Four great crises around Europe's fringes threaten to engulf the EU, potentially setting the unification project back by decades.]]> |||
Brussels - Four great crises around Europe's fringes threaten to engulf the European Union, potentially setting the ambitious post-war unification project back by decades.
The EU's unity, solidarity and international standing are at risk from Greece's debt, Russia's role in Ukraine, Britain's attempt to change its relationship with the bloc and Mediterranean migration.
Failure to cope adequately with any one of these would worsen the others, amplifying the perils confronting “Project Europe”.
Greece's default and the risk, dubbed 'Grexit', that it may crash out of the shared euro currency is the most immediate challenge to the long-standing notion of an “ever closer union” of European states and peoples.
“The longer-term consequences of Grexit would affect the European project as a whole. It would set a precedent and it would further undermine the raison d'être of the EU,” Fabian Zuleeg and Janis Emmanouilidis wrote in an analysis for the European Policy Centre think-tank.
Though Greece accounts for barely 2 percent of the euro zone's economic output and of the EU's population, its state bankruptcy after two bailouts in which euro zone partners lent it nearly 200 billion euros ($220 billion) is a massive blow to EU prestige.
Even before the outcome of Sunday's Greek referendum was known, the atmosphere in Brussels was thick with recrimination - Greeks blaming Germans, most others blaming Greeks, Keynesian economists blaming a blinkered obsession with austerity, EU officials emphasising the success of bailouts elsewhere in the bloc.
While its fate is still uncertain, Athens has already shown that the euro's founders were deluded when they declared that membership of Europe's single currency was unbreakable.
Now its partners may try to slam the stable door behind Greece and take rapid steps to bind the remaining members closer together, perhaps repairing some of the initial design flaws of monetary union, though German opposition is likely to prevent any move towards joint government bond issuance.
The next time recession or a spike in sovereign bond yields shakes the euro zone, markets will remember the Greek precedent.
An economic collapse of Greece, apart from the suffering it would cause and the lost billions for European taxpayers, could aggravate all three of Europe's other crises and destabilise the fragile southern Balkans.
With tension already high in the eastern Mediterranean due to civil war in Syria, the eternal Israeli-Palestinian conflict, the unresolved division of Cyprus and disputes over offshore gas fields, a shattered Greece might turn to Russia for help. In exchange, it might veto the next extension of EU sanctions against Moscow, or even offer access to naval facilities once used by the United States.
Athens is already struggling with an influx of refugees from the Syrian and Iraqi conflicts who wash up on its Aegean islands, seeking the safest transit route to Europe's prosperous heartland in Germany or Sweden.
Cash-starved Greek authorities are more than happy to see them head north in search of asylum elsewhere in the EU. It is not hard to imagine a government cast out of the euro zone using migrants as a means of piling pressure on EU countries.
The “boat people” crisis has proved divisive in the EU, with Italy and other frontline states accusing their northern and eastern partners of lacking solidarity by refusing to co-finance or take in quotas of refugees. Britain has refused to take any.
Failure to resolve Greece's debt crisis after five years of wrangling makes the EU look weak and divided in the eyes of Russian President Vladimir Putin, Chinese President Xi Jinping and others looking to expand their power.
Brussels officials acknowledge that the euro zone crisis has caused a renationalisation of decision-making on some policies and sapped the “soft power” of Europe's model of rules-based supranational governance. It has weakened the EU's hand in world trade and climate change negotiations.
Worse may yet be to come.
Britain's demand to renegotiate its membership terms and put the result to an uncertain referendum by 2017 raises the risk of the EU losing its second largest economy, main financial centre and joint strongest military power.
Despite opinion polls showing British supporters of staying in the EU have roughly a 10 point lead, and some relief that Prime Minister David Cameron did not include any impossible demands in his renegotiation agenda, there is nervousness in Brussels.
UK opinion polls got the May general election spectacularly wrong. Since his victory, Cameron has been tripped up several times by Eurosceptic rebels in his Conservative party.
A long, agonising Greek economic meltdown, whether inside or outside the euro zone, with social unrest and political havoc, might reinforce those who argue that the UK economy is “shackled to a corpse”.
Given Russia's lingering Cold War hostility towards Britain, seen in Moscow as the United States' most loyal ally, Putin would likely be delighted by any prospect of the UK leaving the EU.
