The Russian Direct Investment Fund (RDIF) and the ChemRar Group of companies have begun supplying the Avifavir anti-coronavirus drug to South Africa, RDIF announced in a press release.

According to the press release, Chromis, a joint venture established by RDIF, Russia’s sovereign wealth fund, and ChemRar Group, announced the signing of a distribution agreement with South Africa’s 3Sixty Biopharmaceuticals, a subsidiary of 3Sixty Global Solutions Group, to deliver Avifavir, the first Russian anti-COVID drug, to South Africa.

The RDIF stressed in the statement that South Africa has recently seen a rapid increase in the number of patients with coronavirus infection and in terms of infections, South Africa currently ranks 5th globally.

Earlier, 3Sixty Biopharmaceuticals signed an agreement to import Remdesivir to South Africa, which is injected intravenously in hospitals. However, because South Africa has a shortage of hospitals it needs other effective ways to treat patients with COVID-19, the RDIF said.

"Avifavir is effective in the early and middle stages of infection. Treatment of outpatients with Avifavir can help decrease the number of hospital admissions and reduce the burden on the healthcare system," the RDIF said.

"South Africa is the second BRICS state after Brazil to which RDIF and ChemRar have agreed to supply Avifavir. Thanks to the agreement with 3Sixty Biopharmaceuticals, doctors in South Africa will obtain an effective tool to treat patients at an early stage, preventing the progression of the disease and risk to the lives of patients," Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said as quoted by the press release.

Avifavir is produced by a joint venture of RDIF and ChemRar Group. It is one of the two registered COVID-19 drugs in the world. Avifavir has also become the first Favipiravir-based drug in the world approved for treatment of COVID-19. It has shown high efficacy in clinical trials, disrupting the reproduction mechanisms of coronavirus.

On May 29, Avifavir received a registration certificate from Russia’s Ministry of Health and became the first Russian drug approved for treatment of COVID-19 patients. On June 3, the Ministry of Health included Avifavir in the seventh edition of the guidelines for the prevention, diagnosis and treatment of the novel coronavirus infection.

The International Monetary Fund (IMF) has approved a R70 billion (US$4.3 billion) loan for South Africa to help the country manage the immediate consequences of the fallout from COVID-19. The Conversation Africa’s editor, Caroline Southey, asked Danny Bradlow to shed some light on what South Africans should expect.

What conditions has the IMF attached to the disbursement?

The IMF has provided the funding through its Rapid Financing Instrument. This is designed to support countries facing an urgent need for financing due to a crisis such as the COVID-19 pandemic. The goal is to help the country face the immediate financial consequences of the crisis. As a result the IMF provides the financing quickly and without strict conditions. The country merely needs to show the IMF that it is facing a crisis, that it will use the funds to deal with the crisis, that it will cooperate with the IMF to solve the balance of payments problems caused by the crisis and to describe the economic policies that it proposes to follow.

In some cases, the IMF may require the country to undertake certain policy actions before it can access the funds.

In South Africa’s case, the country’s payments problem relates to the fact that the economy is expected to contract by about 7% this year and the budget deficit to increase to about 15% of GDP. This means that the government will need to increase the amount it has to borrow. Given that it has been downgraded by credit rating agencies, and that the economy is in bad shape, there is a substantial risk that both local and foreign investors will have a limited appetite for South African debt. This will complicate the government’s efforts to finance the deficit.

The IMF loan helps resolve this problem.

South Africa provided the requisite information to the IMF in the form of a letter of intent signed by the minister of finance and the governor of the Reserve Bank. The letter has not yet been made public. But, according to the IMF press release, South Africa seems to have informed the IMF that it intends to take certain steps to stabilise the country’s finances. This means that the government will cut government spending to reduce its need to borrow. The current disputes over public sector wages and funding for state owned enterprises are examples of steps it could take. The government has also said it will improve the governance of state owned enterprises, and introduce reforms to stimulate a growing and inclusive economy. These reforms could include measures to improve competition in different sectors of the economy.

South Africa made these undertakings in last October’s medium term budget statement and in the supplementary budget statement in June this year.

This suggests that the IMF is merely expecting the country to implement the policies already announced by the government.

How will the money be disbursed?

This kind of financing is provided in one payment. The IMF press statement doesn’t say when the funds will be disbursed but the goal is to make the funds available “rapidly”. That could be as early as August.

Once the funds are disbursed, the government will be free to spend them. According to the national treasury’s statement, it plans to use the money to support health and frontline services, to protect the vulnerable, drive job creation, support economic reform and stabilise public debt.

These are all consistent with the purpose of the Rapid Financing Instrument and the government’s stated intentions.

But these purposes are very general and we will need to see more detail about what exactly the government will spend the funds on.

What restrictions are there on the government’s ability to use the money?

