×

Warning

JUser: :_load: Unable to load user with ID: 59

Monday, 09 December 2019

34-year-old Sanna Marin has become Finland’s youngest Prime Minister ever after winning Sunday’s election.

Sanna is to replace former Prime Minister Antti Rinne who resigned on Tuesday, December 3, after losing the confidence of the coalition partner Centre Party over his handling of a postal strike.

The former transport minister whose party is the largest in a five-member governing coalition will be the world’s youngest serving prime minister when she takes office in the coming days.

“We have a lot of work ahead to rebuild trust,” Marin told reporters after winning a narrow vote among the party leadership.

“I have never thought about my age or gender, I think of the reasons I got into politics and those things for which we have won the trust of the electorate.”

Sanna had a swift rise in Finnish politics since becoming head of the city council of her industrial hometown of Tampere at the age of 27. She will be taking over in the middle of a 3-day wave of strikes, which will halt production at some of Finland’s largest companies from Monday, December 9.

The Confederation of Finnish Industries estimates the strikes will cost the companies a combined 500 million euros (US$550 million) in lost revenue.

Published in World

If you are using an older phone and you are wired on WhatsApp, you need a phone upgrade urgently. WhatsApp has announced it will stop working on millions of phones from 31 December, as they have reached their lifespan.

That means users on a variety of older handsets could end up losing access to the messaging app.

Facebook-owned WhatsApp has confirmed via its support page that it will stop supporting these devices on December 31, 2019.

The company says that any phone running the Windows Mobile operating system will not be supported after this date.

However, that’s not all. Any iPhone running software older than iOS 7 will no longer be supported and neither will any Android device with version 2.3.7 installed.

The iOS and Android blocks won’t happen this month but will take place on February 1, 2020.

WhatsApp says that anyone using these older phones can no longer create new accounts or reverify existing accounts.

‘Because we no longer actively develop for these operating systems, some features might stop functioning at any time,’ the company said in a blog post announcing the cut-off dates.

WhatsApp regularly stops support for older devices, forcing users to keep up to date if they want to continue using the app.

Here are all the dates that WhatsApp stopped working on older phone systems.

June 30, 2017 – Nokia Symbian S60
December 31, 2017 – BlackBerry OS and BlackBerry 10

December 31, 2018 – Nokia S40

December 31, 2019 – Windows Phone OS

February 1, 2020 – iOS 7 and Android 2.3.7

Published in Telecoms

Defence firms in the United States accounted for more than half of the $240 billion global sales of military equipment and services by the world’s top 100 arms groups in 2018.

Stockholm International Peace Research Institute (SIPRI), a Swedish-based institute made this known on Monday in its report on Top 100 arms producing and military services companies last year.

SIPRI noted that arms sales increased by 4.6 per cent compared with 2017 and 47 per cent since 2002, the year from which comparable data was first available.

According to SIPRI, for the first time since 2002, the top five spots in the Top 100 ranking are held exclusively by arms companies based in the United States: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. These five companies alone accounted for $148 billion and 35 per cent of total Top 100 arms sales in 2018. Total arms sales of US companies in the ranking amounted to $246 billion, equivalent to 59 per cent of all arms sales by the Top 100. This is an increase of 7.2 per cent compared with 2017.

A key development in the US arms industry in 2018 was the growing trend in consolidations among some of the largest arms producers. For example, two of the top five, Northrop Grumman and General Dynamics, made multibillion-dollar acquisitions in 2018.

‘US companies are preparing for the new arms modernization programme that was announced in 2017 by President Trump,’ says Aude Fleurant, Director of SIPRI’s Arms and Military Expenditure Programme. ‘Large US companies are merging to be able to produce the new generation of weapon systems and therefore be in a better position to win contracts from the US Government.’

