Major International Business Headlines Brief::: 02 April 2020

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Major International Business Headlines Brief::: 02 April 2020

 


 

 


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ü  Ghana slashes GDP forecast over coronavirus shock

ü  Nigerian banks limit debit card withdrawals abroad

ü  Africa seeks IMF, World Bank and EU support on debt relief - UNECA

ü  S.Africa's 2019/20 tax revenue at 1.4 trillion rand, short of target

ü  Paris Club creditors agree to cancel $1.4 billion of Somali debt

ü  World Bank approves delayed $500 million education loan to Tanzania

ü  S.African insurer Discovery, Vodacom set up online virus consultation
service

ü  Fitch, Moody's downgrade S.African banks to junk

ü  Eskom could buy less power from wind farms during lockdown

ü  Glencore's chrome joint venture in South Africa with Merafe declares
force majeure

ü  BA expected to suspend 36,000 staff

ü  Oil prices rise on hopes of a price war truce

ü  Denying coronavirus loans 'completely unacceptable' banks told

ü  Nearly a million universal credit claims in past two weeks

ü  Will coronavirus reverse globalisation?

 

 


 <mailto:info at bulls.co.zw> 

 


Ghana slashes GDP forecast over coronavirus shock

ACCRA (Reuters) - Ghana’s finance ministry has slashed its 2020 GDP growth
forecast from 6.8% to 1.5% due to the coronavirus pandemic, a rate that
would represent the Ghanaian economy’s worst performance in nearly four
decades.

 

In recent years the oil, gold and cocoa-producer has had one of the top ten
fastest-growing economies in Africa. The International Monetary Fund
forecast average growth of 5% in the near term following its successful
completion of an IMF programme last year.

 

Finance Minister Ken Ofori-Atta said the new growth forecast of 1.5% could
be further lowered if the country goes into full lockdown to curb the spread
of the virus, which has so far infected 152 in Ghana and killed five.

 

“Never before, in the history of the Fourth Republic, has the entire
Ghanaian economy and society experienced such (a) severe external shock,”
Ofori-Atta told lawmakers in a speech whose text was published late on
Monday.

 

Authorities have imposed a two-week lockdown in the capital Accra and the
city of Kumasi, which are the worst-affected areas as well as being Ghana’s
main economic hubs. They have also closed all borders and schools and banned
mass gatherings.

 

A 50% slump in the global oil price partly due to coronavirus means the
government forecasts a near $1 billion shortfall in oil revenue this year as
well as lower tax revenues and import duties, Ofori-Atta said.

 

Seeking to cushion the Ghanaian economy, the central bank has cut interest
rates, while the government has asked the IMF for around $550 million in
emergency funding.

 

In addition, Ofori-Atta asked lawmakers to allow the ministry to fund a
Coronavirus Alleviation Programme with 1.25 billion Ghanaian cedi ($219
million) from Ghana’s stabilisation fund. Interest rate payments on
non-marketable bonds will be deferred, he said.

 


 <mailto:info at bulls.co.zw> 

 


 

Nigerian banks limit debit card withdrawals abroad

ABUJA (Reuters) - Nigerian banks are limiting the amount individuals can
withdraw with their debit cards while abroad, bankers said on Wednesday, in
an effort to ease foreign currency settlement risk.

 

The central bank is battling to conserve dollar reserves that are down 16%
from a year ago after the coronavirus outbreak triggered a sharp fall in the
price of oil, Nigeria’s main export. The oil price plunge has also prompted
foreign investors to shed Nigerian assets.

 

Fidelity Bank said it would impose a new limit of $1,000 from April 1, down
from $3,000 previously, a senior executive told Reuters.

 

Other lenders — Zenith Bank and GT Bank — have lowered withdrawal limits for
individuals while abroad.

 

Stanbic IBTC Bank said it has pegged its daily limit at $300.

 

Such moves have previously been at the behest of the central bank, but it
was not clear if the regulator was behind the latest action.

 

The naira has hit fresh lows on both the official and over-the-counter spot
markets after the central bank devalued the currency last month and
suspended forex sales to retail currency traders.

