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In a special session Monday at the World Economic Forum’s Sustainable Development Impact Meetings 2023, Kenyan President William Samoei Ruto, US Secretary of the Treasury Janet Yellen and other leaders called for strengthening value chains in Africa as key to transforming food systems and improving food security for the continent.
Ruto offered a grim assessment of the current situation on the continent: As of the end of 2022, approximately 31.8 million people in East Africa were in dire need of emergency food assistance, including 6.1 million children under the age of five. Agricultural production in Africa is currently the lowest in the world, with severe implications on nutrition and food security.
“The numerous cases of hunger constitute a humanitarian crisis, highlighting the underutilization of our continent’s immense potential for high productivity and surplus food production,” Ruto said. “In fact, it is a paradox: The account of Africa’s starvation amid plenty is parallel to the account of Africa’s poverty amid resource abundance and underdevelopment in the middle of huge potential.”
Africa’s already vulnerable food systems are straining under the combined weight of climate change, the COVID-19 pandemic and grain shortages brought on by the Ukraine War. Yet worsening food insecurity is not necessarily in Africa’s future as governments forge innovative partnerships with the private sector to deliver the type of financing that Africa’s food producers desperately need.
“The impacts of food insecurity on individuals and communities are acute,” said Yellen. “Hunger and poor nutrition undermine health and educational outcomes and well-being. Food insecurity also has economy-wide impacts, contributing to lower productivity that holds back economic growth. This means food security matters both morally, and for the global economy.”
Yellen noted how food security is inextricably linked to broader global challenges, which must be addressed in parallel. “Pandemics lower income. Conflict disrupts supply chains. Climate change poses risks to entire agricultural systems. So, combatting food insecurity also depends on broader efforts to address these global challenges and this requires evolving the multilateral development banks, which are a central pillar of our international economic system.”
Ruto, who addressed the nexus between climate change, agricultural productivity and food security at the Africa Climate Summit earlier this month, pointed to positive examples of innovative private sector-led initiatives to help Africa better realize its agricultural potential. He singled out Sanergy, a Kenyan company that converts organic waste into fuel, fertilizer and animal feed and has expanded its footprint in Kenya, creating hundreds of jobs; Nairobi-based SunCulture, which uses solar energy for radiation and has made its technology accessible to over 10,000 farmers through an innovative “pay-as-you-go” model; and Del Monte, which has recently invested $5.5 million in a new fresh fruit packing facility that sources from 2,000 Kenyan farmers.
Samantha Power, US Agency for International Development (USAID) Administrator, noted that the small and medium enterprises that comprise so much of Africa’s agricultural sector find themselves too big for microfinance and too small for bank loans. She stressed the potential to transform subsistence farmers into entrepreneurs – a change that has the potential to lead to improved livelihoods and educational opportunities for children, thus breaking the cycle of subsistence farming for the next generation.
Initiatives like USAID’s Feed the Future aim to help with this transformation by connecting small-scale farmers with global agribusinesses – “matchmaking,” as Power described by way of example, “between Rwandan growers of coffee and Starbucks – or PepsiCo could be interested in some of the chickpea farmers that we work with in rural areas, and maybe that could service some of the healthy and more nutritious snacks that they’re making.”
“Feed the Future has brought down poverty and malnutrition 25% in the areas that it’s working for,” said Power.
For Anne Beathe Tvinnereim, Minister of International Development of Norway, small-scale farmers and the food value chain hold the key to greater food sovereignty for African countries. “Too often, these businesses are considered too poor and too risky for investors, and the local market is held back not because of lack of capacity, but lack of capital,” she explained. “We want to reduce that risk. We want small-scale farmers to have increased access to inputs and markets. We want processors to be able to purchase new equipment, and distributors to reach the last mile. By de-risking private investments in the agro value chain, I believe African countries will be less dependent on expensive imports.”
Akinwumi Ayodeji Adesina, President of the African Development Bank (AfDB), noted how in response to the closing of the Black Sea ports during the Ukraine War his bank responded not by seeking foreign assistance, but by investing in African farmers. “We very quickly launched a $1.5 billion initiative to make sure that Africa can feed itself,” he said. “It’s not about begging for food, it’s about getting seeds in the ground in your bowl and actually growing your own food.”
“And it’s working extremely well,” he added. “Today, we are supporting 24 million farmers to produce 38 million metric tons of food valued at $12 billion. That is 8 million metric tons of food more than what Africa will lose from importing from either Russia or Ukraine. It’s all about Africa having the pride and the dignity of producing the food itself.”