The IMF loan does not impose any conditions over and above what is in South African law on how the funds can be used. Consequently, the funds will be subject to the same procurement and accounting requirements as all other budgetary expenditure.

In addition, the government will have to account in its future budget statements and reports to parliament on how the funds have been used. South Africans will also be able to demand that the government demonstrate that the funds have been spent consistently with the requirements of the constitution and bill of rights. This means the government should show that it is using the maximum available resources, from whatever source, to help realise all the rights that the constitution and South Africa’s international commitments grant to South Africans.

The IMF requires that South Africa repay the funds to the IMF over 20 months beginning 40 months after the loan is disbursed. This means that South Africans will need to ensure that the funds to repay the IMF are properly budgeted for.

What are the upsides of the loan?

The most important benefit is that South Africa is getting $4.2 billion at about 1.1% interest. This is a very cheap source of funds. If the government tried to raise the same amount either on domestic markets or from other international sources it would pay a considerably higher interest rate – the current rate for government bonds of comparable maturity is about 7%.

The second potential benefit is that the IMF loan will catalyse other funds for the country. In other words investors in South Africa and abroad will interpret the IMF’s action as an expression of support for South Africa and this will give them the confidence to invest in South African debt. Given that foreign investors hold about 30% of South African government’s rand denominated debt this boost to confidence could be important. It will both reduce the incentive of these investors to sell their government bonds, potentially pushing up interest rates, and enable the government to issue new debt if needed.

The third benefit is that by helping to stabilise South Africa’s situation, it will limit the damage that may be inflicted on the neighbouring countries. This, in turn, could help South African exports and thus help preserve jobs and income in South Africa.

What are the downsides?

The most significant downside is that the loan is denominated in foreign exchange. Thus South Africa has to bear the risk that if the rand depreciates, the loan and the interest on it will become more expensive. Given the state of the South African economy, this is not an insignificant risk.

But it’s important to keep in mind that the IMF denominates the loan and the repayment obligations in Special Drawing Rights. These are the IMF’s special form of money and its value is made up of a composite of a basket of currencies. These include the US dollar, the euro, the Japanese yen, the Chinese renminbi and the pound sterling. The values of these currencies tend to fluctuate against each other so that some appreciate while others depreciate. This helps mitigate the foreign exchange risk that South Africa must bear.

The second risk is that if South Africa does not use the funds from the IMF wisely, the country’s economic situation will deteriorate and it will struggle to pay back the debt.

If this happens or the pandemic lasts longer than anticipated, the country could be forced to seek additional support. In either case South Africa’s negotiating position would be significantly weaker.The Conversation

 

Danny Bradlow, SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The South African government has asked the International Monetary Fund (IMF) for $4.2 billion. The money would come from a facility that provides financing to countries

facing an urgent balance of payments need, without the need to have a full-fledged program in place.

According to the IMF managing director this means that the recipient can spend the money freely but should keep the receipts. Nevertheless, reports that South Africa has been negotiating a letter of intent with the IMF suggests that at least part of the financing will be linked to tougher IMF conditionalities.

The letter of intent is a letter from the government to the IMF in which it sets out the policies that it intends to implement to correct the macro-economic problems that caused it to seek IMF support. The IMF board decides to provide a country with financing on the basis of this letter. Its contents are the core of the conditionalities attached to IMF financing.

South Africans will learn the actual terms of the IMF financing at the end of July when its board of directors considers the country’s request for financial assistance.

But many have already made up their minds about this transaction. Some see it as a humiliating defeat in which the country will be forced to surrender its sovereignty and accept demeaning and immiserating economic policies. Others see it as the first step back from the abyss. They expect the IMF to force the country to take its medicine, as bitter as it may be, and regain economic health.

Both these views are overwrought and ultimately misleading. South Africa has more bargaining power in its relationship with the IMF than either view suggests. In the end, the terms of the IMF arrangement will depend on how effective the government was in its negotiations with the IMF.

To understand this, we need to answer three questions: Will South Africa have to surrender part of its sovereignty to the IMF? Is the IMF a particularly unreasonable negotiating partner? What responsibilities does the IMF have in negotiating the conditions?

The three questions

Will South Africa have to surrender part of its sovereignty to the IMF?

Sovereignty is a complicated and sensitive issue. It raises concerns about a state’s autonomy and ability to control its own destiny. One manifestation of sovereignty is a state’s decision to sign an international agreement. It shows that it is an actor on the international stage capable of reaching binding agreements with other subjects of international law – states and international organisations like the IMF.

Nevertheless, most international agreements restrict the sovereign’s freedom of action.

Consider, for example, the African Continental Free Trade Agreement. This agreement obliges South Africa to open – and keep open – its economy to trade with the rest of Africa. Before agreeing to this limitation on its freedom of action, South Africa negotiated with its co-signatories to minimise the cost of its commitments and maximise the benefits it expects from the arrangement.

