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Is there trouble in paradise for the South African economy?

South Africa, which is often touted as one of Africa’s most developed nations, seems to be going through a rough patch economically.

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Africa: South African unemployment rises to 17-year high of 30.8%, Is there trouble in paradise for the South African economy, International Monetary Fund

South Africa, which is often touted as one of Africa’s most developed nations, seems to be going through a rough patch economically. The country known for its vibrant tourism has suddenly seen a slowdown in the last year.

According to Africa.com, data released by the country’s tourism board reported that international tourist arrivals in South Africa were down by 11.65% in 2019. The decline in tourism could be because of the drought in the Western Cape province, which made news reports on a global front.

Is there trouble in paradise for the South African economy?

In addition, the security concerns in the country have been an issue, most notably with the recent xenophobic attacks that marred the country’s public image, as well as the rise of tourism in other African countries, such as Namibia, Senegal, Ethiopia, Botswana and even Rwanda.

With tourism on the decline, South Africa’s rand has also been deeply affected due to the country’s struggling economic performance. According to a report from Al Jazeera, the value of the rand’s decline was as low as 0.7% and it traded above 15 per dollar for the first time in a week.

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There has also been a power outage crisis in the country, which has been ongoing for some time. , South Africa’s electricity public utility, recently announced a stage three load shedding that was to take place in some parts of Western Cape earlier this week. This shedding would often see certain municipalities disconnected from power for a specific period in a day.

The stage three load shedding executed by Eskom was intended to reduce the usage of open cycle gas turbines, while the load shedding at night would help restore the levels of the hydro-pumped storage, in order to prepare for the upcoming week.

[READ MORE: What the Year of Return means for Ghana tourism)

Though Eskom had advised the public that the shedding was done to avoid a national blackout, the frequent power cuts by load shedding are having an impact on businesses that would require electricity to operate.

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With the pressing issues at hand affecting its economy, South Africans have taken time to address these problems and to also offer solutions that would work in the best interest of the country. In relation to tourism, the South African tourism industry has partnered with the South African Police Services (SAPS) on a safety plan.

According to Travel Weekly, the safety plan would see the government set aside a total of 40 million rand ($2.7 million) to address the issue. The tourism safety plan is to include both proactive and preventive measures that would guarantee a rapid operational response in any event of an incident concerning tourists. The tourism safety plan also vows to provide an aftercare program that would attend to tourists, who have been victims of an attack.

As for power cuts, many South Africans are seeking new possible ways of renewable energy. The president, Cyril Ramaphosa, also mentioned the country’s intention of exploring renewable energy in his recent state of the nation address. Ramaphosa believes that South Africa’s turn to renewable energy would help ease power cuts, which have gravely affected the country’s economy.

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South Africa is definitely a land of opportunities and it has so much to offer, due to it being one of Africa’s biggest economic outlets on the continent. One would hope that these recent stumblings in South Africa would be temporary, as the country looks to bounce back to being the vibrant, loving and hospitable country everyone would love to visit.

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Paul Olele Jnr writes from Washington DC. He is a 2019 graduate of George Washington University and currently works as graduate Media and Research Intern at the Initiative for Global Development.

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Columnists

The Nigerian insurance sector; repositioning for efficiency

For the industry to thrive, the regulators may also need to deepen micro insurers’ activities in the Nigerian economy.

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Insurance in Nigeria, FBN Holdings Annual general Meeting, FBN General Insurance Limited CEO Bode Opadokun, FBN General Insurance Limited 2018 financial result

The Nigerian Insurance sector is critical to propelling income equality and reducing the poverty level of any society, but the industry’s performance has continued to drag amid many factors, such as; low underwriting capacity of players, lack of trust by consumers, poverty and the inadequacy of distribution infrastructure.

These factors have jointly contributed to the abysmal level of insurance penetration – the proportion of insurance business to the gross domestic product over the years.

READ: Fintech key to insurance penetration, processing of claims – LASACO MD

The Nigerian Insurance sector remains largely underdeveloped with Insurance penetration still at c.0.5% to GDP. The sector which contracted by 18.67% y/y in the Q3 GDP report released by the National Bureau of Statistics (NBS) is set for a deep recession in 2020.

The covid-19 pandemic effect has increased health, travel, and business disruption claims. These claims, coupled with underwriters’ inability to write risks in Q2 and the tapered household income should amplify the sector’s expected recession.

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READ: AXA Mansard divests from its pension and real estate ventures

In a bid to rid the sector of these known drags, the National Insurance Commission (NAICOM), the primary regulator in the industry launched its recapitalization exercise in May 2019. The plan’s proponents intend to improve the industry’s minimum paid-up capital in each business segment, thereby solving premium flight issues that have continued to plague the industry.

Following the lingering impact of coronavirus, the deadline was adjusted from June 2020 to December 2020 to implement Phase I of the project while the deadline for the second phase’s performance was moved to September 2021. Some players have called for an extension of the regulator’s deadline given the impact of Covid-19 on their businesses.