 

 

 

Africa seeks IMF, World Bank and EU support on debt relief - UNECA

JOHANNESBURG (Reuters) - African finance ministers want International
Monetary Fund, World Bank and EU support for bilateral, multilateral and
commercial debt relief amid the coronavirus crisis, the UN Economic
Commission for Africa (UNECA) said.

 

Africa is facing a perfect storm of an impending global economic downturn,
plummeting oil and commodity prices and weaker currencies which threaten to
imperil its coronavirus response. [nL8N2BK105]

 

Co-chaired by South African Finance Minister Tito Mboweni and Ken Ofori-Atta
of Ghana, the ministers met via video conference on Tuesday. Many wore
medical masks, said the UNECA, which hosted the meeting.

 

“The call for debt relief ... should be for all of Africa and should be
undertaken in a coordinated and collaborative way,” UNECA said in a
statement.

 

In an initial meeting organised by UNECA last month, ministers called for a
$100 billion stimulus package, including a suspension of debt service
payments. [nL8N2BG69J]

 

Following Tuesday’s meeting, they said the continent’s development partners
should consider debt relief and interest rate forbearance over a two to
three-year period for all African low-income and medium-income countries.

 

They also called for the creation of a special purpose vehicle to “deal with
all sovereign debt obligations” though no further details were given as to
what shape it would take.

 

Africa’s confirmed coronavirus cases had climbed to at least 5,300 by
Tuesday, with more than 170 recorded deaths, according to a Reuters tally.

 

 

 

S.Africa's 2019/20 tax revenue at 1.4 trillion rand, short of target

JOHANNESBURG (Reuters) - South Africa’s tax revenues again fell short of the
government’s target, with preliminary collection for the year ended March at
1.356 trillion rand ($75.58 billion), the revenue service said on Wednesday,
several billion rand short of the amount estimated in the February budget.

 

Commissioner of the South African Revenue Service (SARS) Edward Kieswetter
said lower-than-expected economic growth, increasing job lay-offs and
persistent electricity shortages were the main contributors to the slide in
tax receipts.

 

“These factors have begun to manifest themselves measurably in weaker
economic activity, especially in sectors such as manufacturing and financial
services,” Kieswetter said in a teleconference.

 

($1 = 17.9409 rand)

 

 

 

Paris Club creditors agree to cancel $1.4 billion of Somali debt

WASHINGTON/PARIS (Reuters) - The Paris Club of creditor nations agreed on
Tuesday to restructure Somalia’s debt, including immediately canceling $1.4
billion owed by the impoverished Horn of Africa country.

 

Three decades of conflict have left Somalia all but cut off from the global
financial system and relief from its debt is expected to open the way for
new sources of financing for the country.

 

The decision, first reported by Reuters, cancels 67% of the debts owed to
Paris Club creditors by Somalia. It came after more than nine hours of
discussions by videoconference.

 

Somali Finance Minister Abdirahman Beileh called the decision a big step
forward for his country, which is also grappling with the coronavirus
outbreak and a recent desert locust swarm.

 

“We had very productive discussions with the Paris Club and we welcome their
support in relieving Somalia of a substantial amount of its debt to them,”
Beileh told Reuters.

 

He said the Somali government would hold separate bilateral discussions with
the creditors to finalize the process. He said his government would continue
the economic reforms it had undertaken over the past eight years to enable
the debt relief.

 

An official with the International Monetary Fund said several creditors were
expected to grant Somalia additional debt relief on a bilateral basis, and
it could eventually see 100% debt cancellation deals with some countries
after it completes additional steps under the Heavily Indebted Poor
Countries (HIPC) Initiative in about three years.

 

The IMF and the World Bank said last week that Somalia had taken the
necessary steps here to begin receiving debt relief.

 

Several of Somalia’s Paris Club creditors, including the United States, the
UK and Norway, as well as the World Bank and the IMF, urged Paris Club
members to provide “generous” debt relief to Somalia during the negotiations
on Tuesday, said one source familiar with the discussions.

 

Somalia is the 37th country to qualify for debt relief under the HIPC
process.

 

In time, debt relief will help Somalia reduce its external debt to $557
million in net present value terms from $5.2 billion at the end of 2018, the
IMF and the World Bank said.

 

The IMF last week also approved a new three-year $395 million financing
arrangement for Somalia under its Extended Credit Facility (ECF) and
Extended Fund Facility (EFF).