South Africa’s arrangement with the IMF is similar. It is exercising its sovereign prerogatives when it decides to enter into an arrangement with the IMF. Before doing so, the country should negotiate for the best possible deal with the IMF.

Is the IMF a particularly unreasonable negotiating partner?

No bank, charitable foundation or international financial institution provides large amounts of financing without attaching conditions designed to ensure that the recipient uses the funds responsibly and pays them back as agreed. These conditions can range from demanding collateral to requiring promises that restrict the recipient’s future conduct in some way, such as limiting the ways in which it can use the funds.

The IMF conditions its financing on policy measures rather than on collateral or promises about the use of the funds. Historically, these conditions were ideologically driven and controversial. They included reducing the economic role of the state, making economies more market friendly and more globalised.

More recently the IMF leadership has incorporated issues such as inclusiveness, sustainability, social safety nets and gender parity.

It is not easy to predict what the exact mix of conditions will be in any particular case. The experience of other countries suggests that the actual mix is a negotiated outcome. Consequently, the conditions’ content and wording will depend on the country’s economic situation, its willingness to engage in tough negotiations with the IMF and on how effective it is in convincing the IMF of the validity of its positions.

What responsibilities does the IMF have in negotiating the conditions?

The IMF’s Articles of Agreement states that it should help countries

correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

Thus, the IMF should demonstrate that whatever conditions it attaches to its funding are consistent with the recipient’s prosperity over the medium term. It must also show that it is not helping one IMF member state at the expense of its responsibilities to other member states.

In addition, the IMF, like any international organisation, should comply with applicable customary international law principles.

First, it must respect the sovereignty of its member states, including their laws. Second, it must respect their international legal obligations and not undermine their ability to meet these obligations. Third, the IMF, which is a specialised UN agency, should, pursuant to the Universal Declaration of Human Rights, [contribute to securing the

universal and effective recognition and observance" of human rights.

Based on these principles, the IMF has three responsibilities in regard to its arrangement with South Africa. First, it must ensure that the conditions attached to its financing are consistent with the South African constitution. In particular this means that the IMF must ensure that its conditionalities are consistent with the bill of rights in the constitution.

Second, the IMF must make sure that it does not require anything that is inconsistent with South Africa’s treaty commitments. These includes the state’s international human rights and environmental obligations. Out of respect for South African sovereignty, the IMF must defer to South Africa’s interpretation of these commitments, provided they are not inconsistent with international law.

Third, the IMF should explain how it has determined that the effect of its conditionalities is consistent with the applicable international legal principles. It is important to note that this requirement does not mean the IMF cannot require the state to take such actions as cutting its budget. But it does mean that the IMF has a responsibility to show that these cuts are the least cost way of achieving its objectives.

South Africans should not view the IMF either as the protagonist in its nightmares, or as its saviour. Instead the country should treat it as it would any other financial institution. It should demand that it live up to its own international responsibilities and demonstrate why it thinks its agreement with the government will benefit all South Africans.The Conversation

 

Danny Bradlow, SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria

This article is republished from The Conversation under a Creative Commons license. Read the original article.

When it comes to public transport, there is a responsibility both on operators and on commuters to make the required changes to their travel and commuting behaviour. This is the only way in which we can hope to keep coronavirus infection rates under control.

The comment comes from a manufacturer and distributor of cleaning products INDUSTROCLEAN, following an announcement made by President Ramaphosa on Sunday night on the regulations and limitations for long and short distance taxi journeys.

Emma Corder, Managing Director of INDUSTROCLEAN, says the reality is that public transport is a high-risk environment because of the number of people in a confined space with limited ventilation. There is also little if any access control to identify potentially sick commuters as well as a variety of common surfaces to touch such as handrails and doorknobs.

“All parties involved in public transport – taxi operators, bus companies, train operators and commuters – have to take the necessary precautions,” she says.

It starts with the wearing of a mask, explains Corder.

“This is a critical way to protect yourself and others, and it is equally important to wear it correctly. Masks block droplets from your sneezes and coughs and minimizes the likelihood of you touching your face and either spreading or coming into contact with the virus from other people.”

Eating requires removing the mask in a high-risk situation, so change habits and eat and drink before or after the ride. It will benefit others just as much as it helps you stay safe and virus free, she adds.

Secondly, it’s important that commuters sanitize their hands before and after each trip. Most transport operators provide hand sanitizers but having your own on hand is always advised. 

“Carrying your own hand sanitizer will not only keep you safe but also provide peace of mind during your commute,” commented Corder. It is important that the sanitizers contain 70% alcohol.

