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Three reasons explains its clout

Why the Fed hold the world in its hands The US Federal Reserve is the most important actor in the governance of the international financial system. PHOTO REUTERS

The realities of global financial governance mean that the decision on which monetary policy approach to adopt has been taken out of African hands. DANNY BRADLOW

I

nflation is a global problem. At the end of August, it was 8.3% in the US and 9.1% in the Euro area. It is 20.3% in Nigeria, 25% in Malawi, and over 30% in Ethiopia and Ghana. The impact on Africa is devastating. The International Energy Agency estimates that by the end of the year 30 million more Africans will be unable to afford fuel for cooking. The World Bank estimates the number of Africans living in extreme poverty will increase from 424 million in 2019 to 463 million this year. There is no agreement on why this is happening.

Some argue that it is primarily a supply side problem. The dislocations in supply chains caused by the effects of the Covid pandemic and the war in Ukraine have reduced the available supply of goods like fuel, fertiliser and food, forcing their prices up. Others maintain that it is primarily a consequence of the loose monetary policies of leading central banks like the US Federal Reserve (Fed). For a number of years they have kept interest rates low and engaged in quantitative easing. This involved buying bonds on financial markets to increase the funds available to financial institutions like commercial banks, investment banks, asset management firms, private equity firms, hedge funds, pension funds, insurance companies, money market funds, and sovereign wealth funds.

MANAGING THE PROBLEM These two groups also differ on how to manage the problem. The first group argues that it will diminish as the supply side issues are resolved.

African countries have no means for holding the Fed accountable for the adverse impacts its actions have on Africa.

NO CHOICE They maintain that the current high prices will incentivise companies to increase production. The increased availability of goods like food, fuel and fertiliser, will ultimately lead to their prices – and inflation – falling. The second camp argues that central banks should raise interest rates and unwind quantitative easing. They argue that these actions will make it more expensive for companies, households and governments to borrow. This in turn

PROUD PARTNERS & CONTRIBUTORS ONTRIBUT ONTRIBUT ONTRIBUT ONTRIBUT

ONTRIBUT ONTRIBUT

will slow the economy down and reduce demand (and potentially employment). This, they maintain, will drag prices lower and end inflation. Unfortunately, the realities of global financial governance mean that the decision on which approach to adopt has been taken out of African hands. The Federal Reserve has decided that the problem must be addressed as a monetary problem. Consequently, it is raising interest rates and unwinding quantitative easing.

TNERS PROUD&PC

African central banks must follow suit for at least three reasons. First, the US dollar is the world’s most important currency. In 2021 it accounted for 59% of global foreign reserves, over 70% of all trade invoices and over 60% of both deposits and loans denominated in non-local currencies. In 2019 it was involved in over 80% of foreign exchange transactions around the world.

GO TO PAGE 2

2

BUSINESS NEWS

Why the Fed hold the world in its hands FROM PAGE 1 The US dollar’s dominance means that the eco­ nomic wellbeing of all countries is linked to their ability to obtain dollars and to its price in their local currency. It also gives the Fed, which is responsible for protecting its value, global leverage. Second, the US$27 trillion market for US treas­ ury securities is the largest and safest in the world. When there is trouble or uncertainty in the world, investors rush to buy dollars and invest in US markets. Their incentive to do so strengthens as the difference between US rates and those in other countries shrinks. African central banks wishing to manage these movements have to raise their inter­ est rates. Otherwise, they face the prospect of their currencies depreciating as investors sell assets denominated in local currencies to buy dollars. The falling value of their local currency will make it more expensive for their countries to buy the dollars they need to service their dollar denominated debts and pay for imports. This in turn risks causing higher domestic inflation.

DOMINATING ACTOR

CURRENT ROLE

Third, de facto, the Fed is the most important actor in the governance of the international financial system. For example, at the onset of the Covid­19 pan­ demic panicked investors around the world scrambled to convert their investments into dollars thereby reducing access to credit for sov­ ereigns, corporations, and households around the world. The Fed, to avoid a crisis in US markets, responded forcefully and rapidly. Within weeks, the Fed injected over US$2.3 trillion into fi­ nancial markets and activated swap lines that provided access to US$30­60 billion to select central banks. It also created a special facility to help other central banks. The Fed’s actions provided liquidity to finan­ cial institutions. They, in turn, decided how to allocate the trillions of dollars of additional liquidity among their many sovereign, corpo­ rate and household clients. By mid­2020 US dollar credit to emerging market and developing countries had grown by about 7% to US$4 trillion. The International Monetary Fund (IMF), os­ tensibly the leading global economic govern­ ance institution, moved more slowly. Between March 2020 and March 2022, it provided a total of US$171 billion in emergency financial support to 90 countries.