Russian companies’ arms sales remain stable
The combined arms sales of the 10 Russian companies in the 2018 ranking were $36.2 billion—a marginal decrease of 0.4 per cent on 2017. Their share of total Top 100 arms sales fell from 9.7 per cent in 2017 to 8.6 per cent in 2018. This can be explained by the higher Top 100 total in 2018 due to the substantial growth in the combined arms sales of US and European companies.

Among the 10 Russian companies listed in the Top 100, the trends are mixed: five companies recorded an increase in arms sales, while the other five showed a decrease. Russia’s largest arms producer, Almaz-Antey, was the only Russian company ranked in the top 10 (at 9th position) and accounted for 27 per cent of the total arms sales of Russian companies in the Top 100. Almaz-Antey’s arms sales rose by 18 per cent in 2018, to $9.6 billion.

‘Arms sales by Almaz-Antey, the largest arms producer in Russia, continued to grow in 2018,’ says Alexandra Kuimova, Researcher for SIPRI’s Arms and Military Expenditure Programme. ‘This increase was due not only to strong domestic demand, but also to continued growth in sales to other countries, particularly of the S-400 air defence system.’

Arms sales increase for French companies but decrease for British and German companies
The combined arms sales of the 27 European companies in the Top 100 increased marginally in 2018, to $102 billion. Arms sales by companies based in the UK fell by 4.8 per cent, to $35.1 billion, but remained the highest in Europe. BAE Systems (ranked 6th) is the world’s largest arms producer outside of the USA. Its arms sales dropped by 5.2 per cent in 2018, to $21.2 billion.

‘Six of the eight UK-based companies listed in the Top 100 reported a reduction in arms sales in 2018,’ says Nan Tian, Researcher for SIPRI’s Arms and Military Expenditure Programme. ‘This was partly due to delays in the UK’s arms modernisation programme.’

The combined arms sales of French companies in the Top 100 were the second highest in Europe, at $23.2 billion. ‘The overall growth in arms sales of the six French companies in the SIPRI Top 100 was mainly the result of a 30 per cent increase in sales by combat aircraft producer Dassault Aviation,’ says Diego Lopes da Silva, Researcher for SIPRI’s Arms and Military Expenditure Programme.

The total combined sales of the four German arms-producing companies in the ranking fell by 3.8 per cent. ‘An increase in deliveries of military vehicles by Rheinmetall, the largest arms company based in Germany, were offset by a drop in sales by shipbuilder ThyssenKrupp,’ says Pieter D. Wezeman, Senior Researcher with SIPRI’s Arms and Military Expenditure Programme.

Other notable developments in the Top 100
Eighty of the 100 top arms producers in 2018 were based in the USA, Europe and Russia. Of the remaining 20, 6 were based in Japan, 3 in Israel, India and South Korea, respectively, 2 in Turkey and 1 each in Australia, Canada and Singapore.

The combined arms sales of the six Japanese companies remained relatively stable in 2018. At $9.9 billion, they accounted for 2.4 per cent of the Top 100 total.

The three Israeli companies’ arms sales of $8.7 billion accounted for 2.1 per cent of the Top 100 total. Elbit Systems, Israel Aerospace Industries and Rafael all increased their arms sales in 2018.

The combined arms sales of the three Indian arms companies listed in the Top 100 were $5.9 billion in 2018—a decrease of 6.9 per cent on 2017. The decline is mainly a result of Indian Ordnance Factory’s significant 27 per cent drop in arms sales.

The three companies based in South Korea had combined arms sales of $5.2 billion in 2018, equivalent to 1.2 per cent of the Top 100 total. Their collective arms sales in 2018 were 9.9 per cent higher than in 2017. Bucking the trend, however, was LIG Nex1, whose sales fell by 17 per cent in 2018. The shipbuilder DSME, which was ranked in 2017, dropped out of the Top 100 in 2018.

Arms sales by Turkish companies listed in the Top 100 increased by 22 per cent in 2018, to $2.8 billion. Turkey aims to develop and modernize its arms industry and Turkish companies continued to benefit from these efforts in 2018.

Created in 1966 by the Swedish parliament, SIPRI tracks military spending and arms transfers.