Other tips include:

  • First a good deep cleaning and disinfection with a hospital grade disinfectant is advised. It is important that all vehicles be cleaned both in and outside. They need to be wiped down on the inside after both the morning and afternoon peak-hour periods, on a daily basis.
  • Regularly deep clean all seats, rails and windowpanes in public service vehicles washing down surfaces with soap and water and disinfect them with a hospital grade disinfectant.
  • For normal cleaning, using the spray and wipe method is effective and disinfectants should be freshly prepared and National Regulator for Compulsory Specifications(NRCS) registered.
  • Hand washing facilities and alcohol-based sanitizers should be placed at strategic points such as security check points, as well as entrances of public transport interchanges and public toilets.
  • Review the stock and availability of essential protection and cleaning equipment and supplies and plan their distribution and refill beforehand.

During travel: 

  • All individuals accessing a taxi, bus or train must undergo temperature screening.
  • Make sure all commuters sanitize their hands before boarding.
  • All commuters must wear a mask at all times.
  • Provide adequate waste management facilities (waste bins and bin-liners).
  • Avoid overcrowding and body contact. Keep a distance from each other. Owners and operators of public transport vehicles are advised to find more innovative ways to avoid overcrowding.
  • Ensure good ventilation and respiratory hygiene in all public transport vehicles.
  • AVOID handshakes at all times.

“We all have to remain vigilant as the number of coronavirus infections continue to rise. By following these simple daily guidelines we can all work together to keep the infection number as low as possible,” says Corder.

South African banks are looking at options ranging from debt consolidation to new ways of leveraging equity to avoid defaults when coronavirus-related debt relief measures end, industry officials said.

The banks gave customers in good standing relief on loans during the pandemic, including payment holidays of up to three months. But some consumers are still in trouble.

Some banks have offered extensions, while others like Capitec offered to refund interest accumulated during payment holidays.

Jacques Celliers, CEO of FirstRand’s retail division, said the lender was worried about the impact of job losses and wanted to avoid a wave of property evictions that would affect prices.

Mortgages make up 59% of 489 billion rand ($28.88 billion) in loans considered at risk, according to the Banking Association of South Africa (BASA).

“We’ll have to be very clever between all of us as to how do we navigate the property game,” Celliers said.

Options could include leveraging the equity in properties, including family members’ properties, in new ways, using pensions or granting term extensions on mortgages, he said.

Anton de Wet, chief client officer in Nedbank’s retail and business bank, said debt consolidation on home loans was a possibility and that term extensions, as well as other solutions, could be discussed with customers individually.

Standard Bank also said its solutions were based on individual clients’ circumstances. Absa said it would make an announcement on its post-debt relief plans in the near future.

Banks have already warned of rising bad loans: Capitec, for instance, said its credit impairment charge was 145% above expectation and it had increased provisions by 3.3 billion rand since February.

Some banks have applied a less-stringent approach to provisioning for loans granted relief after regulators allowed more flexibility in strict new accounting rules.

BASA managing director Bongiwe Kunene said higher provisions could be triggered if consumers can’t keep up with payments following the relief period.

 

Reuters

There isn’t enough clinical research being done in Africa. Less than 2.5% of all clinical trials in the world are done on the continent. This is why South Africa’s involvement in one of the COVID-19 vaccine trials is so important. The country’s effort is being led by Professor Shabir Madhi. The Conversation Africa’s health and medicine editor Ina Skosana spoke to him about the process, and what can be expected. This is an edited version of a podcast, which you can listen to here.


How does the trial work?

The study that we embarked on in South Africa is for a vaccine that was developed by the Jenner Institute at the University of Oxford. It’s what is known as a non-replicating vector base COVID-19 vaccine.

The study came about when I reached out to the principal investigator at the University of Oxford whom I’ve known for over 20 years to find out if there was any interest on their part to include South Africa as part of the clinical development plan of the vaccine. The short answer was yes, provided we conducted the study on our own, including raising the funding to conduct the study.

The agreement with Oxford University preceded a subsequent agreement that they’ve entered into with AstraZeneca, the pharmaceutical company responsible for the further clinical development of the vaccine and future manufacturing. Pre-clinical studies of this vaccine candidate, including in non-human primates, have demonstrated initial evidence of the safety of this vaccine, as well as its ability to protect against COVID-19 disease.

Why South Africa?

The main reason is that the legacy of vaccines shows that they don’t necessarily work similarly across different populations. So if we want to be one of the early adopters, in terms of implementing vaccination against COVID-19 as part of our immunisation programme, we really need to generate data applicable to the local context.

 

A number of past vaccines have been shown to be highly efficacious in high income settings. But when they’ve gone on to be evaluated in low and middle income settings, they were found to be much less efficacious and, at times, not efficacious at all.

So if we want to make informed decisions at an early stage about whether these vaccines are going to be of benefit to people in South Africa, it’s critical that we undertake the clinical evaluation during the start of the entire programme, rather than at the latter stage. Waiting for results to come in from other studies would just lead to a lag in terms of the timing when vaccines would be introduced in South Africa as well as other low and middle income countries.