Scott Nathan, Chief Executive Officer of the US International Development Finance Corporation (DFC), said that the DFC supports financial institutions throughout African and the world and lending to smallholder farmers who are thinking about not just helping with fertilizer, fuel (and) seeds in the ground, but also logistics. “Wastage is one of the hidden taxes on this issue that causes food insecurity,” he said. “So the extent that we can work on cold chain logistics, storage, we’re doing that in India, we’re doing that all over Africa.”
Nathan noted that the DFC has provided $20 million in funding to the One Acre Fund, a social enterprise focused on lending to smallholders. Capital allocated to such initiatives, he said, can generate “a huge amount of leverage for the private sector”.
“We’re helping smallholder farmers in the world’s most vulnerable communities access equipment, training and inputs so they can produce more food, while also strengthening their ability to store and distribute it,” he concluded. “Our goals must be ambitious as we work with the private sector to bring more produce to market and bolster food security.”
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Finance
U.S. companies are barreling towards a $1.8 trillion corporate debt 
Published
3 days ago
on
September 22, 2023
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US firms are barreling towards a giant wall of corporate debt that’s about to mature over the next few years, Goldman Sachs strategists said in a note.
There’s $1.8 trillion of corporate debt maturing over the next two years, Goldman Sachs estimated. Firms could be slammed with higher debt servicing costs as interest rates stay elevated. That could eat into corporate revenue and weigh on the US job market.
The investment bank estimated that $790 billion of corporate debt was set to mature in 2024, followed by $1.07 trillion of debt maturing in 2025. That amounts to $1.8 trillion of debt reaching maturity within the next two years, in addition to another $230 billion that will reach maturity by the end of this year, Goldman strategists said.
The wave of debt that will need to be refinanced could spell trouble for companies, as interest rates have been raised aggressively by the Fed over the last year. The Fed funds rate is now targeted between 5.25%-5.5%, the highest range since 2001.
For every extra dollar spent to service their debt, firms will likely pull back on capital expenditures spending by 10 cents and labor spending by 20 cents, the strategists estimated, a reduction that could weigh down the job market by 5,000 payrolls a month in 2024 and 10,000 payrolls a month in 2025.
Experts have warned of trouble for US corporations as credit conditions tighten. Already, the tally of corporate debt defaults in 2023 has surpassed the total number of defaults recorded last year. As much of $1 trillion in corporate debt could be at risk for default if the US faces a full-blown recession, Bank of America warned, though strategists at the bank no longer see a downturn as likely in 2023.
Finance
Russian response to sanctions: billions in dollar terms are stuck in Russia
Published
4 days ago
on
September 21, 2023
By
“Tens of billions in dollar terms are stuck in Russia,” the chief executive of one large company domiciled in a country told ‘The Financial Times’. “And there is no way to get them out.”
Western companies that have continued to operate in Russia since Moscow’s invasion of Ukraine have generated billions of dollars in profits, but the Kremlin has blocked them from accessing the cash in an effort to turn the screw on “unfriendly” nations.
Groups from such countries accounted for $18 billion (€16.8 billion) of the $20 billion in Russian profits that overseas companies reported for 2022 alone, and $199 billion of their $217 billion in Russian gross revenue.
Many foreign businesses have been trying to sell their Russian subsidiaries but any deal requires Moscow’s approval and is subject to steep price discounts. In recent days British American Tobacco and Swedish truck maker Volvo have announced agreements to transfer their assets in the country to local owners.
Local earnings of companies from BP to Citigroup have been locked in Russia since the imposition last year of a dividend payout ban on businesses from “unfriendly” countries including the US, UK and all EU members. While such transactions can be approved under exceptional circumstances, few withdrawal permits have been issued.
US groups Philip Morris and PepsiCo earned $775 million and $718 million, respectively. Swedish truck maker Scania’s $621 million Russian profit in 2022 made it the top earner among companies that have since withdrawn from the country. Philip Morris declined to comment. PepsiCo and Scania did not respond to requests for comment.
Among companies of “unfriendly” origin that remain active in Russia, Austrian bank Raiffeisen reported the biggest 2022 earnings in the country at $2 billion, according to the KSE data.
US-based businesses generated the largest total profit of $4.9 billion, the KSE numbers show, followed by German, Austrian and Swiss companies with $2.4 billion, $1.9 billion and $1 billion, respectively.
‘The Financial Times’ reported last month that European companies had reported writedowns and losses worth at least €100 billion from their operations in Russia since last year’s full-scale invasion.
German energy group Wintershall, which this year recorded a €7 billion non-cash impairment after the Kremlin expropriated its Russian business, has “about €2 billion in working interest cash… locked in due to dividend restrictions”, investors were told on a conference.