Now that the Fed has decided to fight infla­ tion, it is, in effect, reversing the support it was giving to the global economy. Its policies are contributing to depreciating currencies, rising prices and greater risk of debt defaults in many African countries. International organisations can do relative­ ly little to help developing countries deal with the situation. At best these institutions can make tens of bil­ lions of dollars available to all their developing country member states. By comparison, the US Fed’s quantitative tight­ ening policy will withdraw US$95 billion per month from markets. The growing role of the Fed in global financial governance poses two challenges. The first is that the Fed is a creature of US law and is required to fulfil its statutory mandate of price stability and full employment in the US. To the extent that it takes the impact of its actions on other countries into account, it focuses on those countries that it believes have a significant impact on the US domestic mon­ etary and financial situation. This exacerbates the international financial system’s bias in favour of the richest countries. It may also adversely affect the sustainability of the global economy and the planet. The second challenge is that African coun­

tries have no means for holding the Fed ac­ countable for the adverse impacts its actions have on Africa.

WHAT CAN AFRICAN STATES DO?

Clearly, their options are limited as long as the dollar retains its dominant position in the global financial system and global financial markets remain so powerful. First, they can promote greater awareness of the impact this situation has on Africa. African central banks, operating through an organisation like the Association of African Central Banks, can educate the Fed about the impacts of its policies and actions on Africa. Second, they can advocate for an international body such as the Bank for International Settle­ ments, to set up an independent office to study the global financial governance role of central banks, to consult with affected parties and to issue regular public reports. This office should develop a set of internation­ al standards to guide the Fed and other leading central banks on how to balance their domestic mandates and their extra­territorial responsi­ bilities as global financial governance actors.

• Danny Bradlow is a professor of international development law and African economic relations at the South African Research Chairs Initiative (Sarchi) at the University of Pretoria.

Less open, agreeable and conscientious

Has the pandemic changed our personalities? Participants in a new study recorded changes in the opposite direction to the usual trajectory of personality change.

PHOTO UNSPLASH/ JOSHUA FULLER

JOLANTA BURKE

F

or many of us, some personality traits stay the same throughout our lives while others change only gradually. However, evidence shows that significant events in our personal lives which induce severe stress or trauma can be associated with more rapid changes in our personalities. A new study, published in PLOS ONE, suggests the Covid pandemic has indeed triggered much greater shifts in personality than we would expect to have seen naturally over this period. In particular, the researchers found that people were less extroverted, less open, less agreeable and less conscientious in 2021 and 2022 com­ pared with before the pandemic. This study included more than 7 000 parti­ cipants from the US, aged between 18 and 109, who were assessed before the pandemic (from 2014 onwards), early in the pandemic in 2020, and then later in the pandemic in 2021 or 2022. At each time point, participants completed the “Big Five Inventory”. This assessment tool measures personality on a scale across five di­ mensions: extroversion versus introversion, agreeableness versus antagonism, conscien­ tiousness versus lack of direction, neuroticism versus emotional stability, and openness versus closedness to experience. There weren’t many changes between pre­ pandemic and 2020 personality traits. However, the researchers found significant de­ clines in extroversion, openness, agreeableness and conscientiousness in 2021/22 compared with before the pandemic. These changes were akin to a decade of normal variation, suggesting the trauma of the Covid pandemic had acceler­ ated the natural process of personality change.

All of these traits influence our interaction with the environment around us, and as such, may have played a role in our wellbeing decline. For example, working from home may have left us feeling demotivated and as though our career was going nowhere (lower conscien­ tiousness). This in turn may have affected our wellbeing by making us feel more irritable, de­ pressed or anxious.

WHAT NEXT?

PERSONALITY AND WELLBEING Many of us became more health­conscious during the pandemic, for example by eating better and doing more exercise. A lot of us sought whatever social connections we could find virtually, and tried to refocus our attention on psychological, emotional and in­ tellectual growth – for example, by practising mindfulness or picking up new hobbies. Nonetheless, mental health and wellbeing de­ creased significantly. This makes sense given the drastic changes we went through. Notably, personality significantly impacts our wellbeing. For example, people who report high levels of conscientiousness, agreeableness or extroversion are more likely to experience the

highest level of wellbeing. So the personality changes detected in this study may go some way to explaining the decrease in wellbeing we’ve seen during the pandemic. If we look more closely, the pandemic appears to have negatively affected the following areas: • our ability to express sympathy and kindness towards others (agreeableness); • our capacity to be open to new concepts and willing to engage in novel situations (openness); • our tendency to seek out and enjoy other people’s company (extraversion); and • our desire to strive towards our goals, do tasks well or take responsibilities towards others seriously (conscientiousness).