This has been the experience for many other life saving vaccines where it has taken between five and 20 years between their availability in high income countries and low middle income countries.

How are participants chosen for the trial?

Participation is completely voluntary.

Participants typically come to inquire about the study at clinics. We sit down with them and explain what the study is all about. What are the criteria for joining, what the expectations are of the volunteers because the study has quite intense expectations in terms of being able to come for regular visits. And they obviously need to be agreeable that when they do participate in the study, if they do develop signs and symptoms suggestive of COVID-19, that they would come forward to be investigated. This is critical for us to be able to determine whether this vaccine protects against COVID-19.

In addition, we would do some blood tests which ensures that they don’t have any sort of medical conditions that we would want to exclude.

If they’re found to be eligible, we randomly allocate them to one of two groups. Half will receive the vaccine, and the other half a control substance, which in our case, is a placebo. This is important for two reasons. The first is that it allows us to provide robust data in terms of the safety profile of the vaccine. And the control group enables us to determine whether the vaccine actually does have any impact in protecting against COVID-19.

Is there any reason people should be sceptical of the trial?

The short answer is no. The narratives that Africans are being used as guinea pigs is fundamentally incorrect. Rather a case of us wanting to generate robust scientific data to be able to make informed decisions about whether those vaccines actually do protect South Africans – and possibly Africans more generally – against developing COVID-19.

What are the next steps?

Right now we busy enrolling into the clinical trial. We’ve just reached the 200 mark out of the 2000 participants that we plan to enrol. We expect to have completed enrollment of all the volunteers over the next three to four weeks.

After that we will keep in touch with all of the participants at least every two weeks, including weekly SMS messages to determine whether or not experiencing any signs or symptoms of COVID-19. And if they are they will be asked to come in to be investigated to determine whether they are infected or not.

The endgame of the study is twofold. One is obviously to evaluate the safety of the vaccine, which is something that is ongoing almost on a daily basis.

The second part is that once we have about 42 individuals that have developed COVID-19 at least about a month after they’ve received the first dose of either the vaccine or the placebo we will then be able to do an analysis to determine whether the vaccine actually does protect against COVID-19. Specifically we will be testing if the vaccine efficacy is at least 60%; that is by being vaccinated your risk for developing COVID-19 will be reduced by at least 60% if not more.

 

We anticipate that we will probably be able to provide an answer as to whether this vaccine works and protects against COVID-19 by the end of November this year. In the worst case scenario it might take us a bit longer probably into the second quarter of next year.

What about managing expectations?

It’s very exciting to be involved in the sort of clinical development of the vaccine. But we need to be guarded in terms of our expectations as to what the result will be.

The fact that we’re embarking on a clinical trial doesn’t mean that we’re going to have a vaccine that’s going to protect against COVID-19.

Only about 10% of vaccines that go into clinical trials are eventually licensed for use. Right now there’ are approximately 200 vaccines that are being developed for COVID-19. It would be a huge accomplishment if, over the next 12 to 18 months, we are successful showing that even one out of every 20 (5%) of the vaccines that go into human studies are safe and provide some protection against COVID-19.

So even though there’s a huge amount of work taking place around vaccines, at least for the next 12 months the only tools that we’ve got available to us to try to protect people is adherence to physical distancing, the wearing of face masks in public spaces, avoiding mass gatherings, and making sure that you’re in adequately ventilated settings when in public spaces.

 

Anyone living in South Africa who is interested in participating in the study can e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.The Conversation

Shabir Madhi, Professor of Vaccinology and Director of the MRC Respiratory and Meningeal Pathogens Research Unit, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

An analysis of financial inclusion in South Africa shows that affordability limits poor households’ access to formal financial services.

In our study, which looked at people’s use of financial goods and services between 2008 and 2015, we found that there was a general increase in use. But this was severely skewed to households with higher incomes.

Financial inclusion is broadly defined as the ability of people to access a range of affordable financial services. Among these are bank and savings accounts, loans and insurance products. Households that are financially excluded can’t take part in various forms of savings or wealth accumulation. These range from paying bills via direct debit to gaining favourable forms of credit.

The key policy implication of our findings is that more financial services should target low-income households. It should be a priority, given the high rate of exclusion among the poor.

Measuring use based on income

In general, there are four dimensions of financial inclusion: access, usage, quality and welfare. In our study, we focus on usage.

The financial services available in South Africa range from the well-known ones such as bank accounts and credit cards to the less well known ones such as hire purchase agreements and loans with “mashonisa” (loan sharks). In the South African context, a bank account remains the most used financial service. The number of unbanked adult individuals decreased from 17 million to 14 million between 2003 and 2017.

Our study is the first to thoroughly investigate the data from the National Income Dynamics Study. This study interviews the same households (if possible) every two years to track the changes in their income and non-income welfare over time.

One standout feature of the study is that it asks household heads about their usage of 14 financial services.