 

 

 

World Bank approves delayed $500 million education loan to Tanzania

DAR ES SALAAM (Reuters) - The World Bank has approved a $500 million
education loan to Tanzania after years of delays because of concerns about
the country’s policy of banning pregnant students from public schools.

 

The World Bank froze $1.7 billion in loans to Tanzania in 2018 following
both the pregnant student ban and a law making it illegal to question
official statistics. It started releasing funds again to the East African
country last September.

 

The terms of the loan, which is designed to improve secondary school access,
give pregnant students - who were forced to drop out - a chance to complete
their schooling through alternative public education programs, the World
Bank said late on Tuesday.

 

President John Magufuli announced the pregnant student ban in 2017, drawing
harsh criticism from activists and donors.

 

The World Bank, Tanzania’s biggest external lender, says about 5,500
pregnant girls drop out of school every year.

 

Foreign loans and grants are a key source of foreign exchange for East
Africa’s third-largest economy.

 

Opposition leader Zitto Kabwe, who had previously asked the World Bank to
withhold the loan until it was more inclusive, lauded campaigners and the
terms of the loan on Twitter.

 

Still, some activists emphasized there was a lot more work to be done.

 

“I was expecting the World Bank to push for re-entry of banned teenage
mothers in public schools, period,” said Carol Ndosi, a womens’ advocate.
But, until then, this was a step in the right direction, Ndosi said.

 

 

 

 

S.African insurer Discovery, Vodacom set up online virus consultation
service

JOHANNESBURG (Reuters) - South African insurance company Discovery and
mobile operator Vodacom are teaming up to offer a free, online doctor
consultation service to all South Africans with coronavirus-related
concerns.

 

Discovery had already set up an online service for its own customers but had
put it on ice due to a regulatory hold-up. Now it will be open for anyone.

 

The 20 million rand ($1.11 million) cost of the first 100,000 consultations
will be split between the two companies. Doctors sign up to the service
voluntarily, with more than 5,000 registered so far.

 

Vodacom will also provide free access to the platform via mobile data, but
only with a Vodacom sim card, meaning users will have to already be a
customer or sign up to Vodacom to access the service.

 

Discovery CEO Adrian Gore said there was no financial benefit to the insurer
from the partnership, and it would not receive a share in any revenues
Vodacom earned from new customers.

 

He added that sources of funding would have to be explored if the number of
consultations went above 100,000.

 

Gore also told Reuters that the company was modelling the potential impact
the coronavirus will have on claims, with its businesses in South Africa and
Britain a focus.

 

“COVID claims are certainly going to go up and we’re modelling that, but the
cost of other health events are going down quite dramatically, people are
not going for elective surgery, so there’s a bit of a counter balance,” he
said.

 

There was also a much higher risk of mortality claims too, he continued,
adding the insurer was “preparing carefully” for this outcome.

 

($1 = 17.9594 rand)

 

 

 

 

Fitch, Moody's downgrade S.African banks to junk

JOHANNESBURG (Reuters) - Two top ratings agencies downgraded big South
African banks’ credit ratings to junk, a move expected after the country’s
sovereign rating suffered the same fate last week from Moody’s - the only
agency to consider it investment-grade.

 

Fitch Ratings and Moody’s said late on Monday they had downgraded South
Afrian lenders’ ratings to ‘BB’ and ‘Baa3’ respectively with a negative
outlook, meaning the lenders are no longer considered investment-grade and
they risk further downgrades if the situation worsens.

 

The agencies said Standard Bank, Absa, FirstRand, Nedbank and, in the case
of Moody’s, Investec’s fortunes were tied to the deteriorating economy in
South Africa, already in trouble prior to the outbreak of coronavirus, and
those of the government.

 

Both highlighted the further blow to the economy, which slipped into
recession in the final quarter of 2019, of the pandemic and a 21-day
nationwide lockdown as the key factor, with banks’ expected to see rising
bad debts and lower revenues.

 

“A secondary driver of today’s rating actions is South African banks’ high
sovereign exposure, mainly in the form of government debt securities held as
part of their prudential liquidity requirements, which links their credit
profiles to that of the government,” Moody’s continued.