Published in World

A South Korean court, on Monday, jailed three executives of Samsung Electronics for their role in a plot that included burying computers under factory floors at its biotech affiliate, in an investigation of alleged accounting fraud.

Prosecutors began investigating the suspected fraud at Samsung Biologics after South Korea’s financial watchdog complained the firm’s value had been inflated by 4.5 trillion won ($3.82 billion) in 2015.

The episode is the latest legal trouble for South Korea’s top conglomerate, whose leader Jay Y. Lee is embroiled in separate trials in a corruption scandal involving former President Park Geun-Hye.

“The boldness of the defendants’ criminal acts was beyond the public’s imagination and stunned society,” Judge Soh Byung-Seok said, handing down sentences of up to two years.

“Most South Korean people want Samsung … to become the world’s top-class company contributing to the country’s economy, however, if such growth is based on breaches and unlawfulness, it will not be applauded” the judge added.

Lawyers for the executives were not immediately available for comment. Samsung Electronics declined to comment, and representatives of Samsung Biologics were not immediately available for comment.

Published in Telecoms

 

Last month Benin president Patrice Talon shook the establishment table of France-Africa relations when he said in an interview the Francophone nations in West Africa want take more control over their CFA franc currency and plan to move some of their reserves away from France

“Psychologically, with regards to the vision of sovereignty and managing your own money, it’s not good that this model continues,” is reported to have told Radio France Internationale.

But while Talon’s comments was a something of a surprise, it was no longer a shock. Where once the idea of the questioning the status of the France-backed CFA franc seemed heresy,  discussions around its future are becoming more common both from grassroots activists and in offices of African governments and opposition leaders.

Earlier this year, Luigi Di Maio, Italy’s former deputy prime minister and current minister of foreign affairs revived the controversy about the role of the CFA franc on Africa’s development with a provocative statement:“France is one of those countries that by printing money for 14 African states prevents their economic development and contributes to the fact that the refugees leave and then die in the sea or arrive on our coasts.”

Although President Emmanuel Macron of France said he would “not respond” to the statement, he did note that in the past “France will go along with the solution put forward by your [African] leaders.” The statement, however, has brought to question the CFA franc currency zone, the relations between the 14 countries within the CFA zone and France, and their impact on economic and development performance.

There is also a clear divergence in opinion among African leaders using the currency. In a recent trip to France, president Alassane Ouattara of Cote d’Ivoire qualified the discussion about the CFA franc as a “false debate,” considering that the currency is “solid and well-managed” as well as “stabilizing” African economies.

But Chad’s president Idriss Debby said back in 2015 he considers the CFA as “pulling African economies down,” and that “time has come to cut the cordon that prevent Africa to develop.” He called for a restructuring of the currency in order to “enable African countries which are still using it to develop.”

In my book Innovating Development strategies in Africa: The Role of International, Regional, and National Actors, I examine the political economy of the performance and economic development strategies of the countries from CFA franc zone from 1960 to 2010. Building on it and additional research, it is important to address this debate dispassionately with impartial analysis of how the CFA works, the arguments of its supporters and opponents both academically and politically, its broader impact on economic performance, and the options ahead.

The origin story

The CFA franc was created in December 1945 when the French government ratified the Bretton Woods Agreement and became the currency of les colonies françaises de l’Afrique or the CFA (“French Colonies of Africa”). The French Treasury guaranteed the currency under a fixed exchange rate dependent on the deposit of 50% of CFA franc reserves into the French central bank.

The CFA was later split into the Communauté Financière d’Afrique (“Financial Community of Africa”) which included the West African countries Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo and the Communauté Financière de l’Afrique Centrale(“Financial Community of Central Africa”) including Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea, and Gabon.

The Central Bank of West African States and the Bank of Central African States are responsible for coordinating monetary exchanges through operating accounts with the French Treasury. These accounts operate according to several rules, including:

  • Each central bank must maintain at least 50% of foreign assets with the French Treasury,
  • Foreign exchange cover of at least 20% should be maintained for “sight liabilities”
  • Each government is limited to a ceiling of 20% of that country’s revenue from the previous year.