Over time, our personalities usually change in a way that helps us adapt to ageing and cope more effectively with life events. In other words, we learn from our life experi­ ences and this subsequently impacts our per­ sonality. As we age, we generally see increases in self­confidence, self­control and emotional stability. However, participants in this study recorded changes in the opposite direction to the usual trajectory of personality change. This is understandable given that we faced an extended period of difficulties, including constraints on our freedoms, lost income and illness. All these experiences have evidently changed us – and our personalities. This study provides us with some very useful insights into the impacts of the pandemic on our psyche. These impacts may subsequently influ­ ence many aspects of our lives, such as wellbe­ ing. Knowledge allows us to make choices. So you might like to take the time to reflect on your experiences over the past few years, and how these personality changes may have affected you. Any changes may well have protected you during the height of the pandemic. However, it’s worth asking yourself how useful these changes are now that the acute phase of the pandemic is behind us. Do they still serve you well, or could you try to rethink your perspective?

– The Conversation

• Jolanta Burke is a senior lecturer at the Centre for Positive Psychology and Health, RCSI University of Medicine and Health Sciences at Dublin, Ireland.

3

BUSINESS NEWS

Ghana’s petroleum sector management a mess What’s gone wrong?

Ghana’s petroleum sector continues to be manipulated by politicians through the indiscriminate removal and appointment of technocrats and executives.

CLEMENT SEFA-NYARKO

A

fter three decades of prospecting Ghana discovered commercially viable quantities of petroleum in 2007. Within 3.5 years, it exported its first barrels of crude oil. The progression from discovery to extraction and export was twice as rapid as the global average of six to seven years. The record speed is indicative of the significant political interest in the sector relative to others such as agriculture and healthcare. In the intervening years, oil has contributed in many different ways to Ghana’s economy. Directly it has contributed over US$1 billion annually to the gross domestic product of the country. This includes the royalties paid by multinational oil companies. Indirect benefits have included gas infrastructure, an expanded petrochemical industry and increased skilled employment.

“CURSE”

The natural resource literature on resource rich developing countries equate such resources to a “curse”. This is because the benefits are, in most cases on the continent, not enjoyed by citizens. In a recent paper, I investigated the political behaviour and institutional arrangements in the petroleum sector over three decades. My view, based on my analysis, is that two factors – political disagreements and political considerations – supersede any predictable and clearly stated objectives in petroleum governance. This is despite enhanced checks and balances that civil society introduced after the discovery of oil in 2007. The arbitrary and uncensored decision making have consistently cost the country – and particularly ordinary Ghanaian dearly. This continues to be the case today.

HISTORY OF MISTAKES

I identified three phases of petroleum governance. The first – 1983 to 2001 – was the period when personal relationships determined who had power in petroleum governance. This period

PHOTO UNSPLASH/ALEKSEY MALINOVSKI

predates oil discovery and production. The second – 2001 to 2008 – saw the sector change dramatically as clientelist political manoeuvres took over to attract foreign investments. The third phase – from 2009 to the present – was the active involvement of civil society following the discovery and production. This offered some degree of checks-and-balances. In 1983 the Ghana National Petroleum Corporation was set up as a national oil company. It was responsible for the sector emerging as a rent-seeking venture. This was because it hedged anticipated future petroleum revenues in the form of loans receivables to meet the country’s petroleum import needs and to fund exploration activities.

“BOOTY FUTURES” This action was termed “booty futures” – a situation where revenues from petroleum are collected several years before discovery and production. The corporation had the mandate for petroleum exploration as well as imports of petroleum products for domestic consumption. Fiscal space was constrained at the time. One of the corporation’s strategies was therefore to use anticipated proceeds from future oil production from some fields to hedge oil price hikes. It also used proceeds from the sale of cocoa on the world market to directly pay for imported crude oil without having to look for foreign exchange to cover the cost. These kinds of derivative transactions cost Ghana millions of dollars due to ill-informed advice from its financial advisers. In addition, the government demanded 65% of the profits. This was a high share for a nascent industry without certainty of discovery. This made Ghana unattractive to investors. The state continued to pump resources into exploration and incurred further financial losses. Investors began to show interest in 2001 when a new government revised the profit-sharing terms to between 10% and 15%.

