FORTUNE+ VIDEO SPONSORED CONTENTS ADVERTORIALS FORTUNE AUDIO Fortune Careers New TRADE AFRICA New

Fortune Logo

Month: February 2022

Common Framework: Not Do or Die

Posted on by Web Master

Double-digit GDP growth for over a decade has not come without costs. The hope was that investments in infrastructure would pay for themselves in time. Unfortunately, export revenues lagged so significantly over the last decade, especially compared to GDP growth, that the country has an unhealthy foreign currency reserve that makes debt settlement hard.

And then COVID-19 happened. Now, the end game is near. The administration of Prime Minister Abiy Ahmed (PhD) has to find a way to pay back an estimated 1.9 billion dollars this year in debt installments. About 66 million dollars of this is interest on the billion-dollar Eurobond maturing in 2024.

Some economists believe that the fate of the economy over the next few years rests in the hands of the G20 Common Framework debt relief initiative, which can lead to the restructuring of the country’s debt.

How does it work?

The Common Framework is the more extreme cousin of the Debt Service Suspension Initiative (DSSI), put in place shortly after the COVID-19 became a global pandemic and wrought an economic crisis. Countries eligible for the DSSI, the poorest worldwide, could apply to pause debt service. Ethiopia did, like many other countries around the world. Unfortunately, the DSSI ended last December even though every estimate shows that the recovery of developing countries will be slow relative to the industrialised world.

But a small opening was left. It was given an uninspired name, the Common Framework for Debt Treatment beyond the DSSI, a harbinger of the neglect that would be afforded to countries that apply to it. It will allow countries to seek further restructuring of stressed debt, leading perhaps to debt service suspension and extension of maturities.

The IMF is warning that unless the process for countries that apply for the Common Framework – currently, Ethiopia, Zambia and Chad, but maybe more this year – there could be a wave of debt defaults in emerging markets and low-income countries.

Debt default is terrible but neither is the Common Framework as unproblematic as it sounds. It does not merely seek to restructure debt owed to multilateral institutions and bilateral lenders but also private creditors. This is hard to swallow for credit rating agencies such as Fitch, which consider treatment under the Common Framework no less than default.

The best-case scenario would be to receive clarity that private creditors would not be affected. For whatever reason, though, this has not been forthcoming. Without building up this confidence, further engagement in the Common Framework is agreeing to what amounts to default and thrashing further Ethiopia’s credit rating. It will not help to cry about it later like Ghana is doing now with a credit rating downgrade that seems suspect.

Anything less than clarity on how private creditors will be affected, Ethiopia should look elsewhere to address its debt stress. Things are not as bleak as they look without the Common Framework, especially if the government plays its hand with the long term in mind.

Some of the good news could be a result of good luck. Fuel prices may come down, but the war between Russia and Ukraine will mean the complete opposite. Coffee prices may also be high going into the next year, depending on how fast production in Brazil picks up. The government needs to sustain the impressive growth in coffee exports this year by increasing exporters’ foreign currency retention to incentivise production. The windfall will not be around forever. More IMF special drawing right (SDR) allocations could also come Africa’s way, and some of it would trickle down to Ethiopia, if developed countries are willing to donate their share. The initial allocation will help the government service debt this year. More of it will not hurt.

Within the capacity of the government to address the macroeconomic situation is to build up foreign currency reserves. One positive already is that COVID-19 is retreating. This is good news for the hospitality sector and the most significant source of foreign currency for the country, Ethiopian Airlines. We need to build on this by bringing back peace to the country. It does not mean that 100 million people hold hands and sing Kumbaya anytime soon. But, for the economy to return to peak condition, the state of war needs to be ended.

A less precarious political situation would have one more benefit. It makes it possible to accelerate reform in the telecom sector. Some 40pc of Ethio telecom’s shares need to be sold this year before Safaricom Ethiopia decimates its market leadership. A second telecom player buying in would further consolidate the foreign currency reserve.