It would weaken those in the EU seeking a robust response to Russian behaviour in Ukraine and Georgia and detach Washington's trusty partner from the continental bloc, although Britain would remain a member of NATO.
That could strengthen Putin's hand in dealings with German Chancellor Angela Merkel, who has led European diplomacy seeking to restore Ukraine's control over all its territory.
Rem Korteweg of the Centre for European Reform compares the interlocking crises to the four horsemen of the apocalypse in the New Testament Book of Revelation: harbingers of a “day of judgment” representing conquest, war, famine and death.
“The EU's leaders will find it hard to tame these four horsemen,” the Dutch thinker wrote in an essay. “If a European answer cannot be found, the horsemen will continue to promote chaos, instability and mutual recrimination within the EU.”
As their left-wing government made tentative overtures to its European partners, Greeks expressed hope catastrophe might yet be averted.]]> |||
Athens - Athens was still standing on Monday. The Parthenon had not crumbled before the coming Apocalypse. And as their left-wing government made tentative overtures to its European partners, Greeks expressed hope catastrophe might yet be averted.
“I think there will be an agreement,” said 21-year-old student Christina Sideri, queuing to withdraw the 60 euros Greeks have been rationed to per day for a week now. “There's no way we'll leave the European Union, and the European Union cannot continue without Greece.”
Greeks believe they called Europe's bluff on Sunday with a resounding vote to reject the terms of an international aid deal despite the warnings of European leaders they faced being cast adrift from the euro currency bloc.
The next few days may yet prove Greeks wrong, but the 61 percent who voted 'No' were won over by the assurances of their left-wing Prime Minister Alexis Tsipras that they were voting on austerity, not on their place in Europe.
Thomas Gerakis, of pollster Marc, singled out two public addresses by Tsipras on Friday, armed with a timely report by the International Monetary Fund describing Greece's debt as unsustainable. That has long been Tsipras' chief argument in favour of a writedown on the debt.
In a rousing speech to 50,000 people in Athens, he told them a 'No' vote was a vote to stay in Europe, and “live with dignity in Europe”. Europe was bluffing, he intimated.
“On Sunday, you are not deciding whether Greece stays in Europe, you are deciding whether ... we will accept the continuation of a policy from which even its architects say there is no way out,” Tsipras said in a television address on the same day.
“What was crucial was the rally and the timing of Tsipras' televised address on Friday, when he said that a 'No' vote does not mean a rupture with the EU but would be a tool for better negotiations,” said Gerakis.
“That was the key moment when a significant number of voters went from the 'Yes' to the 'No' camp,” he said, after most polls in the run-up to Sunday's ballot put the two sides almost neck-and-neck.
Despite the 'No' camp's euphoria, officials in Brussels and Berlin said a Greek exit from the currency area now looked ever more likely.
Tsipras returns to Brussels on Tuesday for an EU summit armed with what he will argue is a popular mandate to fight for better terms and debt forgiveness.
He will meet fierce resistance from Germany, Greece's biggest creditor and toughest critic, but the noises from Madrid and Rome suggest others in the bloc might be more amenable.
“At some point this is going to end,” said Sideri. “We can't have capital controls forever, the banks can't be closed forever. Let's hope for something better.”
Across the road, 40-year-old taxi driver Christos Mitsionis was in good spirits, unusually so given Greece is literally on the verge of running out of cash.
“I think they'll reach a solution,” he said, with a smile. “Everything needs to be discussed, so we don't find ourselves in this situation again.”
Gerakis, the pollster, said the referendum may also have provided a vent for Greeks tired of being the bad boys of Europe. After the ignominy of bankruptcy and bailout, and years of plummeting living standards, to say 'No' to their creditors was for many Greeks a moment of catharsis.
“I think there was also a psychological reason at play,” he said. “A people who have been pressurised for so many years needed to express a degree of pride, especially when they didn't feel it would cost them anything.”
Tsipras, too, can still bask in the role of newcomer, elected just five months ago as an alternative to the same staid faces of a discredited political elite that has run Greece for 40 years.
Ironically, even if he can clinch a new deal, it will involve many of the tenets of the last proposal Tsipras dismissed as a “humiliation”.
Argyri Alexopoulou, 65 years old and unemployed for the last 25, said Greeks had been duped.
