African currencies have lost ground against the US dollar this year, further driving inflation in the import-reliant region. Depleting dollar reserves have left policymakers with limited options to arrest the decline.
Sub-Saharan African currencies are on a downward spiral against the US dollar this year, spelling trouble for citizens and businesses alike.
"We are unable to buy the same amount of goods we used to buy, our capital and trade volumes have drastically fallen pushing our businesses towards bankruptcy," said Joseph Obeng, president of the Ghana Union of Traders Association (GUTA).
Interest rate hikes in the US — which is driving away investors in pursuit of higher returns toward US assets — and weak demand for African exports amid global recession worries have been dragging down African currencies.
Local citizens are decrying higher prices of imported goods leading to high costs of living while importers are complaining about their inability to source enough goods due to the decline in the value of their local currencies.
When currencies weaken against the greenback, imports become expensive as they are mostly denominated in US dollars.
"We are unable to make profits since our customers no longer have the purchasing power to patronize our businesses," Obeng said.
Although the question is simple, there are no easy answers. A mix of both internal and external issues has been behind the continuous decline in African currencies. Most African economies have been unable to recover fully from the economic disruptions caused by the COVID-19 pandemic.
"Basically, a stronger dollar can lead to capital outflows as investors seek to get better risk-adjusted returns on their investments and they would get that back in the US. As capital flows out of a country, local interest rates will rise and that's just to maintain parity," Stephen Akpakwu, head of sovereign advisory at Crossboundary Africa, told DW.
Many Sub-Saharan countries depend on a narrow range of commodities for foreign exchange. This means that when global demand for those goods falls, the value of their currencies drops too due to a drop in foreign income.
The global economic slowdown due to the Russian war in Ukraine has resulted in lower demand for African exports, thereby hurting foreign exchange earnings and pulling down local currencies. The war has also partly driven up import costs for food and fuel, further depleting the foreign exchange reserves in the region.
Fiscal deficits — the shortfall in a government's total income compared with its expenditure — have also been partly blamed for causing higher demand for dollars. About half of the countries in Sub-Saharan Africa had deficits exceeding 5% of gross domestic product last year, putting pressure on their exchange rates, the International Monetary Fund said.
The Nigerian naira is the biggest loser, falling more than 70% against the dollar this year, primarily after Nigeria's central bank removed trading restrictions on the official currency market.
With more than two-thirds of imports in most Sub-Saharan African countries priced in dollars, the region is highly sensitive to a strengthening dollar.
"A 1 percentage point increase in the rate of depreciation against the US dollar leads, on average, to an increase in inflation of 0.22 percentage points within the first year in the region," the IMF said in a blog in May. "There is also evidence that inflationary pressures do not come down quickly when local currencies strengthen against the US dollar."
With 60% of external debt in US dollars in Sub-Saharan African countries, declining currencies are making it more costly to service those loans.
''You have a real issue with debt. So, your external debts in terms of the nominal service cost will go up if your local currency depreciates. It would actually cost you a lot more to service the debts that you currently have," Akpakwu said.
Different governments have taken different measures to prop up their currencies. Some governments have resorted to implementing tighter monetary policies, including hiking interest rates. Many central banks have also tried to boost their currencies by pumping in dollars from their reserves in the local foreign exchange market, but with their reserves depleting fast, they are left with limited options.
In Kenya, the government is aiming to collect more revenue by raising taxes to address budget deficits and cut down on borrowings in dollars.
In Nigeria, President Bola Tinubu announced an end to the country's multiple exchange rate system which was used to artificially keep the naira strong. As a result, in June, the central bank lifted trading restrictions on the official market, driving down the naira to a record low.
Ethiopia has opted for more stringent measures such as imposing bans on foreign currency transactions by local businesses.
Akpakwu says governments can still do more by prioritizing local currency financing to insulate themselves against exposure to increased exchange rates. He further adds that governments must diversify their manufacturing abilities to avoid an overreliance on commodity exports by introducing industrial policies that drive growth in different sectors.