MANIPULATED The petroleum sector continues to be manipulated by politicians. This is done through the indiscriminate removal and appointment of technocrats and executives. The Ghana National Petroleum Corporation has become notorious for being embroiled in several petroleum agreement scandals. Potentially these are costing the tax payer

billions of dollars. Some misappropriation has been averted due to the vigilance of civil society groups. But there’s still a lack of transparency and inadequate political will to propose and implement laws to the letter.

PETROLEUM ITSELF NOT THE PROBLEM The primary determinants of the quality of Ghana’s petroleum governance are the political environment and the degree of engagement of civil society in governance. Petroleum is not a problem, neither is any natural resource per se. Instead, petroleum arrived at a time in which the country was beset by three fundamental structural problems. First, political arrangement was characterised by political power influencing the disbursement of benefits to the elites. This arrangement was aggravated by the excessive power of decision making, appointment and resource disbursement at the hands of national level political actors. In this context, there was subjectivity, secrecy, and lack of consideration for alternative and grassroot perspectives in governance in general. These factors have cost Ghana several billion dollars. And continue to do so. Recent revelations show that Ghana risks losing about US$1.5 billion annually due to a 2020/21 gas supply agreement. The agreement has seen Ghana selling gas at a needlessly discounted rate of 77% to a private entity.

Tsatsu Tsikata and Kwesi Botchwey – derailed efforts to set up the necessary infrastructure, contributing to the flaring (burning) of gas in the initial stages of petroleum extraction. This disagreement had roots in the mid-1990s when Botchwey was the finance minister under Jerry Rawlings and vehemently opposed the indiscriminate infusion of public funds into petroleum exploration. Third, all Ghanaian governments have shown a lack of political will to formulate and implement laws and other legal frameworks. Even where laws exist, they have shown an appetite to bypass them.

STRONGER GOVERNANCE

To ensure sustained confidence in Ghana’s petroleum sector, I propose the following. First, future legislation – or amendments to existing laws – must provide guidelines for dealing with sweat equity. Sweat equity is the equity that one gets in return for one’s efforts in bringing petroleum investors to Ghana. The EO Group and the AGM Petroleum Ghana Ltd are examples of Ghanaian entities that have benefited from this. Without any legislation governing this phenomenon, political actors have exploited it by allowing their cronies to bring preferred investors into the sector without going through competitive procurement processes. Dealing with this loophole would ensure that profit sharing in petroleum agreements were discussed with the country’s national interest in mind, not personal interests.

CIVIL SOCIETY DISPUTES Second, internal and external party-political disputes have shaped institutional quality and outcomes. For instance, the dismissal or reassignment of up to 90% of Ghana National Petroleum Corporation staff in 2001 due to a change in government created room for the government to pay an avoidable judgement debt of US$19.5 million to Société General. The lack of coordination between the then Kufour government and the corporation due to competing political interests between the two main political parties in Ghana left room for Societe General to get away with a higher rather than lower negotiated judgement debt amount. Similarly, tensions in 2014 between two leading members of the then ruling party –

Second, parliament must ensure that regulations are drafted and gazetted within stipulated periods after passage of laws. This will get rid of excessive political discretion in the implementation of laws. Third, civil society groups, such as the media, should up the ante by making it politically unattractive for politicians to exploit petroleum governance. They can do this by vigorously informing electorates about how the sector is being run. Fourth, political parties should build consensus to develop a long-term bi-partisan strategy to establish stability of staffing and appointments in the petroleum sector.

– The Conversation

• Clement Sefa-Nyarko is a postdoctoral research associate at the La Trobe University in Melbourne, Australia.