“The question was completely unclear,” she said, in reference to the densely worded question in the referendum, sprung on Greeks at eight days notice with little time for a real campaign or debate.
A cartoon on the front page of top-selling newspaper Ta Nea showed a Greek man rummaging through a giant ballot box. His wife asks, “Is there hope, Mitsos?” He replies, “I'm looking for it.”
Warren Buffett has donated $2.84 billion in stocks to the Bill and Melinda Gates Foundation and four family charities.]]> |||
Washington - Warren Buffett on Monday donated about $2.84 billion of Berkshire Hathaway Inc stock to the Bill and Melinda Gates Foundation and four family charities, as part of the billionaire's plan to give away nearly all of his wealth.
The 10th annual donation, Buffett's largest, comprised 20.64 million Class “B” shares of Berkshire, and increased Buffett's total contributions to the charities to more than $21.5 billion.
The Gates Foundation, which focuses on improving education and health and reducing poverty, receives the biggest share.
Also receiving donations are the Susan Thompson Buffett Foundation, named for Buffett's late first wife, and the Howard G. Buffett, Sherwood and NoVo Foundations, respectively overseen by his children Howard, Susan and Peter.
Buffett, 84, still owns nearly 19 percent of Berkshire's stock. Forbes magazine on Monday estimated that would give him a net worth exceeding $64 billion, ranking fourth worldwide.
Bill Gates, the Microsoft Corp co-founder and Berkshire director, ranked first, at $78.8 billion.
Most of Buffett's holdings are in Class “A” stock, which gives him about one-third of Berkshire's voting power.
Buffett typically makes his donations in July, reducing the number of shares by 5 percent from the prior year. (http://www.berkshirehathaway.com/donate/webdonat.html) Dollar amounts often rise because of increases in Berkshire's stock price.
The charities typically sell donated shares to finance their activities, reflecting Buffett's desire that the money be spent. Buffett also makes smaller donations to other charities.
Buffett has run Berkshire since 1965. The Omaha, Nebraska-based company has more than 80 businesses in such areas as insurance, railroads, energy and chemicals, and as of March 31 had more than $143 billion of stock and bond investments.
Berkshire also owns nearly 27 percent of food and beverage company Kraft Heinz Co, which began trading on Monday.
NUM was totally opposed to the sale of the Kimberley Mines by De Beers Consolidated Mines in Kimberley, the union said.]]> |||
Rustenburg - The National Union of Mineworkers (NUM) was totally opposed to the sale of the Kimberley Mines by De Beers Consolidated Mines (DBCM) in Kimberley, the union said on Monday.
Acting NUM spokesperson Livhuwani Mammburu said De Beers announced in September last year that it was always looking into three options - closure of the mine in 2018, looking at other mining methods to extend the life beyond 2018, or selling the mine to a third party which could mine profitably beyond 2018.
“The company failed to consult the NUM branch before announcing the sale of the mine. DBCM failed to prove that they have explored and exhausted all avenues which prove that the mine is unprofitable beyond 2018, with reference to the Mine Works Programme (MWP) which estimated the lifespan of the mine to be until 2032,” Mammburu said.
The 13 imported locomotives that cost R600m met all the regulatory standards and regulations, the Prasa CEO said.]]> |||
Johannesburg - The 13 imported new diesel locomotives that cost R600 million met all the regulatory standards and regulations, Passenger Rail Agency of South Africa (Prasa) CEO Lucky Montana said on Monday.
“We are meeting the standards, the testing and commissioning of these locomotives. I can confirm that they not only meet but exceed the safety standards we have in place,” Montana said at a press conference in Johannesburg.
Montana was responding to a media report on Sunday that the locomotives were imported despite “explicit warnings that the trains are not suited for local rail lines” and that Prasa had received “new diesel locomotives that are too high for the long distance routes they were intended for”.
The 13 locomotives form part of an order of 70 locomotives South Africa secured for R3.5-billion from Spanish manufacturer Vossloh Espana.
However, Montana said that the Rail Safety Regulator confirmed that they had issued a testing and commissioning licence to Prasa for the locomotives.
“They were satisfied that this locomotive meets all the requirements.”
Rapport newspaper on Sunday referred to the tender deal as “what may be the country’s largest and most expensive recent tender blunder”.
