Tag Archives: economy
Africa’s Farmers Seek Private Money
By Busani Bafana [ Sweetpotato farmer Jose Ricardo in Maputo Mozambique. Africa currently imports almost 40 billion dollars worth of food, and experts say that the continent needs to become more self-reliant. Credit: Busani Bafana/IPS Africa currently imports almost 40 billion dollars worth of food a year, but it should implement measures to attract private sector investment in agriculture in order to reduce its food import bill and increase its self-reliance, experts in the sector tell IPS. “In the next 10 years, African countries should not rely on food aid, but should produce their own food and buy from within Africa when they run out of food,” agriculture researcher and director of the Barefoot Education for Africa Trust, Professor Mandivamba Rukuni, told IPS. “The biggest trick is the private sector putting more money into agriculture. There is nowhere in the world today where you can get the government or industry moving if government and the private sector are not working together.” — agriculture researcher, Professor Mandivamba Rukuni “Food self-reliance means wealth creation and farmers should be directly linked to markets. More people will have more money in their pockets if more smallholder farmers are farming profitably, and this can be done,” Rukuni said. African countries, according to an Alliance for a Green Revolution in Africa (AGRA) African Agriculture Stats Report launched in Maputo, Mozambique’s capital, on Sep. 4, produced 157 million tonnes of cereals and imported 66 million tonnes in 2010. In August, the Forum for Africa Research in Africa put the continent’s current food import bill at more than 40 billion dollars, money it said would be better spent enabling African farmers to become self-sufficient. African heads of state and government committed themselves to improving agricultural and rural development in Africa in the Maputo Declaration of 2003. It includes the ambitious goal of governments allocating at least 10 percent of national budgets to agriculture and rural development. But in the last 10 years, only a few of the 54 African Union (AU) member states have made this investment. These include Burkina Faso, Ghana, Guinea, Mali, Niger and Senegal. A further 27 have developed formal national agriculture and food security investment plans under compacts. Compacts are a result of country roundtables that bring together key players in agriculture to agree on investment priorities. Currently one of the few countries prioritising investment in agriculture is Nigeria. In that West African nation, the government developed the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), which seeks to reduce the risk in the agricultural finance value chain by building long-term capacity and institutionalising incentives for agricultural lending. The goal of NIRSAL is to expand bank lending in the agricultural value chain. Nigeria’s minister of agriculture and rural development Akinwumi Adesina told IPS that Nigeria was leveraging 3.5 billion dollars for agriculture from local banks. The government is shouldering the risk in a bid to attract the participation of the private sector. “We are developing an approach for the private sector to have access to finance because without finance you cannot do much,” Adesina told IPS. “We are working on new financing instruments that will allow our capital markets to work for agriculture. Agriculture accounts for 44 percent of our GDP and 70 percent of all employment but it has only two percent of all bank lending in Nigeria.” Meanwhile, Rukuni told IPS that while most African countries have not been able to commit 10 percent, they have seen the wisdom of doing so. “Although 10 percent is a nice figure to talk about, it is not a magic figure. What is more important moving forward is catalytic public financing, where government, its experts, farmers and private sector work together and really understand here it is important for government to invest to trigger private sector investment,” Rukuni said. Citing China, India and Brazil as examples of public-private partnerships at work, Rukuni said it was time for Africans to understand that there is no competiveness in agriculture without governments and the private sector setting joint targets in infrastructural development, for instance. “The biggest trick is the private sector putting more money into agriculture,” he said. “There is nowhere in the world today where you can get the government or industry moving if government and the private sector are not working together.” The AGRA report notes that despite having over 70 percent of prime uncultivated land, land holdings in Africa continue to shrink. This shrinkage has impacted on the productivity of the 33 million smallholder farmers responsible for up to 90 percent of the continent’s agricultural output. The alliance estimates that a one percent growth in agriculture will increase the income of the poor by more than 2.5 percent, yet only 0.25 percent of bank lending in the Common Market for the Eastern and Southern Africa region goes to smallholder farmers. AU Commissioner responsible for agriculture and rural