If the government plays its hand right, COVID-19 does truly retreat and some things turn out in the country’s favour (more IMF SDR allocation to Africa, high coffee prices into next year or low fuel prices), Ethiopia can do without a faulty Common Framework.

Easy for Schools to Label. Terrible for Everybody Else

Posted on by Web Master

There are always memorable moments from our time in school. One of those, for me, was when we were first introduced to the mind-boggling (pun intended) anatomy of the human brain and its major constituent parts. Being aware of our discerning struggle to distinguish the cerebellum from the cerebrum, our teacher alluded to what he had thought was a hallmark of what happens to people if the frontal lobe was affected. He was our fifth-grade science teacher, ever lustrous, courteous and fatherly.

He asked if someone in the classroom had noticed a particular person near our school, which was around Mesqel Square. No one had but me. He was a short, bald and wiry man, who was used to relentlessly walking up and down the streets not far from our school.

Our teacher portrayed him as someone who is “off his rocker” and mentally unbalanced. Amidst the man’s muscular look, it was apparent he had seen better days. Encouraged by his appreciation of me in noticing the man, I asked if there are things we can do to prevent this mishap. He vehemently, with a stern scientist look, alleged that it is very difficult to correct if a person is “once touched” in the head.

However, out of empathy, a friend’s father took the man in and helped him get medical help. He ended up being an employee in his maintenance workshop. Our teacher was wrong. No doubt, mental conditions that are biological do exist. Still, for the man on the streets, it was the poor luck of failing to find an environment that accommodates the diversity of behaviours and personalities, not an incurable brain dysfunction. It is an indictment of how certain scientific analysis fails to recognise the importance of empathy and why it is possible for people to adapt and grow.

There was a mother-daughter team in the 1920s that seemed to have ventured otherwise, Katherine Briggs and Isabel Briggs Myers, a pair of writers, who gave birth to their brainchild building on the writings of Carl Jung, a notable psychologist. Slowly but surely, with a “life of its own”, their work triumphed to being an important accessory in the study of psychology and organisational behaviour.

It is reported that the Myers-Briggs Type Indicator, the most popular personality test in the world, is now applied in a range of institutions from Fortune 100 companies, universities, hospitals, and churches, to the military, with its concepts of extraversion versus introversion and thinking versus feeling reaching the mainstream.

This was reminisced with a discussion I had with a long time friend, to whom the Myers-Briggs test is synonymous with the style of management at the company that employed him. He took the test but to his detriment. He was deemed as not having what it takes to be promoted amidst the annual human capital optimisation assessments.

The criticism to Myers-Briggs is that the labelling of live human beings emerged as one technique for annihilating individuality – for treating people as interchangeable and sometimes disposable. This is true. Human beings are unique precisely because they are hard to “type cast” and can exhibit behaviours that are so diverse that some may assume some biological ill may have befallen them, like my fifth grade teacher did.

We need to develop empathy, which is not a mystical phenomenon but a natural, innate ability that we can strengthen and nurture, as the same holds true to the other arts or learnable skills. Therefore, it is high time that we start to learn them at school instead of flattening human behaviour into a static, predetermined set of traits. We are not robots, after all.

Africa’s Unfinished Trade Agenda

Posted on by Web Master

The African Continental Free Trade Area (AfCFTA), which entered into force on January 1 last year, promises to accelerate the diversification of the region’s economies and reduce the impact of commodity-price cycles on growth. Whereas Africa’s external trade is dominated by primary commodities and natural resources, the first shipment under the AfCFTA – from Ghana to South Africa – comprised manufactured goods of the sort that largely drive intra-African trade.

Many therefore hope that the AfCFTA – by creating a single market of 55 countries with a total population of more than 1.3 billion and a combined GDP of 3.4 trillion dollars – will catalyse industrialization as firms take advantage of economies of scale to spread the risk of investing in smaller markets. To that end, the trade agreement will eliminate tariffs on 90pc of goods (the ultimate goal is 97pc liberalisation).