According to senior railway engineers and certain sources, Prasa had been warned that the locomotives were too tall for local use and exceeded the height restrictions for diesel locomotives on the long distance lines.
According to Rappport, the locomotives have a roof height of 4264mm and the maximum height for diesel locomotives may not exceed 3965mm.
However, on Monday, Montana said the regulator sent the press release to the journalist in question detailing that the locomotives met the necessary standards. He questioned why the authority was not “taken seriously” and why a letter from an anonymous engineer should be elevated above what the regulator on the issue said.
He said the locomotives were 4.1 metres high.
“I think that the big question is why the media decided not to publish the statement by the rail safety regulator,” he said.
“[According to the report] our locomotives cannot even pass through a bridge, but we passed through tunnels. From our side there is no story, the hype was created.”
At a press conference, Prasa showed a video of one of the locomotives going through a tunnel to demonstrate that the locomotives had no problem going through tunnels.
He said as Prasa was preparing the locomotives, they needed to make sure that there was proper alignment and that Transnet and the Rail Safety Regulator would go with them.
Montana said he was disappointed after political statements from various political parties in parliament on the matter.
“They are ill-informed. On the statements issued about corruption - the procurement process we followed, we followed until scrutiny,” he said.
“It is very unfortunate… and I hope the political parties will familiarise themselves with the facts and not try to score some cheap political points that have no base.”
He said the locomotives Prasa bought could not be bought or made by a company in South Africa.
The testing phase of the locomotives were currently in place, where they each have to travel 3,000km before they could be used for commercial use to ensure that they met requirements, he added.
“It is a beautiful locomotive, its impact on the track, we’ve cut the cost of maintenance,” he said.
“The Rapport article yesterday and the sensationalism and the article saying that this was the most expensive blunder – is wrong,” a defiant Montana said.
In a statement by the Economic Freedom Fighters on Monday, spokesman Mbuyiseni Ndlozi said the party condemned the African National Congress-led government for the “reckless use of taxpayers funds” in the procurement of 70 “defective” locomotives.
He said that Transport Minister Dipuo Peters had welcomed the arrival of 13 locomotives despite warnings from engineering experts that these locomotives were not suitable for South African railway tracks.
“The EFF is concerned and disturbed by serious disregard of prudent management of taxpayers funds by the department of transport and its related entities like Prasa,” he said in a statement.
“We have reason to suspect that bribes may have been exchanged in the cheerful procurement of these ‘defective’ locomotives from a company that was found guilty of price collusion in Germany in 2012. The CEO of Prasa, Lucky Montana, is already facing numerous allegations of corruption,” Ndlozi said.
He said Montana should be suspended and investigated on corruption allegations against him and that the contracts of “defective locomotives” which were not locally manufactured should be suspended.
However, at the press conference Montana said there was no corruption and that the locomotives could not be manufactured locally.
“People are beating on drums, withholding information to create the perception that Prasa is run by a bunch of incompetent people, that we are corrupt, and secondly, that we are incompetent. This is not true,” said Montana.
The National Union of Mineworkers would fight retrenchments at Glencore’s Optimum Coal Mines, the union said.]]> |||
Rustenburg - The National Union of Mineworkers would fight retrenchments at Glencore’s Optimum Coal Mines, the union said on Monday.
Deputy general secretary William Mabapa said this was after Glencore proceed with its plan to retrench 628 employees.
“We want to place it on record that when we met with the company [on Tuesday the 30th June 2015 at the CCMA from 10h00 to 12h00] in Witbank and the same day at the Department of Mineral Resources (DMR) in Pretoria from 14h30 to 17h20, the agreement in principle was that after the DMR issued Optimum Coal Mines with Section 93A, the company must study the document and come back to officially chart a way forward with stakeholders. As NUM, we are still waiting for a meeting at DMR with Glencore,” said Mabapa.
“We are watching the space from now until the 31 July 2015 as to what DMR will do to enforce compliance. If DMR fails, we are consulting with our lawyers as to what recourse we will take against DMR if they fail and Glencore succeeds with retrenchment.”
He said if Optimum did not comply, the minister should take its mining license.
“This will be a testing case to get the government department to wake up and do their work,” he said.
“We are aware that Glencore is still operating with contractors like Coalcore with 1,100 employees and other subcontractors. The ministers of labour and DMR must explain why the company can retrench its employees but continue with subcontractors. This is a foreign approach by Glencore.”