development, Rhoda Peace Tumusiime, told IPS that investment in African agriculture has become more urgent than before and this was reflected in the political movement towards the development of national agriculture plans as proposed under the Comprehensive Africa Agriculture Development Programme (CAADP) framework of eliminating hunger and reducing poverty. “The 70 percent of the population who depend on agriculture is a big figure, so if we focus on improving the situation of this 70 percent, poverty will be eradicated. We do not want a situation where the economies are growing but agriculture is not,” she said. In a March 2013 report, “Growing Africa: Unlocking the Potential of Agribusiness”, the World Bank projected African agriculture would top a trillion dollars in 2030 on the back of increased domestic and international demand for food. The bank also urged African governments to improve their agriculture policies and promote agribusiness as a driver of growth. Abraham Sarfo, agriculture, technical and vocational education advisor at the New Partnership for Africa’s Development, told IPS that agriculture used to be part of dual development planning but was now on the continental agenda through the Africa-driven CAADP agenda of eliminating hunger and reducing poverty through agriculture. “A sector that contributes over 30 percent of the economy of a country and is still at subsistence level shows how it is underdeveloped compared to mining or ICT that attract the private sector,” Sarfo told IPS. He called for the increase of innovative financing models that will remove risk in agriculture investment to attract the private sector. Phillip Kiriro, president of the East Africa Farmers Federation, which represents about 200 farmer bodies told IPS that access to critical inputs and better technologies has slightly improved in the last 10 years but governments still need to help farmers live off their land. Continue reading
Indian rupee, stocks jump on new bank chief’s plans
Indian rupee, stocks jump on new bank chief’s plans (AFP) / 5 September 2013 India’s rupee strengthened and stocks jumped on Thursday after new central bank governor Raghuram Rajan outlined a reform plan aimed at boosting investor confidence and stabilising the ailing currency. Raghuram Rajan, second left, the newly appointed governor of Reserve Bank of India, is received by its Deputy Governor Kamalesh Chandra Chakrabarty, second right, and others as he arrives at the RBI headquarters in Mumbai, India. AP The rupee climbed to 65.75 against the dollar, gaining nearly two percent from its previous close, on investor hopes the worst could be over for the currency, the worst performing in Asia this year. Indian shares jumped as much as 2.96 percent at the open, led by banking stocks, after Rajan took over Wednesday from Duvvuri Subbarao as head of the Reserve Bank of India (RBI). In the afternoon stocks were up 1.51 percent. Rajan sought to reassure rattled markets with his first speech in the post, outlining a fresh approach to the currency crisis and warning that he may have to take unpopular steps to get Asia’s third largest economy back on track. Sonal Varma, an economist at Nomura Securities, said Rajan had made “an impressive start” but she stressed that a weak growth outlook was still a “major concern”. “In our view, amid the current gloom, the new RBI governor has infused a sense of optimism that he is in charge and that the RBI under him will unleash more financial sector reforms, a medium-term positive for the economy,” she said. Rajan, a former IMF chief economist, emphasised the importance of transparency and consistency in the bank’s actions, after the RBI spent weeks trying to stabilise the rupee with a range of measures. He stressed he would hew to the RBI’s mandate of “securing monetary stability” and sustaining confidence in the value of the country’s money. “This means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or demand pressures,” he said. India faces its worst financial crisis in decades, as the once-booming economy grapples with sharply slowing growth, high inflation and a record current account deficit. Some analysts fear the economy could be heading for a meltdown with the rupee down around 22 percent against the dollar this year. Rajan’s bold entry to the job, which included financial deregulatory measures such as opening up the country’s banking sector, received rave reviews from economists and the local media. “This was easily the most substantive speech by a Reserve Bank governor on his first day in office,” financial daily Business Standard said on Thursday. With a mock photograph of Rajan in a James Bond-style pose on its front page, The Economic Times newspaper said he had “gotten off to a good start, radiating brisk purpose and optimism”. Rajan, famed for forecasting the 2008 global financial crisis, left his post as a professor at the prestigious University of Chicago’s Booth School of Business and returned to India last year before taking up the new job. Continue reading
Unhappy Ending For Indonesia Growth Story