“The vast majority of the cash that was generated within our Russian joint ventures since 2022 has dissipated,” Wintershall said last month, adding that no dividends had been paid from Russia for 2022.
Russian officials are yet to outline “a clear strategy for dealing with frozen assets”, said Aleksandra Prokopenko, a non-resident scholar at the Carnegie Russia Eurasia Centre. “However, considering the strong desire of foreign entities to regain their dividends, they are likely to explore using them as leverage – for example to urge western authorities to unfreeze Russian assets.”
Finance
Transforming Africa’s Transport and Energy Sectors in landmark Zanzibar Declaration
Published
4 days ago
on
September 21, 2023
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A special meeting of African ministers in charge of transport and energy held from 12-15 September on the theme, “Accelerating Infrastructure to Deliver on the AU Agenda 2063 Aspirations” has concluded with an action-oriented Zanzibar Declaration aimed at spurring the Continent’s transport and energy sectors.
Convened under the auspices of the African Union’s Fourth Ordinary Specialized Technical Committee on Transport, Transcontinental and Interregional Infrastructure and Energy, the meeting was organized by the African Union Commission (AUC) in collaboration with the African Union Development Agency (AUDA-NEPAD), the African Development Bank (AfDB) and the United Nations Economic Commission for Africa (ECA).
Speaking at the Ministerial segment of the meeting, Robert Lisinge, Acting Director of the Private Sector Development and Finance Division at the ECA called on member states to address the barriers limiting private sector investments in infrastructure and energy, urging them to facilitate investments by creating conducive policy and regulatory environments. “The requirements of continental infrastructure development and the aspirations of Agenda 2063 and Agenda 2030 far exceed current levels of public sector investment,” he said.
He stressed that over the next ten years, there is a need for concerted action to address energy transition and security issues, in order to open up opportunities for the transformation of the continent. He cited ECA’s analytical work on the AfCFTA, which demonstrates there are investment opportunities for infrastructure development in the area of transport and energy and added that digitization and artificial intelligence offer great opportunities for the efficient operation of infrastructure.
According to the Zanzibar Declaration, the Ministers adopted the AUC and ECA continental regulatory framework for crowding-in private sector investment in Africa’s electricity markets. This framework will be used as an instrument for fast-tracking private sector investment participation in Africa’s electricity markets. The Declaration also called on ECA and partners to develop a continental energy security policy framework as called for by the 41st Ordinary Session of the Executive Council and an Energy Security Index and Dashboard to track advancements in achieving Africa’s energy security.
The meeting acknowledged the efforts by ECA to support Member States in coordinating Public-Private Partnerships (PPP) with development partners and the establishment of the African School of Regulation (ASR) as a pan-African centre of excellence to enhance the capacity of Member States on energy regulation.
The Declaration requested the ECA and partner institutions to further act in the following areas:
The AUC, in collaboration with AUDA-NEPAD, ECA, AfDB, RECs, Africa Transport Policy Programme (SSATP), and the African Continental Free Trade Area (AfCFTA) Secretariat to implement the roadmap on the comprehensive and integrated regulatory framework on road transport in Africa.
ECA, in collaboration with AUC, to identify innovative practices and initiatives that emerged in the aviation industry in Africa during the COVID-19 pandemic and propose ways of sustaining such practices, including the development of smart airports with digital solutions for improved aviation security facilitation and environmental protection.
ECA, in collaboration with AUC, to establish mechanisms for systematic implementation, monitoring and evaluation of continental strategies for a sustainable recovery of the aviation industry.
The AUC, AUDA-NEPAD, AfDB and UNECA to engage with development partners and Development Finance Institutions (DFIs) to mobilize resources for projects preparation and implementation of PIDA-PAP 2 projects.
ECA and AUC, in collaboration with partners, to coordinate PPP initiatives to avoid duplication of efforts and strengthen complementarity.
The AUC and ECA to work with continental, regional and specialized institutions to support the design and implementation of programmes, courses, and capacity development initiatives of the African School of Regulation (ASR) to support the implementation of the African Single Electricity Market and Continental Power System Master Plan.
The AUC to work with AUDA-NEPAD, AfDB, ECA and RECs, respective power pools, regional regulatory bodies, and relevant stakeholders to design continental mechanisms for regulating and coordinating electricity trade across power pools.
AUDA-NEPAD, AUC, AFREC, ECA, AfDB, Power pools and development partners to comprehensively assess local manufacturing of renewable energy technologies and beneficiation of critical minerals for battery manufacturing.
ECA and AFREC to accelerate the implementation of the Energy4Sahel Project to improve the deployment of off-grid technologies and clean cooking in the affected Member States.
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