He said DMR failed to issue directives as empowered by Section 52 of the Mineral and Petroleum Resources Development Act (MPRDA) to recommend corrective measures like judicial management (corporate rescue) or liquidation as opposed to retrenchment, but instead issued Section 93A of the MPRDA requesting the company to submit rehabilitation plan for the depleted and mined out areas as part of compliance of any mining licence holder.
Washington Post asks Samuel J Palmisano what he has been up to since leaving as IBM CEO.]]> |||
Washington - Samuel J Palmisano led Big Blue as if he were coach. He thought about the stock market like a scoreboard. He thought about employees as players whose technical skill outshone his own, but who needed a leader to bring out their collective best. He thought about the record he had to maintain each season to stay on for the next.
It's been three and-a-half years since Palmisano retired as chief executive of IBM, where he spent his entire career. And though the scores were high during his decade-long run as CEO, revenue has slid since his departure — from about $107 billion in 2011 to $93 billion in 2014. It has left some analysts wary of the tech giant's long-term health, and of whether the financial gains under Palmisano came at the expense of sustainable growth.
Does Palmisano think he could have done anything differently to set up IBM for success once he left? Not really. What has happened since falls to a new coach, a new team, he says.
In retirement he has turned his efforts to a nonprofit research institute called the Center for Global Enterprise. This conversation has been edited for length and clarity.
Q: How does it feel being out of the hot seat?
A: Life is great no longer being CEO of a large public company. I think some people underestimate the difficulty and stress of the job.
Q: Once you stepped out of the role, did you become more aware of all the stress you were carrying?
A: A year after I was no longer CEO, I was getting my annual physical. I've gone to the same doctor for 10 years, and the guy looks at me and says, "Everything has improved, even things that at your age should never improve" — things which I won't say here.
He said, "So, I guess there was a lot of stress in your job, wasn't there?" And I said, "Yeah, I guess there was." You don't realise it at the time, because you just do it. You grind away. Everyone wants the organisation to be successful, so you work hard.
Q: Do you think many CEOs have trouble keeping in mind the things they should really care about when all is said and done?
A: You're there primarily to drive financial results. We could argue the good or the bad of that — that's a nice intellectual discussion — but you're measured by your owners, the shareholders, and they expect financial performance. It's like if you're a coach in sports, you have to win on Sunday. You can't lose two years in a row in the NFL and still be a coach for that team. It's the same thing. You can't have three or four bad years as a public CEO and expect to be CEO during year five. That's just the nature of the job.
Q: What was the hardest part of leading a public company?
A: Not falling in love with yourself. I was maybe the longest-sitting CEO of IBM other than a Watson, but, nonetheless, I'm not the IBM company. A lot of people before me built a great enterprise. I was fortunate enough to represent it for nine to 10 years, but I'm a temporal steward of an iconic organisation.
Q: In 2010, you set a target for what earnings per share would be by 2015. Do you still think that was the right target to set?
A: The first model was set in 2006 for 2010. We didn't like the 90-day forecast of Wall Street. You make or you miss by a penny, and stocks are very volatile. I just felt that was the wrong way to run the company. However, investors want some direction as to where you'll be so they can measure you and decide whether to invest in you or not. That's a very fair request. It's not shortsighted — they're putting their money and their faith in you and the company.
So, we came up with something we felt we could live with and that made sense, which was a 2010 road map to go from $6 to at least $10 a share. It wasn't about wanting a financial target. It was about giving a long-term perspective of where the IBM company could be in four or five years. It was a way to be shareholder-friendly, but not be quarterly driven.
Q: When you retired, by most metrics the company was performing really well. What's it like to see that IBM has struggled?
A: When you're gone, you're gone. When you're no longer the boss, then get out of there. Don't comment from the cheap seats. The circumstances are completely different in today's world economically, technologically.
Q: Let's talk about succession planning. What lessons did you learn when you took over the CEO role from Lou Gerstner, and then when you passed it along to Ginni Rometty?
A: The responsibility of the CEO is to prepare multiple alternatives for the board to decide. There were probably three legitimate CEO candidates within the organisation. Then the board, based upon their view of the future strategy, made a decision. They can go outside if they feel it's appropriate. I'd argue you should go inside, because insiders know the place the best.