Source: dw.com/Africa
Dar es Salaam, Tanzania — Tanzanian President Samia Suluhu Hassan has called for the removal of trade barriers on the East African nation's border with Malawi to boost trade between the two countries, the presidency said late Friday.
A statement by the Directorate of Presidential Communications said Hassan made the call at the end of her three-day state visit to Malawi on Friday. "People between the two countries should do business along the border without barriers," said Hassan.
The statement, signed by Zuhura Yunus, director of Presidential Communications, said Hassan and Malawian President Lazarus Chakwera tasked ministers responsible for trade to work out the elimination of existing trade barriers.
The statement said Hassan commended Malawi for starting to teach the Kiswahili language in schools, saying the language stood a better chance of uniting Africa.
According to the statement, during her visit, Hassan witnessed the signing of agreements on information and communications technology between the two countries.
Source: allAfrica.com
The Southern African Development Community (SADC) convened a workshop to share knowledge on issues connecting water, energy and food (WEF Nexus) and how these are affected by climate change, and the resultant impacts on communities in Southern Africa.
The workshop was convened in Gaborone, Botswana, from 28th to 29th June 2023 under the framework of the European Union (EU)-funded Intra African, Caribbean, and Pacific (ACP) Global Climate Change Alliance Plus (GCCA+), which is being implemented in the Region by the SADC Centre for Renewable Energy and Energy Efficiency (SACREEE), the Centre for Coordination of Agricultural Research and Development for Southern Africa (CCARDESA) and Global Water Partnership Southern Africa (GWPSA), on behalf of SADC. These regional organisations focus on country-level implementation of WEF Nexus demonstration projects targeting communities that are vulnerable to climate change to develop hands-on capacity in the implementation of
GWPSA and the SADC Secretariat are assisting Botswana to implement a climate-resilient Integrated Water Resource Management (IWRM) pilot project in the Metsimotlhabe River Catchment through the GCCA+ Programme. GCCA+ aims to increase the capabilities of SADC Member States and countries in the Africa Caribbean and Pacific (ACP) region to mitigate and adapt to the effects of climate change, and have their voices better heard in international climate change negotiations. The GCCA+ supports the achievements of the Regional Indicative Strategic Development Plan (RISDP) 2020-2030, Africa Agenda 2063 and Sustainable Development Goals (SDGs).
The objective of the workshop was to facilitate the exchange of knowledge and experiences, as well as to enhance capacity in the WEF Nexus and IWRM. On the sidelines of the workshop, participants visited one of the GCCA+ pilot sites in Metsimothlabe, which implemented a solar powered drip irrigation system and a hydroponics system for high value horticultural production to supplement the livelihoods of the local communities.
Ms. Sibongile Mavimbela, Senior Programme Officer, SADC Secretariat, said the regional body is happy to see participants sharing experiences and best practices gained through the implementation of various pilot and demonstration projects under the GCCA+ Programme.
In her opening remarks, Dr Kene Dick, the Deputy Director in the Department of Water and Sanitation in the Ministry of Lands and Water Affairs, said Botswana is considered one of the most vulnerable countries, and that its National Adaptation Programme of Action (NAP) indicate that climate investments should prioritise water, energy and agriculture sectors. She said the Ministry of Agriculture and Food Security through the Department of Crop Production and the Ministry of Minerals and Energy were key partners that have participated in the Metsimotlhabe Pilot Project.
"There is a need for affordable, renewable energy that can be used to supply water and produce food at the same time and that climate-resilient IWRM interventions have been proposed to support the country to adapt to the effects of climate change. The government alone, without commitments and partnership from the EU and SADC cannot fully perform impeccably in the nationally determined commitments and actions taken in fulfilment of the Sustainable Development Goals that are key to the Ministries of Water, Energy and Agriculture," said Dr Dick.
The EU expressed satisfaction that the US$9 million GCCA+ project in the SADC Region delivered intended results and was helping Member States pursue climate-resilient projects. EU Head of Cooperation, Mr Clément Boutillier, said SADC Region, like many other areas around the world, faced significant challenges in balancing the competing demands for water, energy and food, and that it was critical that a framework that promotes sustainable development, meets basic human needs, and protects the environment is developed.