 

It said the lenders’ overall sovereign exposure, including loans to often
troubled state-related entities, averaged at 176% of their capital bases.

 

In a statement, Absa said it remained well capitalised in all of its
jurisdictions: “We remain confident that we have significant financial
resources to remain resilient through the current crisis.”

 

Nedbank said the downgrade would have an immaterial impact on the group’s
capital position and only a small impact on its cost of funds.

 

The other three lenders did not immediately provide a comment.

 

 

 

Eskom could buy less power from wind farms during lockdown

JOHANNESBURG (Reuters) - South African state utility Eskom has told
independent wind farms that it could buy less of their power in the coming
days, as electricity demand has plummeted during a lockdown aimed at curbing
the spread of the coronavirus.

 

Eskom, which is mired in a financial crisis and has struggled to keep the
lights on in the past year, said on Tuesday that power demand had dropped by
more than 7,500 megawatts since the lockdown started on Friday and that it
had taken offline some of its own generators.

 

The utility supplements its generating capacity, which is mainly derived
from coal, by buying power from solar and wind farms under contracts signed
as part of the government’s renewable energy programme.

 

Spokesman Sikonathi Mantshantsha said Eskom had not yet curtailed power
procurement from wind farms but that it had told them this could happen “for
a few hours a day during the next few days, perhaps until the lockdown is
lifted”.

 

“Most of them are able to feed power into the grid in the early hours of the
day. That coincides with the lowest demand period. And we now have a lot
more capacity than needed,” Mantshantsha said.

 

During the lockdown imposed by President Cyril Ramaphosa, businesses apart
from those deemed “essential services” are closed. Many power-hungry mines
and furnaces have suspended operations. [nL8N2BO3HR]

 

Eskom has relatively little of its own “flexible generation” capacity, which
can be ramped up or down easily.

 

The government has committed to buy up to 200 billion rand ($11.1 billion)
of electricity from independent power producers and has issued state
guarantees for those purchases.

 

“They will be compensated for their losses - each day lost will be added to
their contracts,” Mantshantsha said of the wind farms. “In the end they will
not be worse off.”

 

($1 = 17.9886 rand)

 

 

 

Glencore's chrome joint venture in South Africa with Merafe declares force
majeure

LONDON (Reuters) - Glencore’s chrome joint venture in South Africa with
Merafe Resources has declared force majeure on qualifying contracts after a
nationwide lockdown forced operations to shut, a Merafe executive said.

 

“All our operations are shut and are on care and maintenance. We have
declared force majeure on qualifying contracts” Merafe financial director
Ditabe Chocho told Reuters.

 

Glencore declined to comment.

 

South Africa, which has called a three-week lockdown to slow the spread of
coronavirus, is the world’s biggest producer of chrome ore, an essential
ingredient in stainless steel. Last year the country supplied 83% of China’s
imports.

 

The Swiss-based Glencore owns 79.5% of the Glencore-Merafe Chrome Venture,
which has a total capacity of 2.3 million tonnes of ferrochrome per annum.

 

Other South African chrome operators including Samancor Chrome and Tharisa
have also declared forced majeure on contracts.

 

 

 

BA expected to suspend 36,000 staff

British Airways is expected to announce it will suspend around 36,000 staff.

 

The airline, which grounded much of its fleet due to the coronavirus crisis,
has been negotiating with the Unite union for more than a week.

 

The two sides have reached a broad deal but are yet to sign on some details.

 

The agreement means that up to 80% of BA cabin crew, ground staff, engineers
and those working at head office will have their jobs suspended but no staff
are expected to be made redundant.

 

The decision will affect all staff at Gatwick and London City Airport after
the airline suspended its operations at both locations until the crisis is
over.

 

Those affected are expected to receive some of their wages through the
government's coronavirus job retention scheme, which covers 80% of someone's
salary capped at a maximum of £2,500 a month.

 

It is thought that the Unite union has been pushing for staff to be paid
more than that. BA has already reached a separate deal with its pilots who
will take a 50% pay cut over two months.

 

BA's parent company, International Airlines Group (IAG), is in a better
financial position than some of its competitors. The group has made healthy
profits in recent years.

 

But the airline's expected decision to suspend such a large number of
workers gives a sense of how hard UK aviation has been hit by travel
restrictions, designed to stem the spread of the pandemic.