In our case, we were preparing multiple people, and the board selected Ginni. I think they made the right decision. She was clearly the most able, the most capable, and she deserved the job.
Q: What did being a company lifer make easier for you when taking on the CEO role, and what did it make harder?
A: The hardest thing is that you have to put yourself in an outsider's view as an insider. You have to be able to look at things objectively and analytically.
The easy part of the job is that you know the culture. If you see things in the culture that are inhibitors to future success, you know exactly what to do to turn those knobs. Lou Gerstner brought the perspective of a customer; he brought an outsider's point of view, but he needed help connecting to the culture to get people to change. He used to tell us in meetings: You guys are the natives with the map. I don't have the map. You've got to help me change this place.
Q: Did you develop techniques for getting people to still give you honest feedback and not shield you from things because suddenly you're CEO?
A: I would try to make sure I had a constant feedback channel. I used to include people other than my direct reports as part of the monthly meeting. They could be four levels down from the senior vice presidents. It was a way for them to learn, and also a way to get different points of view into the discussion that weren't just the old guys who had seen these things a zillion times.
The other thing I would suggest to any CEO is to have one source of data. Not multiple financial systems, not multiple facts. At IBM there was one system — one set of accounting, one set of market share, one set of customer satisfaction and employee morale. It created total transparency. Whether you were a salesperson or an entry-level HR person, you saw the same information the CEO and CFO saw.
There was no time spent debating the data. The discussion was: Given these problems we see, how do we work on them?
Q: What mistake in your life yielded a leadership lesson that has stuck with you?
A: There are a lot of those. Gosh. You have to move faster — I learned that in the PC business. Suddenly one of your competitors cuts prices in Asia, let's say. You don't have a lot of time to respond. You can't study the market trends. You've got to react. I learned I was slow.
Personnel decisions. You grow up with all these people, so you always want to give them a second chance. But a third chance? A fourth chance? A fifth chance? You think: Come on, they'll get better. You coach them and they don't.
Q: On the flip side of that, what would you identify as a key factor that helped you move up the ranks to have a successful career?
A: You've got to start with luck. You've got to be in the right place at the right time, and moving at the right pace. If you're 60, it's hard to become the CEO.
But the most important thing — to me, anyway — was phenomenal resilience. You're going to get knocked down. I got beat up a lot — 2005 first quarter was a bad quarter. Everybody was screaming for my head on TV. You have to fight through it; you can't personalise it. Bad times are going to happen to everybody.
People say you have to be smart. I don't know if I'm smart. I was a scholarship kid who played sports. I'm not an engineer. Do you have to be brilliant to be a successful CEO? If you're brilliant, you should be a brain surgeon. Or an academic. You don't have to be brilliant to run a company, but you have to be a good people person. You have to be able to lead, to cajole. You have to care. That's what you have to do.
The eagerly-anticipated $50bn New Development Bank could unblock the financing of key African development projects.]]> |||
Johannesburg – The eagerly-anticipated USD 50 billion New Development Bank (NDB) which is to be launched by South Africa and other Brics countries in Russia this week, could unblock the financing of key African development projects.
Analyst Christopher Wood of the SA Institute of International Affairs (SAIIA) said on Monday the NDB had reached its moment of truth and would now show what it was capable of.
The NDB is to be officially launched in Moscow on Tuesday when its board of governors meets for the first time.
The board will then report to the Brics leaders at their 7th summit, which will start the next day in the Russian city of Ufa, on their plans to operationalise the bank, International Relations and Cooperation Minister Maite Nkoana-Mashabane said last week.
Brics comprises the emerging nations of Brazil, Russia, India, China and South Africa. Ufa is the capital of the Russian republic of Bashkortostan, 1,355 kilometres east of Moscow.
Wood said at a seminar on the Brics summit that the NDB and another Brics economic mechanism, the Contingency Reserve Arrangement (CRA), were being established faster than many analysts had predicted. Kundapur Kamath, a highly-respected Indian banker had been appointed as the first NDB president. South African banker Leslie Maasdorp will be its vice-president and former Reserve Bank Governor Tito Mboweni will be on the board.
Although the South African government has announced the bank will become operational this year, Wood said that though that would be technically correct, it was unlikely to issue its first loans that soon.
Getting the structure in place was the easy part and now the NDB – which is the most concrete creation of Brics – would have to make hard choices about what sort of development projects to invest in and where.