4

AT YOUR FINGERTIPS

Tracking quarterly GDP performance 6

Real GDP in Q2 N$36.04 bn

N$36.85 bn

N$40.36 bn

N$44.17 bn

N$44.28 bn

N$41.53 bn

N$43.22 bn

N$48.57 bn

2014

2015

2016

2017

2018

2019

2020

2021

2022

N$29.05 bn

N$34.12 bn

N$32.34 bn

N$36.45 bn

20

N$35.22 bn

Overall growth in Q2

30

N$33.23 bn

-8

-11.3%

-6

N$37.36 bn

-2.4%

-4

N$35.5 bn

-1.7%

N$35.69 bn

-2

N$36.3 bn

-0.5%

Nominal GDP in Q2

50 40

N$34.67 bn

0

40 35 30 25 20 15 10 5 0

N$32.9 bn

5.6%

5.5%

5.2%

4.7%

2

5.4%

4

10 2013 2014

2015

2016

2017

2018

2019 2020 2021

2022

0

2013

-10 -12

Snapshot of mining & quarrying

Q2 Q2 2014 ‘15

Q2 ‘16

Q2 ‘17

Q2 ‘18

Q2 ‘19

Q2 ‘20

Q1 Q2 2021

Q3

Q4

Q1 Q2 2022

Snapshot of wholesale & retail

Q2 2014

Q2 ‘15

Q2 ‘16

Q2 ‘17

Q2 ‘18

Q2 ‘19

21.0 0.4% 9.6%

0.5%

1.0% -4.7%

Q2 ‘20

Q1 Q2 2021

Q3

Q4

SOURCE: NAMIBIA STATISTICS AGENCY

30

10

17.6%

0

-20

-20

-1.8%

-23.6%

-10

-10

0.2%

0

Q2 Q2 Q2 2014 ‘15 ‘16

Q2 ‘17

Q2 ‘18

Q2 ‘19

-30 -40

-20.7% Q2 ‘20

-27.6%

0.5% 7.1% 10

11.5% 1.1%

Q1 Q2 2021

Q3

-4.0%

-49.1%

20

-30

30 20

-27.9%

44.6% 21.3% 34.4% 29.4%

38.7%

41.3%

50 40

40

-3.7% -19.3% -25.3% -25.6% -7.2%

-50 Q4 Q1 Q2 2022

Q2 2014

Q2 ‘15

Q2 ‘16

Q2 ‘17

Q2 ‘18

Q2 ‘19

Q2 ‘20

Q1 Q2 2021

Q3

Q4

Q1 Q2 2022

Snapshot of hotels & restaurants

-25.7%

50 20 3.4% 15 11.1% 10 4.8% 5 2.0% 0 -5 -10 -8.6% -6.9% -15 -20 -25 -30

Snapshot of construction 50

-25.6%

80 65.8% 70 60 50 40 30 7.8% 5.4% 20 12.7% 8.0% 11.3% 9.5% 10 4.8% 1.9% 0 -1.4% -10 -2.1% -20 -30 -29.7% -31.1% -40

34.7%

Snapshot of agriculture & forestry

Q1 Q2 2022

40 30 11.7% 0.2% 20 9.0% 7.4% 10 6.2% 0 -1.3% -10 -20 -30 -40 -44.9% 50 Q2 Q2 2014 ‘15

Q2 ‘16

Q2 ‘17

Q2 ‘18

Q2 ‘19

Q2 ‘20

37.6% 19.4% 8.9% 3.7% -3.8%

-5.9%

Q1 Q2 2021

Q3

Q4

Q1 Q2 2022

INFOGRAPHIC: ©NMH010217 - NAMPOLO ANGULA

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5

Green hydrogen: A win for developing countries?

Cost, transport pose problems Namibia has big plans for a US$10 billion green hydrogen project. PHOTO REUTERS

Hydrogen is used mainly to make chemicals such as fertiliser, and in oil refineries. Most hydrogen in the world today is made from natural gas or coal – methods associated with large carbon dioxide emissions. Developed countries are therefore looking to “green hydrogen” instead – produced using renewable electricity such as solar and wind power. Energy experts Rod Crompton and Bruce Young explain green hydrogen’s potential benefits and challenges.

G

lobal hydrogen demand reached 94 million tons in 2021, and contained energy equal to about 2.5% of global final energy consumption. Only about 0.1% of current global hydrogen production is green, but big expansions are planned. New applications for green hydrogen are also envisaged. Liebreich’s classification is a useful indicator of the potential markets for green hydrogen. Since the objective of using green hydrogen is really to reduce carbon dioxide, the applications to target first should be those that will yield the largest reductions in emissions. Liebreich’s ladder shows which they are. The applications in the (green) top row are an efficient use of valuable green hydrogen. But green hydrogen currently costs much more to make than less clean types of hydrogen. Using it to produce the 180 million tons per annum of ammonia required globally for fertiliser production would have a severe knock-on effect on food prices. So it is difficult to see how this transition is going to occur.

HOW IS GREEN HYDROGEN MADE? Green hydrogen is made from water. Using renewable (“green”) electricity, equipment called electrolysers separates the hydrogen from oxygen in water (H2O). The process is called electrolysis. Green hydrogen production emits no carbon dioxide, but the construction of renewable electricity infrastructure currently uses fossil fuels, which do emit carbon dioxide. Hydrogen has traditionally been made from non-renewable energy sources like coal (“black hydrogen”) and natural gas (“grey hydrogen”). When these methods are combined with carbon capture and storage, the hydrogen produced is known as “blue hydrogen”.