The CFA franc monetary system is designed to guarantee the franc currency in international markets, while simultaneously preventing overdraft and inflation in CFA member countries. Between the early 1950s and the mid-1980s, CFA franc countries had stronger real GDP growth and lower inflation than other sub-Saharan African countries. For example, within the past fifty years, Côte d’Ivoire experienced an average inflation rate of 6%— a much lower rate than its neighbor Ghana, which averaged 29% inflation.

From 1960 to 1978, Cote d’Ivoire averaged an annual GDP growth rate of 9.5%, which then stagnated, while Ghana’s GDP responded positively to structural adjustment programs in the 1980s. Cote d’Ivoire, among other CFA countries, did not respond immediately to structural adjustment programs. Strong growth and low inflation from the early independence period did not survive the economic shocks of 1986 to 1993, and the CFA became significantly overvalued and subject to increasing deficits in the French Treasury’s operations accounts. Domestic production lapsed, and African countries increasingly relied on imported materials. CFA countries’ public debt increased and central banks exceeded statutory ceilings, leading to significant fiscal imbalances.

In1994France devalued the CFA franc, raising the parity rate from 50 CFA francs per French franc to 100 CFA francs per French franc. CFA member countries’ governments imposed wage freezes and layoffs in the wake of the CFA devaluation, leading to widespread unrest over inaccessible goods for consumers and unmanageable price controls for suppliers.

Then Senegalese president Abdou Diouf had promised citizens during his 1993 campaign that franc would not be devalued. So in 1994 thousands of demonstrators responded to this broken promise as many suffered the effects of France bowing to Western pressure to increase the CFA franc’s parity rate. Just one month before the devaluation, Michel Roussin, the French Cooperation Minister, had said there was no chance at devaluing the CFA Franc because France was “very attached to the Franc Zone”.

Growing debates

The challenge of implementing effective monetary policies for growth and stability throughout Africa has led to years of debate over the CFA franc zone. Many European and African leaders have supported its continuation, while others seek separation between France, the European Union, and Francophone African countries.

The debates over the CFA franc often begin with the question of exchange rates and devaluation. Studies have shown that the CFA franc’s convertibility at a fixed exchange rate was the impetus for the 1994 devaluation; an average of 730 million French francs was being converted each month before 1992, which was a massive increase from the less than 284 million French francs converted monthly before 1984.

Monetary policies that were effective in achieving real exchange rate depreciation also resulted in a reduction in government expenditures and a decline in investment. As a positive effect, the unlimited convertibility of the CFA franc to the euro has generally reduced the risk of foreign investment in CFA countries. Though, foreign investment in CFA countries remains low relative to other emerging economies, such as the BRICS economies that include South Africa.

Guinea, which has its own currency, still stands as an example for supporters of the CFA zone. Guinea frequently experiences currency shortages and its central bank does not have sufficient policies to ensure stability, so the CFA zone is presented as a solution to instability in this particular case.

Côte d’Ivoire president Alassane Ouattara has in the recent past contended that CFA zone countries are better off than Anglophone countries due to growth and low inflation, whereas the poor are disproportionately affected by unpredictable inflation in Anglophone countries. What is rarely discussed is that similar or better outcomes could be achieved with other policy options.

In terms of trade, the CFA’s fixed exchange rate to the euro has led to a greater facilitation of trade through the reduction of uncertainty and stabilization of domestic prices. The logic of fixed exchange rates traces back to the Bretton Woods period when 63% of developing countries had their currency pegged to that of an industrial country.

The potential problems with a fixed exchange rate are mostly offset in Central African Economic and Monetary Union (CAEMU) countries, due to these countries’ high levels of excess liquidity from oil revenues. However, West African Economic and Monetary Union (WAEMU) countries have experienced declining liquidity since 2004, thus suffering from the volatility of a fixed rate amidst external shocks.