The AfCFTA will likely boost foreign direct investment across Africa – empirical evidence elsewhere shows that joining a free-trade area could increase it by around a quarter – and shift its emphasis from natural resources toward labour-intensive manufacturing industries. Moreover, the pact has the potential to transform African economies, significantly increase the continent’s share of global trade, and strengthen its bargaining power in international trade negotiations.

But while many have touted the AfCFTA as a game-changer for Africa, trade liberalisation alone will not necessarily guarantee economic success.

To be sure, the agreement has rightly attracted much attention in academic and policy circles. The World Bank, the International Monetary Fund, the United Nations Conference on Trade & Development, and the African Export-Import Bank have all compiled extensive studies on the AfCFTA’s potential impact. And the Journal of African Trade recently published a special issue on “The AfCFTA and African Trade,” which I co-edited with Andrew Mold of the UN Economic Commission for Africa.

All these analyses point to the agreement’s significant and positive impact on economic development. Specifically, the empirical results according to computable general equilibrium models – which allow for trade-diverting and trade-creating effects of tariffs and non-tariff shocks by exploiting countries’ comparative advantage and price adjustments – are highly encouraging. Aggregate headline estimates derived from these models show that the AfCFTA would increase Africa’s GDP by 0.5pc after full implementation in 2045, relative to a scenario without continental trade integration.

Real wages would increase for both skilled and unskilled workers, and especially for the latter, suggesting a shift toward more inclusive growth. The World Bank estimates that the AfCFTA could lift 30 million people out of extreme poverty and around 68 million out of moderate poverty by 2035, with women benefiting more than men. Trade integration could also have a significant impact at the household and corporate level: Combined consumer and business spending is projected to reach 6.7 trillion dollars by 2030.

Trade within Africa is expected to grow strongly under the AfCFTA, with intracontinental exports increasing by 34pc (equivalent to around 133 billion dollars annually) compared to a scenario without the agreement. Moreover, around two-thirds of intra-African trade gains will likely be realised in the manufacturing sector – historically the most effective elevator out of poverty. This would set the stage for a welfare-enhancing and mutually reinforcing relationship between intraregional trade and industrialization, resulting in the sustainable growth of well-paid manufacturing jobs while broadening countries’ tax bases and improving their external accounts.

But substantial non-tariff barriers, regulatory differences, and divergent sanitary, phytosanitary, and technical standards increase the costs of cross-border trade within Africa by an estimated 14.3pc, well above the average tariff of 6.9pc. Removing these constraints and deepening the integration of African businesses into global value chains will significantly boost intra-African trade and drive growth. The World Bank estimates that full implementation of the AfCFTA could raise Africa’s real income by seven percent (about 450 billion dollars) by 2035, with trade facilitation measures to cut red tape and simplify customs procedures responsible for 292 billion dollars of this increase.

Overcoming Africa’s chronic infrastructure deficit – both physical and digital – will boost the power of trade creation and help to ensure the successful implementation of the AfCFTA. By tackling the continent’s supply-side constraints, policymakers can enhance both production and logistics in a region with more landlocked countries (16) than any other. As investors seek to capitalize on the economies of scale offered by the AfCFTA, integrating markets and improving connectivity must be a top priority.

Clarifying the AfCFTA’s rules of origin – which determine whether products are duty-free under the agreement – also is key to accelerating industrialisation and the development of regional value chains. Despite the challenges posed by COVID-19, negotiators have made significant progress on the rules-of-origin agreement, which should be concluded later this year. That will pave the way for phase-two negotiations on key drivers of future growth, including protocols on investment, competition policy, and intellectual property rights.

But, as the rush to conclude bilateral trade agreements with third-party countries suggests, Africa’s most important trade-integration challenge may be the perennial one of putting the region’s collective interest first. Although the AfCFTA does not bar member countries from entering such negotiations, bilateral deals with third parties could affect African trade patterns and set precedents for regional trade and investment rules. In practice, they could lead to trade deflection, given that the AfCFTA’s most-favoured-nation clause automatically extends tariff concessions granted to a third party to AfCFTA members.