 

With future bookings cancelled for the foreseeable future, airlines have
been haemorrhaging cash.

 

Over the next three months, the International Air Transport Association
expects airlines to rack up losses of almost $40bn (£32.3bn). It said
carriers were burning through their cash reserves fast, mainly because of
the multi-billion-pound cost of refunding tickets for cancelled flights.

 

Many staff at Virgin Atlantic have had their jobs suspended for two months
and crews at Easyjet are out of work for three months.

 

This week, British Airways has run government repatriation flights to get
hundreds of British nationals home from Peru, after the country went into
lockdown.

 

It is one of several UK-based airlines that has agreed to run further
repatriation flights in the coming weeks as hundreds of thousands of people
are still stuck in other parts of the world.--BBC

 

 

Oil prices rise on hopes of a price war truce

Global oil prices have risen after Donald Trump said he expected Saudi
Arabia and Russia to reach a deal soon to end their price war.

 

The cost of crude had fallen to 18-year lows as the two countries slashed
prices and ramped up production.

 

At the same time demand has been hit hard by shutdowns around the world to
slow the spread of the coronavirus.

 

US oil has just seen its worst quarter on record, falling by two thirds in
the first three months of the year.

 

Speaking about the dispute at a White House news conference, Mr Trump said:
"It's very bad for Russia, it's very bad for Saudi Arabia. I mean, it's very
bad for both. I think they're going to make a deal".

 

He added that he expected them to "work it out over the next few days" after
he spoke to both countries' leaders.

 

In Asian trade Brent crude oil was up by more than 6% to over $26 a barrel,
while US oil was some 5% higher.

 

Traders have suggested that prices may also have been boosted by
expectations that American shale oil producers, which have relatively high
production costs, are coming under pressure to cut production.

 

"High debt levels could see some of those producers wiped out," Michael
McCarthy, chief market strategist at CMC Markets said.

 

The American oil industry, which Mr Trump described as having been
"ravaged", has just seen the first stock market-traded casualty of the
collapse in oil prices.

 

Shale producer Whiting Petroleum, which was once the largest oil producer in
the US state of North Dakota, filed for bankruptcy on Wednesday. The company
said it had worked to cut costs and would continue to operate under a
restructuring plan.

 

It came as global demand for crude oil was predicted to be almost 23% lower
this month than it was a year ago, according to research firm Rystad Energy.

 

Meanwhile, Mr Trump will reportedly meet the bosses of major energy
companies, including Exxon Mobil and Chevron, at the White House on Friday.

 

They will discuss a range of options that may include possible tariffs on
oil imports from Saudi Arabia, according to the Wall Street Journal.--BBC

 

 

 

Denying coronavirus loans 'completely unacceptable' banks told

Business Secretary Alok Sharma has issued a stark warning to banks, after
concerns that up to a million companies could fold because they could be
denied emergency loans.

 

"It would be completely unacceptable if any banks were unfairly refusing
funds to good businesses in financial difficulty," Mr Sharma said.

 

The government-backed loan scheme aims to ensure companies can access cash
as the UK lockdown slows the economy.

 

But some say loans have been denied.

 

Speaking in Downing Street on Wednesday, Mr Sharma referenced the financial
crisis - when the government bailed out a number of the UK's largest banks.

 

"Just as the taxpayer stepped in to help the banks back in 2008, we will
work with the banks to do everything they can to repay that favour and
support the businesses and people of the United Kingdom in their time of
need," he said.

 

Banks have been criticised by companies and MPs for insisting directors put
their own property or savings up as collateral before they are approved for
the emergency loans.

 

Businesses have also complained of banks charging interest rates of up to
30%.

 

'Simply not responsive'

The head of the Federation of Small Businesses, Mike Cherry, said banks were
either trying to push firms towards "standard, expensive products" or they
were "simply not responsive".

 

"We can't have a situation where banks are approached by successful small
firms and lenders offer up business as usual products," he said. "This is
not business as usual."

 

"They were promised interest-free, fee-free, government-backed support from
banks," he said.

 

He said millions of firms were at risk of collapsing because they were in
need of urgent help that has not been made available.