Many commentators have predicted that China’s launch of its Asian Infrastructure Investment Bank (AIIA) which has attracted much greater global attention than the NDB, would detract from the NDB.
But Wood disagreed, saying that, on the contrary, it would help to channel more of the NDB’s development funds into Africa, because the AIIB would focus more on Asia.
And the previous decision by the Brics leaders to establish the NDB’s first regional branch, for Africa, in South Africa, would also help to channel funding to this continent, he said.
Wood expected India and Latin America also to receive considerable funding. And he said that he expected the NDB to focus on financing big infrastructure projects. This would likely include some social projects such as schools and hospitals but would mainly go to economically self-sustaining projects such as roads and railways.
These would mainly be regional projects which connected the continent, with an initial focus on linking South Africa and its industrial strength, to the rest of the region.
Wood said, however, that it was not clear what difference the NDB would make, as there was already plenty of money available for infrastructure financing, including from other development banks, and what was missing so far was enough viable projects.
But he said that because NDB development financing would probably come with no political conditions – unlike the World Bank for example – the NDB could free up some projects which now faced political constraints.
As an example he cited Ethiopia’s huge Grand Renaissance Dam on the Nile River which Egypt opposes because the Nile is its lifeblood. Wood said Cairo has used its alliance with the US to exert pressure on the Washington-based World Bank not to finance the dam. The NDB would not face that constraint.
Wood said the NDB might also invest in the ambitious Grand Inga hydroelectric project on the Congo River in the Democratic Republic of Congo, because the NDB governors would be less sensitive to the environmental impact than the World Bank would be.
He said although each Brics country would theoretically contribute USD 10 billion (about R120 billion) to make up the initial USD 50 billion capital for the NDB, the effective contribution would be USD billion (about R24 billion) as the rest would be on call, in the unlikely event it was needed.
He said the CRA, also to be launched at the summit, would not be an institution like the NDB, but merely an agreement by the five Brics governments to set aside money to help any member which ran into financial trouble.
They would probably never call on it as the cost would be high, because resorting to the CRA would send a signal to markets that that country was in deep trouble.
But if any country did ever use the CRA it would most likely be South Africa, if only because the other four members were probably too big to be able to derive any real benefit from it.
Financial services provider Investec has acquired the remaining 51.5 percent shareholding of the Blue Strata group.]]> |||
Johannesburg – Financial services provider Investec announced on Monday it had acquired the remaining 51.5 percent shareholding of the Blue Strata group.
“Investec and Blue Strata have had a very fruitful partnership over the past thirteen years since Blue Strata’s founding in 2002,” Investec chief executive officer Stephen Koseff said.
“As import regulations and complexities increase, the full integration of the remaining 51.5% into Investec offers Blue Strata the opportunity to unlock substantial benefits as well as accelerate its growth trajectory.”
Blue Strata facilitates every aspect of an import transaction from order placement, confirmation and tracking through to the hedging of foreign exchange risk and the management of import logistics until delivery to the client’s warehouse.
Blue Strata co-founder and Chief Executive Officer, Adam Orlin said: “While we have always had a close relationship with Investec, this transaction allows us to grow the business substantially by leveraging Investec’s client base, balance sheet and expertise in complementary areas such as credit management and foreign exchange.”
Blue Strata is a pioneer in providing fully integrated import and trade financing solutions in South Africa, handling thousands of shipments and importing billions of Rands of product annually for its clients. Blue Strata was recently named the winner of the Master’s Zenith category at the 2014 Accenture Innovation Index Awards.
The transaction is effective from March 1 this year. The deal became unconditional on Friday, June 19 June after the necessary agreements were signed in April.
Membership of Brics can help Africa with WEF and AU proposed initiatives to drive the continent’s growth internally.]]> |||
Johannesburg - The 7th Brics Summit, taking place this week in Ufa, Russia, presents another opportunity for South Africa and Africa to help shape its new narrative as it awaits a new driver of growth following the commodity supercycle that fuelled Africa’s growth over the past two decades.
The recent World Economic Forum (WEF) on Africa and African Union (AU) Summit pointed to a number of key steps that Africa could take to drive growth internally. Membership of Brics can help Africa, with most, if not all, the initiatives.