As Jeffrey Sachs has argued, “Without a doubt, if Africa becomes economically integrated, it will be a global leader and the largest economic region in the world.”

As of this writing, 41 countries have ratified the AfCFTA. But if the pact is to become the launchpad for Africa’s deeper integration into the global economy, governments must complement trade liberalisation with robust trade facilitation measures, and strengthen regional coordination in order to engage with external partners as a unified trading bloc.

The Challenge of Convergent Crises

Posted on by Web Master

Climate change is not the only slow-moving crisis to reach a tipping point thanks to corporate greed, individual bad behaviour, a stalemate in international negotiations, and a prolonged lack of any sense of urgency on the part of publics and policymakers. The same factors also have contributed to a dramatic rise in antimicrobial resistance (AMR).

The extent of the threat to human health posed by AMR can hardly be overstated. Already, the loss of antibiotics’ potency or effectiveness contributes to nearly 1.2 million deaths annually. That is more than either HIV or malaria.

Some scholars have noted the similarity of the difficulties in addressing climate change and AMR. But so far there has been little discussion about the damage caused by the convergence of these crises.

Around the world, people who live in urban slums face the combined challenges of climate-related pressures and drugs that no longer work. Even where there is no government monitoring of drug-resistant infections, local doctors in these communities notice the problem. Resistant strains of bacteria develop in these areas due to the widespread availability of substandard drugs, the overuse of antibiotics, and the confluence of sewage and drinking water.

Some reports suggest that climate change leads to changes in disease dynamics and drug resistance. While more research is needed to establish the connection, it is already clear that climate change forces people to move to places with high population density, increased poverty, and limited sanitation.

These environments are ideal for drug-resistant infections to emerge. In fact, some of the most serious outbreaks in the recent past have surfaced in polluted, low-income urban environments in South Asia.

It is no coincidence that poor communities suffer the most devastating effects of climate change, or that drug-resistant infections are likely to affect lower-income groups disproportionately. But climate change is not the only global problem that contributes to the growth of AMR in disadvantaged communities.

While there is some evidence (albeit limited) of a correlation between climate change and conflict, the link between conflict and drug-resistant infections is well established. Conflict overwhelms hospitals and makes treatment inaccessible. It also poisons the environment and allows new strains of bacteria to breed. Communities in conflict zones have a high risk of infection and a low likelihood of receiving appropriate antibiotics.

Microorganisms like Iraqibacter, which emerged after the second Gulf war, are a reminder that conflict remains a potent and underappreciated driver of multidrug-resistant infections. Once again, its effects are felt most by those who are vulnerable and unable to move to a safer place.

If there is reason to believe that climate change and conflict are linked, it is safe to assume that communities affected by these crises also will be affected by a disproportionate burden of AMR.

As with climate change and conflict, those most at risk from antibiotic resistance are rarely part of the discussion about how to confront it. The action plans drafted in global capitals are disconnected from the realities on the ground. For example, small-scale farmers in Pakistan are aware that most of the available antibiotics no longer work for their cattle or poultry, but they do not know what to do about it. And the authorities make no effort to engage them to develop a viable solution. Left with few options, these farmers continue to increase the doses they administer or create their own medical cocktails from available drugs.

A truly global effort on AMR, fully funded and supported by policymakers at all levels, is long overdue. Recent studies provide the necessary data to bring the issue to the forefront of international discussion. But, after more than two years of the COVID-19 pandemic, there seems to be little interest in taking on another global health crisis.

Perhaps one way for the fight against AMR to gain momentum is not to talk about the pathogens alone, but to raise awareness of the combined effects of climate change, conflict, and AMR on people and the planet. The convergence of these crises poses a significant threat to the health of both.

 

Homelessness,Bottled Water, Drama!

Posted on by Web Master

It is hard to ignore the rising number of homeless children on the streets of Addis Abeba. They are often running around begging for someone to buy them bread. It feels bad when we cannot give them anything. It is an indictment on our society that we cannot address the crisis of children going hungry.