READ: FG seeks partnership with National Council of Registered Insurance Brokers, here’s why 

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However, most of the industry’s bellwethers have entirely shored-up their minimum paid-up capital to the required level. In our view, firms that are yet to meet the required capital threshold may likely lose out on the opportunities available on the supply side of the market.

Furthermore, for the industry to thrive, the regulators may also need to deepen micro insurers’ activities in the Nigerian economy.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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Imposters, uniforms and our collective awe

The uniform of the Nigerian Armed Forces, Police, and other Government Security Agencies have become so powerful, that they serve as a form of identification.

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FG deploys more military troops to Lagos to secure public assets

On a bright, sunny Tuesday morning in Lagos, Col. Saki Abdullahi (not real name), got into his personal car and hurried to the bank to sort out some issues with his account and perform some transactions. He was dressed immaculately in his well ironed and starched uniform and you could see your reflection in his well-polished shoes.

As he approached the gate of the New Generation Bank in Victoria Island, one of the Security Guards beckoned on him to open his boot for the usual search. Col. Saki knew the drill and with one touch of a knob near the seat, he flicked open the boot just as the guard walking past him noticed his uniform and rank.

The Guard immediately closed the boot with the briefest of glimpses into it and signaled for his colleague to open the gate. Col. Saki found this rather curious because, on previous visits to the same bank branch, he had been subjected to more scrutiny by the guards on duty.

He parked his car and walked towards the security doors that granted access into the banking hall. He was briskly saluted by the guard and when the door appeared to disallow him entry (on account of his car keys and belt), he was still given swift access. Generally, the Staff was all super courteous and helpful and he left the bank in next to no time.

On the drive back to his office, he had a call and he hesitated as he could not find his hands-free device, but the person on the other line was not someone he could ignore his call. So, he picked and put the phone to his ears and began a conversation. He got to a point and had to slow down in traffic. A Lagos State Traffic Official (LASTMA) who got in front of his car and attempted to stop him because he was on the phone and driving, took one look at him and moved on.

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Then it dawned on him that the reason the LASTMA Official did not bother to approach him was the same reason the guards and bank staff were so nice to him. He was in his Army uniform and in Nigeria that confers a special status and privilege on the wearer.

All over the World, members of the Armed Forces, Police, and other Uniformed Government Security are accorded some form of respect and privilege. It is an unwritten rule borne out of respect for the sacrifices that they make daily for the rest of the citizenry to enjoy the most basic freedoms and security. These privileges however do not in any way place uniformed personnel above the laws of the land or above the rest of the civil populace.

The unbridled privileges and rights that years of Military rule have inadvertently conferred on Uniformed Personnel have created a class of citizens that cannot be questioned and led to a growing army of Impostors, fakes, and impersonating Uniformed Officers of the Law.

In Nigeria, it is a normal sight to see men of the Armed Forces beating up and molesting citizens for daring to wear camouflage clothing on the Streets, as this is deemed as an attempt to impersonate a member of the Armed Forces. Curiously, these outfits are readily available online, and wearing them in other parts of the developed world is not considered a crime or impersonation.

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Section 110 (1) of the Criminal Code makes it unlawful for any person who is not serving in any of the Armed Forces in Nigeria to wear the uniform of the Armed Forces or any part of the uniform of such Forces, or any dress having the appearance or bearing any of the Regimental or other distinctive marks of such uniforms. Camouflage is a part of the military uniform and so it falls under this law.

So, the basic reason for outlawing the wearing of camouflage amongst civilians is security, but if we look at countries with the strongest armies in the world and the prevalence of citizens being allowed to wear camouflage and other dress articles associated with the military, we also notice crimes committed do not have a correlation with the wearing of uniforms. So, the real issue is not the uniform itself, but the access, privilege, power, and rights it confers on the wearer.

Just this past week, it was widely reported that 2 suspects were nabbed by the Oyo State western Security Network codenamed, Amotekun for producing and selling fake Amotekun uniforms. This was after 6 persons were arrested while posing as members of the Corps. Amotekun has launched just over a year ago on January 9, 2020, and already criminal groups are making counterfeit versions of its uniforms. So, you ask yourself, why would anyone want to buy counterfeit versions of Amotekun uniforms if not that they believe it’s a means to access power and riches that they would otherwise not be able to get if they were in civilian dress.

While growing up in Lagos in the early ’80s, uniformed personnel boarded public transportation and were exempted from paying fares. This was done as a form of respect and appreciation (especially after the Civil War), but the sight of uniformed personnel wearing just an article of clothing in the uniform e.g., the Cap, T-Shirt or Pants on a weekend private outing just to avoid paying their fare has become embarrassing. Once Commercial Drivers put uniformed personnel in the front seat of their vehicle, they are emboldened to break all the traffic rules including driving against traffic (One Way Driving).