The first thing that Africa has to do is to aggressively drive investment in infrastructure. Earlier this year, the commodity trading company Trafigura published a report which found that developing countries had to double spending on infrastructure to $2 trillion a year by 2020, with the bulk of this money to be directed to Sub Saharan Africa.
Brics, through the New Development Bank, or Brics bank, can help drive financing of that infrastructure. But the initial funding pool for the NBD is $100 billion and that is roughly the amount of Africa’s funding gap in a single year, so the Brics Bank can clearly not do it alone. It would need to be lead funder and attract the World Bank, Sovereign Wealth Funds and global pension funds to help close the funding gap.
Apart from funding , Brics can help infrastructure programme with skills and expertise, as Russia’s plans to supply SA with nuclear through Rosatom, clumsily handled as they have been, as well as China South Rail and China North Rail supply to Transnet’s locomotives and China’s award of a $ 5 billion rail project in Tanzania shows.
The next big benefit that Brics can deliver for South Africa is to help the country export an increasing proportion of higher value and intermediate goods to the Brics countries and their regions of Asia, South America and Eastern Europe, depending on which neighbours Russia is on good terms with.
An April 2014 study by the South African Institute of International Affairs (SAIIA) illustrates this point. The study, by Chukwuka Onyekwena, Olumide Taiwo and Eberechukwu Uneze of the Centre for the Study of Economies of Africa (CSEA) in Abuja Nigeria, showed that between 1995 and 2011, trade between South Africa and Brics countries, grew substantially.
Exports from South Africa to Brics countries grew from less than $5 billion in 1995, to almost $ 25 billion by 2011. But the underlying composition of that needs to change. China is the dominant partner in SA trade as it overtook India in 2003 as the leading destination of SA exports, followed by India, Brazil and a negligible portion to Russia, where trade consists of trucks and cars.
In 2011, crude materials, except fuels accounted for 34,5%, while commodities and their related transaction accounted for 25,5%. Manufactured goods, an added value category that SA can look to grow, accounted for 14,3%, while capital and transport equipment accounted for 2,2% and other manufactured goods mad up only 0,2%. Chemicals and related product, another value added category, accounted for 4,5%, beverages and tobacco, another processed goods category, took up only 0,1% while food and live animals, which are primary goods since they are not processed, accounted for 1%.
Minerals, lubricants and related materials accounted for 17,6%, a decent figure but what one that has room to be grown further.
The process of re-orientating SA exports to value added goods starts at this week’s drafting of negotiation position before devolving to trade negotiation level. Countries rarely open up their market for high value, processed goods as many want to protect domestic industries, but in countries like China an undertaking to open up markets is not enough as bureaucracy at its ports, language barriers and regulations make exporting into China difficult. Other countries use measures like import restrictions, again to protect domestic industries. Breaking down such barriers requires tough negotiations that casts diplomacy aside.
Beneficiation is another area that South Africa needs to improve on given its mineral endowment. But beneficiation is skills and capital intensive and it’s a fight for global market share which means that a smelter opening in one part of the globe, somewhere in Africa, means a closure of another smelter, usually somewhere in the developing world but possibly in a Brics country, with its attendant problem of job losses and social consequences that such closures can cause. There is no country that will let African countries take away their lunch while they sit idly.
Beneficiation has to be fought for and sometimes pursued at an initial high cost for Africa to win its right to add value to most of its minerals. A study by Deloitte found that South Africa produces 90% of the world’s platinum but only 24% of catalytic converters, one of key uses of platinum. It is such patterns of production that need to change.
Finally, the summit will officially inaugurate the Brics Bank, a remarkable feat when one considers that the idea was formally mooted at the 4th Summit in India in 2012, and formalised in Durban the next year. But the Bank’s architect’s will find that their decision to give each country an equal vote irrespective of contribution, while egalitarian and noble, has its limitations. The decision is meant to be anathema to the Breton Woods institutions like the World Bank that the Brics bank is designed to counter.
But what they will find is that the country that contributes the most, likely to be China given the size of its reserves, will demand a bigger say in how money is spent. So while the greatest area of need for infrastructure funding among Brics countries is in Africa, the continent may not get as much as it needs unless its needs are aligned to China and the continent furiously lobbies Shanghai, where the Bank will be headquartered.
South Africa must use this opportunity to raise Africa’s voice.