CHALLENGES GREEN HYDROGEN PRESENT Although the costs of renewable power genera-

tion have been coming down, the cost of electrolysis is still not commercially competitive. Today, green hydrogen has an estimated energy equivalent cost of between US$250 and US$400 per barrel of oil at the factory gate, according to the International Renewable Energy Agency. Future cost reductions are forecast but these are uncertain. Current oil prices are around US$100 a barrel – much less than it would cost to use green hydrogen instead of conventional petroleum products. The costs of transporting hydrogen must be taken into account too. Unfortunately, the physics of hydrogen is against low-cost hydrogen transport. It is much more challenging than oil-based liquid fuels, liquefied petroleum gas or liquefied natural gas. Ocean transport of hydrogen has to be at very low temperatures (-253oC). Petrol or diesel doesn’t need costly refrigeration: it is transported at ambient air temperature. And hydrogen carries only 25% of the energy that a litre of petrol does, making it much more expensive to transport and store the same amount of energy.

ALTERNATIVE TRANSPORT Alternative ways to transport hydrogen have been investigated. Because ammonia (NH3) is much easier and cheaper to transport than hydrogen, the International Renewable Energy Agency has recommended “storing” hydrogen in ammonia for shipping. But that requires additional equipment to put the hydrogen into ammonia and strip it out at its destination. These processes add costs of about US$2.50-US$4.20/kg (equivalent to US$123-US$207 per barrel of oil) according to the agency. Hydrogen is more difficult to handle than conventional fossil fuels. It is a colourless, odourless and tasteless gas, unlike conventional hydrocarbons. This makes leak detection more difficult and increases the risk of fire or explosion. Hydrogen fires are

Although this may sound positive for developing countries, there are big risks in developing hydrogen mega projects. invisible to the human eye. Historically, hydrogen has been controlled within factory perimeters and managed by trained people. The widespread introduction of hydrogen into society will require new measures and skills, including insurance, materials handling, firefighting and disaster management.

FIRST HYDROGEN MEGA PROJECTS Construction of the first gigawatt scale green hydrogen project in Saudi Arabia has already started. Many of the pioneering projects will be built in the southern hemisphere, mostly in developing countries. This is because they are less densely populated and have better renewable energy resources (solar and wind) for generating the necessary electricity. Although this may sound positive for developing countries, there are big risks in developing hydrogen mega projects. For one thing, the “iron law” of megaprojects states: “Over budget, over time, under benefits, over and over again”.

Project owners bear the project execution risk. Risks also include exchange rate risk, remote locations, pioneering technology, and a lack of skills. Prospective host countries will have to balance these risks against the temptations of improved investment, employment and balance of payments. They would be wise to extract guarantees from their customer countries so as to avoid the injustice of the global south subsidising the global north as it transitions to cleaner energy. South Africa now has a “Hydrogen Roadmap” after many years of government funding. There is talk by the energy company Sasol and vehicle manufacturer Toyota of a “Hydrogen Valley”, a geographical corridor of concentrated hydrogen manufacture and application industries. And the South African government and Sasol are talking of establishing a new port on the west coast at Boegoebaai for the manufacture and export of green hydrogen. In Nelson Mandela Bay, Hive Hydrogen is planning a US$4.6 billion green ammonia plant. Namibia also has big plans for a US$10 billion green hydrogen project. The key to reducing green hydrogen costs in the future lies mainly in technological improvements and cost reductions related to mass manufacture and a scale-up in electrolysis. And to a lesser extent, incremental cost reductions in transport and handling. • Rod Crompton is a visiting adjunct professor at the African Energy Leadership Centre, Wits Business School, at the University of the Witwatersrand. Bruce Douglas Young is a senior lecturer at the Africa Energy Leadership Centre.