Ideally, countries in the same monetary union should coordinate member countries’ fiscal policies to offset shocks in different parts of the union. However, no such coordination occurs in the CFA zone.

 

The CFA franc zone as a whole has thus resulted in:

  1. Limited intra-regional trade, especially in Central Africa.
  2. High dependence on producing and exporting a limited number of primary commodities.
  3. A narrow industrial base.
  4. A high vulnerability to external shocks.

A focus on primary commodities and limited intra-regional trade are broadly reflective of CFA franc member countries’ lack of export diversification and low industrialization. Intra-regional trade accounted for about 11% of total external trade of WAEMU countries, 6% of CAEMU countries, and only 9% of all CFA countries’ total external trade.

The CFA franc’s fixed exchange rate is vulnerable to being a pawn on international markets to the detriment of the African economies.

The French government again considered devaluation in 2012, which, while disregarded as a rumor, was assumed to be a method of safeguarding the euro and maintain France’s credit rating. The CFA franc’s exchange rate could thus become a pawn in international markets to the detriment of CFA economies. In 2014, a drop in oil prices increased fiscal and current-account deficits within the monetary zone. Though, African leaders agreed to IMF-supported programs that inspired spending cuts to remedy the deficits instead of changing the exchange rate. This adamant support for the CFA franc’s peg to the Euro challenges the perspective that only European leaders support the fixed rate of CFA francs to Euros.

Debates over the persistence of the CFA franc zone also focus on African states’ independence and sovereignty. Large numbers of unemployed youth throughout sub-Saharan Africa—which may reach over 350 million over the next two decades—are often the loudest opponents of the CFA zone. Other pro-democracy movements, like Y’en a Marre in Senegal and Le Balai Citoyen in Burkina Faso, consider the dismantling of the CFA zone as essential to their campaigns to reform their countries’ respective governments. Other protests have included Kemi Seba, the Benin-born French activist who was charged with burning CFA notes in Senegal before being deported.

Some African economists consider the broader dependency on European monetary policies as a restriction to growth due to a hyper-fixation on inflation. However, African elite and wealthy individuals, the primary beneficiaries of the CFA franc zone configuration, support its continuation. Thus, debates will continue within the various dimensions of class, power, and politics.

The future

Scholars and policymakers have proposed several options to improve the viability of the CFA franc or replace the currency. Each option has advocates and opponents because the different policies target distinct challenges, such as exchange rate independence, inflation control, GDP-growth incentives, and capital mobility. The four most prominent options are to:

l. Tie the CFA franc to a basket of currencies, such as the dollar and the yuan. Pegging the CFA franc to multiple currencies will increase the relative stability of the currency in the event of exchange rate fluctuations of any of WAEMU or CAEMU’s trading partners.

A basket peg based on an import-weighted index, as proposed by Crokett and Nsouli (1977), has also been evidenced to be more beneficial for developing countries. An import-weighted index would be most beneficial for WAEMU due to its high levels of import diversification, while a different configuration, such as an export-weighted index, a bilateral trade index, or an index based on the SDR (special drawing rights) might be more appropriate for the CAEMU zone that is highly focused on primary commodities. Though, in general, severe depreciation of basket currencies would have much graver effects on countries that mainly export primary products, such as CFA countries.

2. Restructure the reserve requirements for CFA franc countries. Higher levels of reserves will ensure the convertibility of the CFA franc, which is currently threatened by changing French and European fiscal policies. This option could be considered a short-term strategy, or precursor to other strategies, that may lead to greater monetary independence for CFA countries. However, in many CFA member countries, high reserves are derived from natural resource revenues, which are subject to changes in world prices and difficult to accommodate in the short-term.

3. Separate WAEMU and CAEMU into optimum currency areas. Optimum currency areas (OCA) have the benefits of high factor mobility, economic interdependence, sectoral diversification, and wage and price flexibility. The challenge is to support the costs related to the establishment of OCAs and ensure the establishment and compliance of uniform regulations.