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The uniform of the Nigerian Armed Forces, Police, and other Government Security Agencies have become so powerful, that they serve as a form of identification. You are not allowed to request to see the identification card of anyone in uniform, to do so can lead to physical intimidation.

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The Military High Command has done its best in recent years to improve military and civilian interaction and to create lines of communication for the civil populace to report incidents of misconduct. These actions have led to a manifest improvement in the civility of interactions between the two sides.

During the last nationwide #EndSARS protests, an Airforce Officer was lauded by all for the manner he was able to calm down the protesters and ensured there was no destruction of property and no loss of lives.

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As we continue on the journey of nationhood, we have to decide as a people what form our respect and the privileges, we accord our men and women in uniform should take.

As we mark Armed Forces Remembrance Day and the sacrifices of our Fallen Heroes, we owe it a duty to discuss how we honor them, while maintaining the rule of law across the board and the dignity of the rest of the civil populace.

‘Long live the Armed Forces, Long Live The Federal Republic of Nigeria’

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A Joe Biden presidency and its impact on Nigeria’s oil

With Joe Biden’s imminent inauguration as the President of the US, his policy on energy and renewables could very well determine Nigeria´s prosperity for the next 4 years.

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Oil traders go bearish, Joe Biden seems more likely to win

A couple of months ago, I wrote on the impact of the Joe Biden Presidency on the oil markets. Now that he is President of the United States with his inauguration on the 20th of January, every country would go back to their political and foreign drawing boards to analyse the impact of his swearing-in on their respective economies or governments.

While some countries would face pressure from Biden in respect to their human rights issues, climate change policies and other diplomatic matters, countries like Nigeria will be analyzing the impact of Biden’s policies on the fate of Oil.

READ: AfDB supports Africa’s flagship climate initiative with $6.5bn 

Three standpoints are crucial here;

  • Will shale oil, which has been the albatross on the neck of oil prices for years, weaken in respect to Joe Biden and notably Kamala Harris’ views on fracking?
  • Will Joe Biden’s soft foreign policy on Iran enable Iranian oil to return to the market?
  • Will Joe Biden emulate Trump in meddling with OPEC+ affairs?

The answers to these three questions would give an outlook on the fate of Nigeria’s black gold.

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READ: Facebook suspends Donald Trump indefinitely

Shale oil

Over the years, the investment in the Shale industry in America has seen the United States increase oil production significantly. In understanding market dynamics, increased production of oil has a negative effect on oil prices. This is why we have not seen $100 oil in many years now.

An increase in US oil has significantly reduced OPEC+ market share and dominance in the oil markets. Historically OPEC could influence prices with their policies, but nowadays, US oil appears as a barrier in the oil markets.

READ: Mike Pence to go against Trump, announces he will attend inauguration

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The dominance of shale is enabled by a few factors. Firstly, Fracking. Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside. It is highly controversial as it threatens to cause pollution and is detrimental to climate change.

Now, climate change is at the forefront of Joe Biden’s energy policy. Inadvertently, it will hamper the production of fossil fuels in the long-run.

Additionally, Wall Street would be wary of investing in the oil and gas sector as the future looks more into renewable energy.

Iranian dilemma

Joe Biden’s relations with Iran would differ from Trump’s relationship with Tehran. While Donald Trump gave tough sanctions during his tenure, Biden would seek to pamper Iran just like Obama did and this will mean Iranian oil can come back to the market. Although private intelligence shows Iranian oil is still exchanged in the markets, this diplomatic relation would still be significant especially with Iran accounting for about 9.5% of the world’s total oil reserves.

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READ: Donald Trump and Joe Biden clash over plans to lift travel ban on UK, EU, Brazil

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Meddling with OPEC+

During Trump’s tenure, OPEC+ was rattled several times. Trump has never hidden his mistrust in OPEC. He has previously labeled them a cartel in the past. When oil prices go high and affect the cost of gasoline on American consumers, Trump calls out OPEC to find ways to reduce the prices.

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However, when prices are so low and energy companies in America can’t break even, Trump, like he did in April 2020, interferes and calls out OPEC to intervene. Interestingly, according to trumptwitterarchive.com, Donald Trump tweeted 271 times about “oil”; 70 about “OPEC”; 351 about “gas” (gasoline and natural gas); 68 about “Saudi Arabia”. It would be rare for Joe Biden to do the same thing as his style of governance will be seemingly different from Trump´s.

READ: FIRS hits 98% of target as it collects N4.95 trillion for 2020 fiscal year

Additionally, America as one of the largest consumers of oil will need to improve its demand overtime before supply outweighs demand as a result of the pandemic. How Joe Biden handles the pandemic would be significant in American demand. Would he endure lockdowns or not? That’s very important in the conversation on his impact on gasoline prices and demand.

Nigeria’s black gold – Oil, would be dependent on the future outlook of the oil market and Biden’s policies. It would be interesting to see if Biden would allow OPEC to seize market share from American oil. The first few years would be very important.

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