For the most part, we tend to ignore them or perceive them as threats that could steal. I have seen some trying to steal. A passenger sitting by an open window in a taxi is a prime target. One time, a small boy attempted to grab this lady’s bag and run. It is unfortunate that they have been dragged into crime at such a young age. It is more heartbreaking to see them smoke and sniff glue to keep warm.

These days, more of them are asking for a bottle of water and, oftentimes, people oblige them.

Sometimes, I give them a bottle of water. Other times I do not. This is because I need to take a bottle of water to work. Since my bag is too small to fit a container for a litre of water, I need to hold it in my hands when I commute. I also get thirsty walking in the sun; I am one of those people who cannot walk a mile without sipping water. Making matters worse, there may not be a kiosk nearby to buy bottled water if I give up the one I bring with me.

Thus, when children or youth on the streets ask me to give them water, I tell them that I need it. I feel bad, but I do not have a choice. I prefer to give them change if I have it.

“Really, you can’t give us that,” is the look they often throw back at me.

I try not to look at them; if I do, I will end up giving them my bottled water out of guilt. But sometimes, the exchange turns into something else. The other day a woman who is probably in her late twenties asked me to give her my bottle of water. I refused as politely as possible, but she insulted me. It was rude and inappropriate.

She felt that I was being mean. It was not true. Looking after one’s self and interests is not being mean. Had I had another bottle of water or were there a kiosk nearby, I would have given it to her, but there was not. It was not stinginess but pragmatism on my part.

Most people who help the less fortunate do it discretely. I would not use the word “help” in my case but I used to give change to homeless people on the streets before I learned some of them do not need it to buy meals but are either too lazy to work or have a substance addiction. Also, some make it look like it is an obligation to give them cash, insulting those that pass them by without giving them change. They do not consider that others could also be facing financial problems because the clothes on their back are not torn or dirty. Everybody has their own battles; some less than others but they are still battles.

It is not debatable that giving change to homeless people will not lift them out of poverty. There needs to be a more concerted effort to provide social welfare, especially in the areas of education, healthcare and housing. Giving them change can provide temporary relief but it will take a village to ensure that they are permanently off the streets.

When Community Fails, Homes Get Broken

Posted on by Web Master

Last week, our home was looted in broad daylight, clearing everything we treasured. The master bedroom door was broken, probably using an axe as the police handling the case described.

My family lost property valued in the hundreds of thousands of Birr, including cash, jewellery, electronics, and sentimental belongings of my father, who recently passed away. The burglary was a massive emotional and psychological burden, not to mention a financial one.

We collected our fathers’ belongings and gifts in the master bedroom to honour him. We have now lost them. The robbery adds more agony to my family and me. The emotional shock of having our father’s house ransacked in this way is upsetting and disturbing.

The callousness of the robbery was not as shocking as our neighbour’s lack of sense of community. They were home when all of this was taking place. At first, when they heard loud knocking at our gates, they informed the unidentified suspects that no one was at home. Shortly after, when there were noises of things breaking, they somehow assumed we were doing this to our own house. They did not catch on even when they saw mean carrying household items out of the gates.

In such times, communities should rise to the occasion and help one another rather than ignoring a crime that would eventually come to them as well. My father was one of our community leaders who offered his helping hand whenever the community faced any tragedy during the day and at night.

Many communities like our neighbourhood are allowing crimes to thrive by, among other factors, lacking coordination. The justice system alone cannot fight such crimes that take place under the nose of the community.

The burglary incident came as another reminder of how deep my father’s traumatic loss goes. We felt alone and disregarded by our community, who knew us from childhood and were supported by my father for years on several occasions.

Instead of our familiar community whom we relied on, we found police officers whom we came to know after reporting the crime were more helpful. They went past what is expected of them as law enforcement officers to be there for us at times of need.