With the aid of some statistical techniques, we developed an aggregate financial usage index to investigate the profile of people who were comprehensively financially included.

What we found

The study found that the increased use of financial products and services was mostly associated with higher income households. The other characteristics of individuals and households that showed higher usage of financial services were: middle-aged, male, white, more educated, urban residents in Western Cape and Gauteng provinces. They came from bigger households with more employed members.

The likelihood of complete financial exclusion was more prevalent in poor rural households living in the Eastern Cape, KwaZulu-Natal and Limpopo provinces. Almost invariably, these households were made up of black people. The study also found that households with low real per capita income and fewer employed members were associated with greater likelihood of financial exclusion. Households bigger in size and headed by middle-aged people were associated with significantly higher financial inclusion and lower likelihood of complete financial exclusion.

The table below presents the proportion of households with at least one adult member having some form of the observed financial services. The results indicate that there has been an increase in the use of most financial services between waves 1 (2008) and 4 (2014/2015). In particular, the proportion of households that have at least one member with a bank account increased from almost 57% in wave 1 (2008) to over 78% by wave 4 (2014/2015), while those with a personal loan from a bank nearly doubled (8.63% to 16.41%) between the first (2008) and last waves (2014/2015).

Proportion of households with at least one adult having some form of financial services. Author supplied

We also considered variables from informal financial sources, such as loans from mashonisa (loan sharks), which have increased from 1.69% in wave 1 to 2.97% in wave 4, and loans from a family member, friend or employer, which increased from less than 2.85% to 8.76%. The use of other important services, such as hire purchase agreements, store cards and pension or retirement annuity plans, also increased across the four waves. There is a decrease in the use of some of the major financial services. For example, households where at least one member reported to have a home loan or bond were at 8.63% in wave 1 and gradually declined over the years, ending up at 5.68% by wave 4. There was also a slight decline in study loans and vehicle finance.

One finance source that particularly stands out is the use of credit cards, which decreased from 12.5% (wave 1) to 9.74% (wave 4).

In all four waves, households that were regarded as poor had relatively lower rates of use of each source of finance.

Poor households had relatively lower rates of use.

The figure below shows the proportion of households that were completely financially excluded (they didn’t have any of the 14 sources of finance). It more than halved between the first (36.77%) and fourth (16.40%) waves.

Proportion of households completely financially excluded.

What next?

Supporting alternative, black finance access and usage is one possibility. This may range from low-cost bank accounts and products to advanced technologies that deliver financial services to the excluded in a swift, affordable and efficient manner.

Other countries can be used as a case study.

For instance, in India, the government and private providers have worked together to grow access to financial products such as insurance at a lower cost. The Indian government founded a social security fund that finances insurance companies to subsidise insurance premium policies offered to poorer households. This initiative has provided over two million poor Indians with access to insurance policies.

The promotion of money pools is also another option. A study conducted from five Caribbean countries showed that money pools, where poor people pool their money and create collective banks, helped people save. In Cameroon, the practice of lending and saving through kinship and financial networks was found to be more trusted than the mainstream.

This clearly calls for a proactive financial system that promotes such channels and one that is trusted by the general public, especially low-income earners.

But financial inclusion initiatives directed at the poor should be closely monitored. This is because they don’t always have a positive impact, particularly on poor people.The Conversation

 

Velenkosini Matsebula, Lecturer, Economics, University of the Western Cape and Derek Yu, Professor, Economics, University of the Western Cape

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Despite a statement from the the Botswana government that President Cyril Ramaphosa had sent Intelligence Minister Ayanda Dlodlo as his envoy to Gaborone, News24 has learnt that the trip has been called off.

The Botswana government said in a statement on Monday that President Mokgweetsi Masisi would meet with Dlodlo on Tuesday afternoon. The statement was further posted on Masisi's official Twitter page.

However, prior to the confirmation by the Botswana government, Ramaphosa's spokesperson Khusela Diko denied that an envoy had been appointed.

"The president has not and has no intention of appointing an envoy to Botswana in relation to the cases involving Bridgette Radebe," she said.

Diko said no minister had been tasked to deal with the matter.

News24 understands the trip was called off after we posed questions to the presidency.

The now cancelled meeting comes as the Botswana government had approached AfriForum to assist it in tracing millions of Pula allegedly laundered from the country.

Botswana's Director of Public Prosecutions (DPP), advocate Stephen Tiroyakgosi, last Tuesday bemoaned the lack of response from South Africa's Department of International Relations and Cooperation (Dirco) after its request for mutual legal assistance in the matter.

Motsepe-Radebe is implicated in allegations of money laundering.

Accusations denied

Last week the Botswana government announced it had enlisted the services of AfriForum's Gerrie Nel to get the Department of International Relations and Cooperation to respond to its request made last September.

The move by Gabarone is expected to cause diplomatic tensions between it and Pretoria.