Though undoubtedly difficult to implement, this configuration could likely benefit both monetary unions because member states’ fiscal policies will be easier to coordinate within a similar regional context. Some research suggests West African CFA members of ECOWAS, the Economic Community of West African States, are already primed to become an OCA because these countries are best suited to integrate their real exchange rates. Although ECOWAS is mulling the launch of “Eco,” a new currency to be used by its 15 member states, including Nigeria, Aloysius Uche Ordu, former Vice President of the African Development Bank recently evaluated its prospects, and argues launching Eco by January 2020 “is, at best, an expensive distraction that the people of West Africa can ill afford at this particular moment”.

4. The establishment of the African Monetary Union. An African Monetary Union would be most challenging to implement and require countries to adhere to strict fiscal rules similar to the CFA zone until stability was achieved. This strategy requires significant investment and capital mobility to ensure a strong exchange rate union and currency convertibility. Movement of labor and capital are necessary to spur economic growth and stabilize relatively different economies. The appeal of an integrated African Monetary Union is the tremendous potential to increase intra-regional trade and encourage domestic production capabilities. However, another monetary union may lead to similar problems of dependence as the CFA franc zone.

Overall, policymakers from the CFA franc zone should analyze the various options to determine a short-term and long-term plan that will increase growth and lead to equitable development of countries that are at different stages. African and European leaders must be resolute and accountable to the various interest groups throughout their two continents.

Any restructuring of the CFA franc will have drastic macroeconomic effects that will require an increase to public investment and provision of public goods, attractive investment policies, development aid, and resource mobilization. The future of the CFA franc is yet to be determined, but it deserves comprehensive, sensitive analysis.

 

 

Source:  Quartz Africa

Published in Bank & Finance

Ghana’s cedi is headed for its 25th straight year of depreciation against the dollar as the government’s fiscal challenges erode investor confidence in the currency of the world’s second-biggest cocoa producer.

The cedi is down 13% so far in 2019, according to data compiled by Bloomberg, poised for the worst decline since 2015, when it slumped 18%. It has declined every year since Bloomberg started keeping records in 1994.

Investors are concerned the government won’t stick to spending targets as it gets closer to an election next year, according to Cobus de Hart, chief economist for west, central and north Africa at NKC African Economics in Paarl, South Africa. The cedi slipped 0.1% on Thursday to 5.67 per dollar, bringing its decline this quarter to 5%.

Ghana's cedi has depreciated every year since 1994

“The overshooting fiscal deficit and debt from arrears is putting pressure on the cedi,” De Hart said by phone. “We have an election coming up next year and portfolio investors are concerned that the plan outlined in the 2020 budget will not be met because revenue continues to underperform.”

Ghana’s budget deficit is forecast to widen to 4.9% of gross domestic product this year, from 4.1% in 2018, according to the median estimate in a Bloomberg survey of economists. The shortfall is rising as the government increases spending to pay for financial-sector bailouts and liabilities in the energy sector.

The central bank’s inability to quickly build foreign reserves due to a deficit in the current account is another source of cedi weakness, De Hart said.

“Even though the trade account is in surplus, the current account is in deficit, impeding accumulation of foreign reserves,” he said. “Gross reserves have hovered around $8 billion for some time now, which suggests that the central bank has not aggressively intervened to support the currency.”

Ghana adopted the cedi in 1965 to replace the Ghanaian pound, which was equal in value to the British pound and its currency since independence in 1957. The “new cedi,” worth 1.2 original cedis and about half a British pound, was introduced in 1967. Decades of high inflation led to a redenomination in 2007, when the new cedi was phased out and replaced by the current currency at a ratio of one to 10,000. It has since lost about 80% of its value.

 

Bloomberg

Published in Bank & Finance
  1. Opinions and Analysis

Calender

« December 2019 »
Mon Tue Wed Thu Fri Sat Sun
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31