They took hours comforting us while taking fingerprints and photographing the disturbing destruction of the crime scene as they inspected for evidence. They were the unlikely consolators. They told us that the memory of our father is not in the property we have regrettably lost but in our hearts and minds. They shared with us the tragedies they are being exposed to on a daily basis in a city where crime is going up.

As the police continue to do their investigation, we could not overlook the fact that the support from communities plays the most significant factor in protecting lives and properties at times like this. Reporting suspicious activities to the police can reduce crimes and harm to families and individuals.

Residential burglary imposes significant costs on the community itself and the nation because crimes do not stop somewhere unless we make them. The experience of being robbed is very traumatic, leaving a feeling of anger and being violated.

Being a good community member helps everyone. My father was one of the founders of a community watch group and hired guards to tighten the security. But it feels like in his absence, his years of hard work to make our neighbourhood safe became pointless because of communities who are not willing to take over and cooperate.

The risk of burglary can be reduced if we all logically do what is expected from us. Police officers say that security devices such as locks and burglar alarms effectively reduce the risk of burglary. Most importantly, they say the risk of burglary is significantly lower in neighbourhoods where the residents have a strong sense of community and look out for each other.

The police handling our case said neighbours are our first line of defence against crime as locks are not sufficient to provide total security. But only if communities step up can we all be safe.

HALF A BUS STATION

Posted on by Web Master

Public property is not always safe from the public. This bus station has been destroyed on its left side. It has lost its aesthetic value and is no longer being used to place advisements but its functionality remains. People are still using it to wait for a bus and as shelter from the sun.

SHADY DAYS

Posted on by Web Master

The sunny season has bit in further as the warmest seasons approach. It is thus high time for some accessories, such as a shade. A street vendor is showcasing a collection of dozens, if not hundreds, of sunglasses on the busy Megenagna road hoping for customers to approach.

Officials Embark on EU Funded Maternal, Child Health Project

Posted on by Web Master

The Ministry of Health has embarked on a three-year project aiming to improve maternal and child health with an outlay of 19.2 million euros sourced from the European Union (EU).

To be implemented in 15 weredas across four regional states – Afar, Benishangul-Gumuz, Somali, and Gambella – the project targets solutions to healthcare constraints brought on by gender inequality. It also focuses on nutrition, family planning, reproductive health and hygiene.

Officials from the Ministry disclosed the project is eligible for extension and additional funding following a review of its effectiveness.

In the past two decades, Ethiopia has reduced maternal and child mortality by half, but a maternal mortality rate of 412 per 100,000 live births and child mortality rate of 67 per 1,000 are still among the highest in the world, according to data obtained from USAID.

Agriculture Ministry to Distribute 1m Hives to Bolster Honey Production

Posted on by Web Master

Officials at the Ministry of Agriculture are preparing to distribute one million modern hives to beekeepers and apiaries in a bid to improve ailing honey and wax productivity.

They estimate the country has the capacity to produce 500,000tn of honey and 50,000tn of wax annually, though actual production lags at less than 15pc. Last year saw the production of 129,000tn of honey and 6,300tn of wax, according to data from the Ministry.

The honey processing industry is a component of a national programme for quality infrastructure development kicked off in 2017 with 50 million dollars in funding from the World Bank. Other industries included in the quality improvement programme are textiles, leather and horticulture.

There are an estimated 1.8 million people involved in the honey and beekeeping industries.

ECX Introduces Five Commodities to Trading Floor

Posted on by Web Master

The Ethiopian Commodity Exchange (ECX) introduced five agricultural items to its trading floor last week.

The addition of black pepper, fenugreek, black cumin seeds, Indian peas, and coriander brings the commodities traded at the Exchange to 16.

The Exchange’s officials say the move will improve the production and marketing systems associated with the spice trade and reduce high transaction costs brought on by the heavy involvement of intermediaries.

More than half a million smallholder farmers cultivate spices on an average holding of less than half a hectare, producing over 240,000tn of 50 varieties of spices each year. The majority of the production comes from the Oromia and Amhara regional states.