6

INDICATORS Namibia Breweries Ltd (NBL)

Letshego Holdings Namibia (LHN)

Nictus Holdings Nam (Nictus)

3.5

55

2.0

48,00 2,50

45,01

3,00

2,50

3,00 2,65

2,65

43,50 41,00

1,75

1,75

1,75

1,75

1,75

1,75

1,75

Feb '22

Mar '22

Apr '22

May '22

Jun '22

Jul '22

Aug '22

1,58 40,92 40,00 40,01

25

Feb '22

Mar '22

Apr '22

May '22

Jun '22

Jul '22

Aug '22

Capricorn Investment Holdings (CGP)

1.5

Feb '22

Mar '22

Apr '22

May '22

Jun '22

Jul '22

Aug '22

FNB Namibia Holdings (FNB)

Oryx Properties Ltd (Oryx)

35

15

1.5

12

14,00 13,30

13,29 13,30 30,50 30,50

13,09 29,49 29,50 10,72

30,01 30,02

29,51

11,01 10,00

10

Feb '22

Mar '22

Apr '22

May '22

Jun '22

Jul '22

Aug '22

Namibia Asset Management Ltd (NAM) 0.8

25

Feb '22

Mar '22

Apr '22

May '22

Jun '22

Jul '22

Aug '22

10

Feb '22

10,20 10,21 10,25 10,26 10,25 10,26

Mar '22

Apr '22

May '22

Jun '22

Jul '22

SNB Holdings (SNO)

Paratus Namibia Holdings (PNH)

6

15

Aug '22

5,96

0,66

0.6

Feb '22

0,66

Mar '22

0,67

0,67

0,67

Apr '22

0,70 5,00

May '22

Jun '22

Jul '22

Aug '22

4

Feb '22

Mar '22

12,77

4,50

Apr '22

4,00

4,25

May '22

Jun '22

4,34

Jul '22

13,00

Aug '22

12

Feb '22

Mar '22

Apr '22

N$/US$

N$/STERLING

10

23 18.00 18.09

8,00

7

Feb '22

Mar '22

17.01 16.88

7,91 7,51

7,51

Apr '22

May '22

Jun '22

7,53

7,52

Jul '22

Aug '22

N$/EURO

17.57

19.63

14

12 Aug

19 Aug

26 Aug

2 Sep

9 Sep

16 Sep

23 Sep

30 Sep

17.08 16.59

17.22

12 Aug

20.21 20.06 19.81 19.91 19.86 19.52

17.60 17.44 17.73

15

12 Aug

19 Aug

26 Aug

28 960

2 Sep

9 Sep

16 Sep

23 Sep

30 Sep

18 000

9 Sep

16 Sep

23 Sep

30 Sep

30 242 29 780 29 561 29 609 29 333 29 248 29 386

16.82

26 Aug

2 Sep

Copper - N$/tonne

136 931

19 Aug

Aug '22

20.13

140 323

12 Aug

19 Aug

26 Aug

2 Sep

9 Sep

16 Sep

23 Sep

30 Sep

NSX PRICES AT MARKET CLOSURE, CURRENCIES AT DAILY MID LEVEL, GOLD AT LME PM PRICE, OTHER COMMODITIES AT LME CASH PRICE

100 000

12 Aug

136 686 136 870 131 145

140 000 130 250

14

Jul '22

180 000

34 000

17.38

May '22

16.16

Gold - N$/oz

19

Jun '22

12,01 12,01

20

8,24

12,99 13,00

4,42

MTC

17.29 17.12

12,90

19 Aug

26 Aug

2 Sep

9 Sep

16 Sep

134 010

23 Sep

138 316

30 Sep

NMH051022 - AS

0,70

7

BUSINESS NEWS

Rich countries forge alliances

‘Friend-shoring’: Africa risks losing out on trade The approaches to reconfiguring supply chains currently unfolding threaten to heap more stress on a continent already weighed down by multiple crises.

JONATHAN MUNEMO

O

ver the past few years, the world’s supply chains have been strained and disrupted by the Covid pandemic, Russia’s invasion of Ukraine, and rising geopolitical tensions. These started with the US-China trade war and then intensified following the war in Ukraine. In response to the cumulative economic and security fallout that has ensued, some advanced countries are now ramping up efforts to divert their supply chains away from countries that are not like-minded and that don’t have shared common values. This new supply chain strategy is called “friendshoring.” Advanced countries are creating friend-shoring alliances which are, in turn, reshaping our global economy. These shifts have adverse implications for Africa. The approaches to reconfiguring supply chains currently unfolding threaten to heap more stress on a continent already weighed down by multiple crises. Africa stands to lose out because the current reshaping of supply chains is not intended to shift trade, investments and jobs towards African trade partners. Rather its got to do with efforts by the EU and US to insulate their supply chains from being disrupted for geopolitical reasons by less trusted partners with significant global market share in key raw materials, commodities and other essential products. Steps can be taken to mitigate the negative economic effects that will be imposed on Africa by this supply chain reorientation. These include forging strong and effective friend-shoring alliances with advanced economies and defending the rules-based multilateral trading system.

