barrel.
This is very unlikely, observes Bismarck Rewane, renowned economist and CEO of Financial Derivatives Ltd.
“That era is gone for good. The chickens (of decades of economic profligacy) have come home to roost. We are now going into a likely prolonged phase of belt tightening,” he told members of the Harvard Business School Association of Nigeria recently.
The smart, hard, work must go on.

Recalibrating Expectations

With an 18% unemployment rate, Botswana is the largest producer—by value—of diamonds, the country’s main source of income, and one of Africa’s fastest growing economies. It has come a long way since its independence in 1966.
Botswana has recently been commended by the African Development Bank (AFDB) for maintaining good economic growth and healthy foreign reserves. The country’s fiscal discipline has raised it to middle income status.
With a GDP of $14.4 million, the International Monetary Fund (IMF) has projected GDP and inflation growth at 3.9% and 6.8%, respectively, for 2013 and 4.1% and 5.8% for 2014.
The country’s main exports are diamonds, copper, nickel and beef. The discovery of alluvial diamonds in the late 1950s has played a large role in the country’s development. Botswana has achieved what many countries in Africa have longed to with their natural resources; ensuring its citizens benefit from their country’s riches.
Debswana, an equal partnership between the government and diamond company De Beers, began in 1978. De Beers has moved its operations and $6 billion-a-year worth of sales to the country. De Beers’ sites have been moved to Gaborone and a new 10-year sorting, valuing and sales contract was secured. The government is looking to turn Botswana into a major international center. The subprime crisis that rocked the world shrunk the country’s diamond revenue.
The country’s rule for new mining investments is that 15% of the company needs to be offered to local investors on the same terms as foreign ones. If the locals do not take up the offer, the companies are free to commence with business as usual.
Pangolin Diamonds recently announced it had discovered one of the largest known kimberlite pipes—a rock formation in which diamonds are formed—in the world at its Tsabong North project.
Botswana cites low inflation, low corruption, a stable economy and investment protection as some of its attractive qualities when courting investors. Investment opportunities lie in manufacturing, information technology and tourism.
It takes 61 days and 10 procedures to start a business in Botswana, and ranks at 56 on the ease of doing business index. The country has increased the profit tax rate; corporate tax is 15%, value added tax (VAT) is 10% and the country has no foreign exchange controls.
Botswana was number 59 on FORBES’ ‘Best Countries for Business’ 2012 list. Credit ratings are stable, with an A- from Standard &amp; Poor’s and an A2 from Moody’s.
Botswana is a member of the Southern African Customs Union (SACU), Southern African Development Community (SADC), enjoys the benefits of the African Growth and Opportunity Act (AGOA) and the Interim Economic Partnership Agreement (IEPA) between SADC and the EU.
Near the Sir Seretse Khama International Airport lies the Botswana Innovation Hub. The country is hoping to attract domestic, regional and global companies. The hub will focus on the biotechnology, energy and environment, information and communications technology and ICT enabled services, as well as the mining technologies sectors.
With a history of having one of the highest infection rates in the world, and one of the most advanced HIV/Aids treatment programmes on the continent, a study by Botswana’s National AIDS Coordinating Agency has recorded a 71% decline in new HIV infections since 2001, thanks to increased knowledge and condom use.
Amid all the advances that Botswana has made, it is currently facing some controversy. A court battle against the government began in 2003 after the government began relocating the Kalahari Bushmen population to settlements.
London-based Survival International has called for a boycott on Botswana tourism as a stance against how the Bushmen are being treated by the government. There is concern over Spain’s king, Juan Carlos, being allowed to shoot elephants in the country while the Bushmen are prevented from hunting, a way of life for them. They are also prevented from digging for water in the reserve, but Wilderness Safaris was granted permission to dig boreholes for water, supplying a swimming pool. Botswana is facing a severe water shortage due to receding dam levels caused by drought.
The British lawyer defending the Bushmen’s rights has been barred from returning to Botswana.
On a governance front, the 2013 Ibrahim Index of African governance, compiled and published by the Mo Ibrahim Foundation, ranked Botswana second out of 52 countries.
The president is selected by the party that wins 29 of the 57 parliamentary seats through proportional representation system. Parliament rejected a call for the people to vote for the president in 2008. The ruling party, the Botswana Democratic Party, has been in power for the last 46 years.

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