http://www.ft.com/cm…l#ixzz2e0gkByv7 Indonesia’s decision to follow Brazil’s lead by raising interest rates at an extraordinary central bank meeting on Thursday temporarily took the sting out of the recent market slide, with the rupiah appreciating against the dollar and the stock market closing in the black. But the global emerging market turbulence , which has also hit Brazil, India, South Africa and Turkey, is unlikely to abate until the US Federal Reserve clarifies its plans to curb its quantitative easing programme. Over the next three months, many emerging market investors will be focused on how quickly the Fed withdraws liquidity from global markets, says Melvin Boey, southeast Asia strategist for Bank of America Merrill Lynch. On a longer-term view, investors and companies in Indonesia are starting to adjust to the fact that, as and when the dust settles, they are unlikely to see a return to the heady economic growth of the past five years, which was pumped up by the US liquidity surge and high prices for Indonesian commodities such as coal, palm oil and rubber. For companies, this “new normal” will mean lower profit margins and higher borrowing costs. For investors, the key question is: how much will growth slow and at what level will asset prices start to look attractive again? “A year ago, we still had high expectations for Indonesia but not now,” says one trader at a London investment bank. “Companies earnings are topping out and the country is moving into a slower cycle, with an election coming up next year as well. But there is a price level at which we’d come back in.” Until earlier this year, Indonesia was seen as one of the world’s hottest emerging markets, with a decade of robust economic growth, a large and fast-growing middle class and plentiful natural resources. The euphoria surrounding southeast Asia’s biggest economy sent the prices of Indonesian assets soaring to record levels. But since the value of the rupiah started falling rapidly in May, subsequently losing 10 per cent of its value relative to the dollar, the equity and debt markets have suffered a major sell-off. The benchmark Jakarta Composite index of shares has fallen by more than 20 per cent since May, when it hit an all-time high, having increased in value by 4.5 times since its global financial crisis nadir in November 2008. The yield on Indonesia’s rupiah-denominated, 10-year government bonds has jumped to well over 8 per cent from a record low of 5.2 per cent at the start of this year. “The central bank should have started tightening monetary policy earlier but the debt looks interesting at these levels,” says a fixed income fund manager in New York. The bank increased its main benchmark lending rate by 50 basis points to 7 per cent on Thursday. After such an extended boom, a correction is hardly surprising. But most analysts believe the fundamentals in Indonesia and other emerging markets are changing. Regardless of when the Fed starts “tapering” its stimulus programme, the economy is likely to slow in Indonesia, says Taimur Baig, chief southeast Asia and India economist at Deutsche Bank. He predicts annual GDP growth could ease to “around 5 per cent” rather than “around 6 per cent” in the next few years. Some Indonesian companies such as Mitra Adiperkasa , a large retail group that has been popular with foreign investors, have already warned their profit margins are being squeezed and are scaling back their expansion plans, for the first time since the global financial crisis. And valuations are not obviously cheap. The Indonesian stock market’s 12-month forward price/earnings ratio of 11.9 makes it more expensive than China (8.5), South Korea (8.2) and Thailand (10.6), but cheaper than India (12.5), Singapore (13.1) and Malaysia (14.4). However, operating profit margins in Indonesia remain among the highest in the region, averaging about 20 per cent, compared with 15 per cent in India and 10 per cent in China, according to Herald van der Linde, HSBC’s chief equity strategist for Asia. “Across the region, all countries are seeing margin pressure but in Indonesia, the margins are higher than elsewhere and the speed at which they come down will be slower,” he says. In any further sell-off, Indonesia could also be cushioned relative to other Asian markets by the fact that many international fund managers have already turned underweight on the country, says Mr van der Linde. By contrast, many still have an overweight portfolio position on India, which is suffering from a deeper macroeconomic malaise than Indonesia. Mr Boey of BofA believes some investors are waiting for the right time to start buying stocks that have been sold off unfairly. “The telecommunications and media sectors stand out from a short term perspective because they have seen a big sell-down, despite the fact that their fundamentals will be immune to what is happening right now as they are not affected by the fluctuating rupiah,” he says. But while there are some brave stock pickers, most international investors want to see more concrete action from emerging market governments before they pile back in. “For me to pound my fist on the table about Indonesia, I’d like to see a turning point in the data, like the current account deficit starting to narrow,” says Mr Boey. Continue reading