the price increases and disruptions caused by geopolitical and economic risks.” And during a recent visit to Japan and South Korea, vice president Kamala Harris emphasised the importance of friend-shoring. Speaking in Tokyo she said “it is important that we and our allies partner in a way that allows us to grow, and in a way that allows us to function at a very practical level”. US president Joe Biden has been pushing the same supply-chain strategy in Asia. A centrepiece of the Indo-Pacific Economic Framework he unveiled in Asia is bolstering regional supply chains as part of Washington’s efforts to strengthen ties with trusted Asian partners. And to counter China. The framework is also a big deal for the US

Africa stands to lose out because the current reshaping of supply chains is not intended to shift trade, investments and jobs towards African trade partners. because it brings together economies that contribute nearly 40% of global GDP. Along with the US, its other key members include Australia, India, Japan, South Korea, New Zealand and several Southeast Asian countries.

SUB-SAHARA The Biden administration also unveiled a new US strategy towards Sub-Saharan Africa in August. But, in sharp contrast to the Indo-Pacific

PUSH FOR STRATEGY

In the US, friend-shoring as a policy goal was first proposed by treasury secretary Janet Yellen in April this year. In her remarks on the way forward for the global economy, she identified friend-shoring of supply chains as a strategy that could achieve two outcomes. Firstly it could securely extend market access. Secondly it could simultaneously lower the risks to the US economy and its trusted trade partners. Then during a tour of East Asia in July, Yellen sought to promote the US administration’s proposed friend-shoring policy first in Tokyo and later on in a speech delivered in Seoul. She said: “In so doing, we can help to insulate both American and Korean households from

PHOTO UNSPLASH/KURT COTOAGA

PHOTO UNSPLASH/PAT WHELEN

Economic Framework, it does not include any specific and concrete friend-shoring commitments for African countries. And appears mainly to be another counter play against China and Russia –the US two top adversaries. The push to diversify supply chains is also underway in Europe. According to European Central Bank president Christine Lagarde, nearly half of companies had diversified their supplier base by the end of 2021. As the world’s largest single market, the EU is able to use its strong regional base to diversify supply chains within the bloc. While the Covid pandemic certainly played an important role in spurring the shift from dependence to diversification, the war in Ukraine was a tipping point for Europe from an economic and security standpoint. It further intensified the drive to diversify supply lines away from Russian suppliers of critical commodities, especially energy, food, and fertiliser. The strategy is to friend-shore them to countries deemed reliable and with shared strategic interests.

LOSING OUT Africa has nothing to gain from the current reshaping of supply chains. This is because US and EU friend-shoring initiatives heavily favour Asian and Indo-Pacific partners. Winners from these initiatives include

Indonesia, Malaysia, Vietnam and other IndoPacific countries deemed to be trustworthy. Their economies will benefit from the boost given to trade, production plants, jobs and investments. In addition, friend-shoring also threatens to undermine the World Trade Organisation’s Aid for Trade initiative. This was launched in 2005 to assist developing countries reduce trade costs and thereby enhance export competitiveness. Its significance has steadily increased in the years after it was launched. At this year’s WTO meeting in July, Aid for Trade discussions focused on helping Africa and other developing countries recover and build long-term sustainable development by supporting priority needs they had identified. These needs include trade facilitation, digital connectivity, export diversification, connecting to value chains, and women’s economic empowerment. They also focused on how environmentally sustainable development can contribute to achieving these priority needs. Reconfiguring supply chains in ways that exclusively lend a helping hand to current US and EU manoeuvring will only make it more difficult for Africa to benefit from WTO support in these important areas.

WHAT’S TO BE DONE?

Looking forward, there are at least three essential things that can be done to mitigate negative impacts on Africa. First, effective friend-shoring alliances should be included as a centrepiece of the new US strategy towards Sub-Saharan Africa. African policy makers should strongly urge the Biden administration to do this and demonstrate commitment on their part to be trusted partners. Second, the EU should also develop an effective friend-shoring strategy with African partners, even as it pushes for an expansion of intrabloc supply chains. Again, it is paramount that African policy makers take the lead and justify the importance of entering into a strong friendshoring relationship with the EU. Finally, defending the rules-based multilateral trading system is important to ensure that it continues to deliver benefits for developing and least developed countries, including those in Africa. • Jonathan Munemo is a professor of economics at the Salisbury University in Maryland, US.