Speaking to City Press, Motsepe-Radebe had challenged the Botswana government to "produce evidence that such a large amount of money left the country in the first place and how and if the Reserve Bank of Botswana has no records of that".

She also bemoaned the fact that the names of her relatives – Ramaphosa is her brother-in-law and Patrice Motsepe is her brother – come up whenever the case is mentioned.

Motsepe-Radebe has denied the accusations.

She further stated that she would "welcome the South African government assisting the Botswana government with its request for mutual legal assistance … These allegations are harmful to my reputation and to all the other citizens that have been referenced in the affidavit".

Late last year, she was named as a co-signatory in two South African bank accounts holding more than $10 billion (R170 billion) allegedly stolen from the Botswana government.

Nel further told the media that: "Money originating from the Bank of Botswana was illegally laundered through various international accounts and pertinent to this particular account, $48 billion found its way to bank accounts in South Africa."

 

A growing insurgency in the northern parts of Mozambique has caught the attention of conflict analysts and observers worldwide.

There is now even a possibility that the South African National Defence Force might become involved in the most northern Cabo Delgado province, with a view to ending the deadly violence and litany of atrocities, abductions and destruction of infrastructure.

Should the South African government decide to send in its military, the main aim would be to focus on the violent activities of an extremist and militant Islamic group, Ahlu Sunnah Wal Jammah. It is also locally known as Al Shabaab, even though it has no connections with the Somali movement of the same name. The group aims to establish its own mosques and madrassas to enhance the spread of its radical dogma.

Ahlu Sunnah Wal Jammah started as a religious sect which turned into a guerrilla group. Initially its goal was to impose Sharia law (Islamic law) in Cabo Delgado. It rejected the state’s schooling, health system and laws, which resulted in much tension in the province. Some analysts argue that the movement is motivated more by greed than by dogma or grievance: that it is making millions of dollars a week through criminal activities relating to mining, logging, poaching and contraband.

Be that as it may, many of its members appear to be socio-economically marginalised young people without a proper education and formal employment. They have been joined by young immigrants in a similar marginalised position. It is estimated that the movement’s members are organised in tens of small cells along the coast of northern Mozambique.

There is rightly widespread concern over these developments. Should South Africa – and specifically its defence force – get involved, it would certainly be venturing into a highly violent and complex landscape, requiring a counter-terrorism type of operations.

Such operations are always highly challenging. Countering terrorist and insurgent forces in Mozambique could be as challenging as the protracted operations against Boko Haram and Al Shabaab, the militant Islamist sects that operate predominantly in Nigeria and Somalia, destabilising large areas with their terror campaigns.

Why should there be serious concern over the situation in Mozambique?

Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa and eSwatini. Four of these six countries are landlocked, and hence depend on Mozambique as a gateway to global markets. Events in Cabo Delgado could thus threaten regional stability.

Even though Mocímboa da Praia, which is regarded as the headquarters of the extremists, is about 2,500km from South Africa, the group nevertheless poses a challenge to the country too. After all, Mozambique has strong economic ties with South Africa as the region’s economic engine. Regional stability is certainly in the interest of South Africa.

From a South African standpoint, four main issues stand out. These are: the danger of the spread of Islamist extremism so close to home; the strategic importance of the area under siege; weakness of Mozambican security forces; and combating organised crime.

Violent extremism

This is the first case of violent extremism of this kind in southern Africa. It is also the first manifestation of a militant movement which is associated with the Islamic State of Iraq and Syria, and the notion of a jihadist insurgency.

Until recently, acts of terror conducted by extremists in southern Africa were confined to Tanzania and Zanzibar.

The death toll and displacements of Mozambican locals in Cabo Delgado are difficult to verify. But reports indicate that more than 1,000 people have died and about two million are affected by the crisis overall.

Secondly, in recent years massive offshore natural gas deposits have been identified, drawing some of the world’s biggest energy players. Offshore exploration in the Cabo Delgado area is among Africa’s three largest liquid natural gas projects.

Investments of billions of dollars have already been made, but an escalation of violence is putting the future of these investments at risk.

These projects could be of major importance to poverty alleviation in the country. Poverty affects most of those in rural areas with low levels of formal education. Economic activity in Mozambique has improved in recent years and has the potential to strengthen in the foreseeable future. But much will depend on the megaprojects in Cabo Delgado, debt restructuring, COVID-19, macroeconomic stability and improved political and economic governance, among other key factors.

For decades, South Africa has experienced an illegal influx of Mozambicans due to development challenges in their country. Thus, economic, political and social development in Mozambique are of the utmost importance to South Africa, which is battling massive poverty and unemployment of its own.

Although exploration in Mozambique is offshore, support facilities are onshore and most vulnerable to attacks. The foreign companies with their massive investments feel threatened, especially now that final investment decisions have to be taken.

South Africa has another interest in these developments. The South African energy and chemical multinational Sasol has invested heavily in gas exploration projects since 2014.