"The WEF Nexus is a powerful tool that can help us achieve these goals. For example, we can significantly reduce water demand in agriculture by introducing drip irrigation systems that consume less energy than other irrigation methods, thus reducing energy consumption. We are happy to be here today to witness one of the knowledge-sharing events that are foreseen under the GCCA+ project in the SADC Region, between all the implementing organizations of these projects working on the WEF nexus," said Mr Boutillier.
On the part of SACREEE, Mr. Kudakwashe Ndhlukula gave an overview of the organization’s experiences from implementing the WEF Nexus demo projects in the region saying "the demonstration projects are expected to unlock the potential for further deployment of re-powered and professionally managed distributed renewable energy (DRE) systems for productive use."
Key outputs from SACREEE were two re-powered irrigation systems installed in Malawi and Zambia, in partnership with CCARDESA and GWPSA, and three DRE for productive energy use installed in Angola, Botswana and Namibia.
GWPSA's Ms. Laura Danga and Mr. Chrisogonous Peter spoke about the need to strengthen the climate resilience of local communities in the Wami River Basin in the United Republic of Tanzania and in the Metsimotlhabe River catchment in Botswana through the pilot implementation of climate-resilient IWRM. Assistance to design and implement IWRM pilot projects on adaptation in Botswana and Tanzania strengthens the capacity of SADC Member States to undertake regional and national adaptation and mitigation actions in response to the challenges caused by the effects of global climate change and climate variability.
Among others, delegates at the meeting agreed that there was need to establish a coordination mechanism as there was a gap in ensuring that different government departments and stakeholders in water, energy and agriculture efficiently worked together. Stakeholders also recommended the need to have incentive driven approaches to encourage the use of the WEF Nexus approach. The meeting also recommended capacitating the local private sector; capacity development of all implementing entities including beneficiaries; decentralizing structures that can establish focal points to support communities; and the need for data diplomacy or sharing of data on WEF Nexus across continents and countries.
Representatives from SADC implementing organizations such as GWPSA, SACREEE, and CCARDESA; the EU; Government Ministries related to WEF and related sectors, including Environment, Climate Change, Planning and Finance; river basin organizations; the SADC Secretariat; German development agency, GIZ; and beneficiary communities, attended the workshop.
Source: Allafrica.com
Government has awarded contracts to 13 companies to supplies fertilizer under the 2023-2024 Affordable Input Programme (AIP), the Minister of Agriculture Sam Dalitso Kawale has disclosed.
Kawale told Nyasa Times on Monday morning that the 13 companies will supply 149,164 metric tons of NPK and Urea fertilizer through the Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM).
"A few months ago, our President directed that all fertilizer procurements for the 2023 season should be done by end of June. Your Ministry of Agriculture wishes to inform you that it has awarded contracts to Optichem (2000) Limited, ETG Inputs Ltd, Farmers World, Afriventures Blantyre Limited, Mediterranean Fertilizers DMCC, Malawi Fertilizer Company, Saeed Investments, Chipala Investments, Sealand Investments Ltd, Midima Holdings Ltd, Chipiku Stores, Zathu Trading and Paramount Holdings Limited," he said.
The minister stated that between these companies, about 80, 000MT of fertilizer is already in the country, which is 53 percent of what Malawi needs.
He said the balance will be in the country before the launch of the program.
"Procurement of transportation services is at advanced stage. Award of contracts to successful transporters is expected to be given by 31st July, 2023. The procurement of seeds and female goats for the programme will be advertised in widely circulated newspapers in a week starting from 2nd July 2023," said Kawale.
The minister further disclosed that smallholder farmers will access all farm inputs before the first planting rains.
Kawale expressed his ministry's commitment to 'frequently give updates on the progress made in the implementation of the programme'.
"The smallholder farmers are requested to prepare their gardens in preparation for 2023/2024 growing season.
"The ministry is committed to continuously improve all the processes involved in accessing farm inputs as well as do things in a timely manner and ensure effectiveness, efficiency and productivity," said the minister.