The arrival of foreign companies has led to deep discontent among local people who are deeply aggrieved by their activities. They had to relocate to make way for the infrastructure development, amid complaints about the compensation they received. They’re also aggrieved that they have been resettled inshore, away from the coastal fishing areas.

These factors further complicate security challenges in the very delicate social landscape. Moreover, the insurgents can easily exploit local grievances as matters play into their hands.

The Mozambican military and police have proven to be no match for the militants. They have been unable to prevent them from taking the northern strategic town of Mocímboa de Praia, as well as invading a town near Quissanga.

To counter the growing insurgency, the Mozambican government has contracted the Wagner group, a private Russian military company, to assist government forces. But the situation appears to have gone from bad to worse.

A South African security group, the Dyck Advisory Group, was also allegedly assisting the Mozambican government.

A fourth cause for concern over dynamics in the Cabo Delgado province relates to organised crime. The area is a major conduit for smuggling drugs and other contraband. The volume of heroin produced and shipped from Afghanistan along a network of routes, via East and southern Africa, has increased considerably in recent years.

Cabo Delgado is a key point for smuggling drugs, wildlife, timber, gems and gold. The insurgency makes it more difficult to enforce the law in the province.

No choice

Operations aimed at countering Islamist extremists tend to continue for many years. Success at curbing violent terrorist attacks requires careful and long term responses.

Ideally, these should comprise a mixed set of interventions, including social reform, economic development and varying degrees of military force.

South African political involvement is now almost inevitable as the Southern African Development Community has already undertaken to help Mozambique in its fight against the insurgency. This makes it highly likely that South Africa’s military forces will somehow get involved.The Conversation

 

Theo Neethling, Professor of Political Science, Department of Political Studies and Governance, University of the Free State

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The provisional liquidator for state-owned regional airline SA Express says that the number of parties interested in buying or investing in the airline has grown from just two to seven, while its ultimate fate it still being considered.

Aviwe Ndyamara was briefing Parliament's Standing Committee on Public Accounts on Wednesday. The briefing took place after the North Gauteng High Court in Pretoria ruled on Monday that the airline's provisional liquidator could sell or transfer the airline's property.

While SA Express and SAA are both state-owned airlines, they are distinct businesses. SAA was placed into business rescue in December 2019. Its business rescue practitioners published their long-delayed business rescue plan on Tuesday evening.

About two months after SAA went into voluntary business rescue, SA Express was placed into business rescue by an order of the court. It entered provisional liquidation in late April this year after its joint business rescue practitioners filed an urgent court application.

Ndyamara he told parliamentarians on Wednesday that the the regional airline's liquidators would continue investigating the affairs of the company while starting to engage a sales process.

"We are not yet in the position to quantify the costs of the sales process; however, all expenses incurred will form part of the liquidation administration expenses. We are in the process of engaging more than six interested parties," said Ndyamara.

Ndyamara said with the finalisation of an interim valuation complete, the liquidators managed to reduce the bond of security of SA Express from R1.8 billion to R113 million. This refers to security required by a master of the high court when appointing a custodian, in this case the provisional liquidators, over an asset, in this case SA Express.

He said the airline had an ongoing lease agreement for offices and hangars for R2.2 million a month, and ongoing aircraft and engine lease agreements of no less than R22.5 million a month.

"Immediate consideration must be given to the termination of the onerous lease agreements however this may result in an impact of the licenses," Ndyamara said.

The airline currently holds two licenses which are scheduled to expire in late July, as well as approval to act as an aviation security training organization approval which expires on 31 December. Ndyamara said the liquidators hoped to engage a sales or investment process before the licenses expire.

'Never investors, only vultures'

SCOPA members found little comfort in the submission of the liquidators in terms of ensuring accountability for the transactions, leadership failures and mismanagement that sent SA Express on the path to business rescue.

SCOPA member and Democratic Alliance MP, Alf Lees, asked Ndyamara what the funding expectations were for the parties interested in buying or investing in the airline.

He also asked what actions have been taken to hold accounting officers accountable for a failure to pay the South African Revenue Service or pay over Unemployment Insurance Fund provisions.

Ndyamara said the North Gauteng High Court ruling empowered liquidators to inquire about specific transactions at the airline. He agreed that there were statutory payments that were not honoured.

"We are extremely early in the liquidation process. It is early stages. If you look at the extension of our powers, it looks at inquiries where we can investigate these affairs and transgressions that may have happened before business rescue or liquidation," he said.

ANC MP Mervyn Dirks, meanwhile, said a litany of leadership failures at SA Express meant there were "never investors for this airline, there were only vultures".

Committee chair Mkhuleko Hlengwa, meanwhile, said National Treasury must come before the committee and explain its role as it relates to finance and the overall approach of government to SA Express.

 

Credit: Fin24

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