 

The Treasury is preparing to change the rules that govern its emergency
loans scheme for businesses facing a cash-flow crisis because of the
coronavirus shutdown.

 

Many companies have told the BBC that the scheme isn't working for them,
with some turned down for a government-backed loan and others told they may
have to wait weeks.

 

The planned rule change follows a furious behind-the-scenes row between the
banks and the government over whose fault it is that too few emergency loans
have been offered to businesses in need.

 

Privately, the banks say it's the government's rules that are in the way.
They are required to lend to firms on normal commercial terms if they can -
and only businesses that can't get a traditional loan qualify for the
scheme.

 

But the Treasury is now reportedly planning to scrap that rule so that banks
can lend faster.

 

Another obstacle has been the demand from banks that company directors put
their own assets at risk by signing personal guarantees when borrowing
£250,000 or more. That is also expected to be addressed.

 

Research from a network of accountants suggested that nearly a fifth of
Britain's small and medium-sized businesses were unlikely to get the cash
they need to survive the next month, under the existing scheme.

 

The study said that between 800,000 and a million firms nationwide may soon
have to close.

 

Acting leader of the Liberal Democrat's Sir Ed Davey said: "At a time when
the whole country is coming together to fight Covid-19 it is becoming
increasingly clear that the Government cannot just leave the big banks to
deliver the coronavirus business interruption loans. The big banks are
simply not rising to the challenge.

 

"Too many small businesses report long delays, high interest terms and being
asked for personal guarantees."

 

Banking trade body UK Finance said lenders were "working hard" to get money
to businesses as quickly as possible both under the government-backed scheme
or by offering normal loans.

 

But the group stressed that banks could only offer loans on the government's
terms if they were unable to lend "under their normal criteria".

 

"As the business secretary said today, this is a new scheme delivered at
pace and there will be issues that need to be addressed," Stephen Jones, who
runs the trade body, said.--BBC

 

 

Nearly a million universal credit claims in past two weeks

Nearly a million people have applied for universal credit benefits in the
past fortnight as the coronavirus pandemic has worsened.

 

The Department for Work and Pensions said 950,000 successful applications
for the payment were made between 16 March, when people were advised to work
from home, and the end of the month.

 

The department would normally expect 100,000 claims in a two week period.

 

Officials said they were working "flat out" to help people get support.

 

But Labour said the figures were "truly shocking" and the government "must
wake up and take action" to help the millions of those at risk of losing
their jobs and the self-employed not covered by government hardship schemes.

 

The figures show the massive increase in demand on the benefit system since
the government urged people to avoid non-essential travel and contact with
others to curb the spread of the virus.

 

There was a warning on Wednesday that 20% of small businesses could fold in
the next month due to the collapse in consumer demand, despite unprecedented
government intervention to support jobs.

 

'Pressure on services'

Universal credit is a consolidated monthly payment for those of working-age,
which replaced a host of previous benefits including income-based
jobseeker's allowance, housing benefit, child tax credit and working tax
credit.

 

In October 2019, there were 2.6 million universal credit claimants - just
over a third of whom were in work.

 

What is universal credit?

Kuenssberg: New universal credit claims signal economic need

The government said the benefit system was still "delivering" despite the
massive increase in demand.

 

"With such a huge increase in claims there are pressures on our services,
but the system is standing up well to these and our dedicated staff are
working flat out to get people the support they need," a spokesperson said.

 

"We're taking urgent action to boost capacity - we've moved 10,000 existing
staff to the help on the front line and we're recruiting more."

 

The sudden and vast increase in those signing up is powerful evidence that
the coronavirus crisis is an economic emergency for a very significant
portion of the public, losing work and losing income in ways they could
never have anticipated a few short weeks ago.

 

The numbers of people losing out on work could therefore be higher even than
this significant level. But given the numbers who have managed to register,
there are obviously very significant efforts going on at the DWP to expand
the service to try to meet the scale of the need.

 

The government has already stepped in with support for the economy and for
workers in ways that have no modern parallel.

 

In time, there may be questions about whether the country can really afford
to support new legions of workers through hard times for more than a short
emergency period.

 

But right now, these figures provide urgent evidence that only a fortnight
after the country was told to shut up shop, there are many, many thousands,
already in economic need.

 

Since the virus struck, the government has made a series of changes designed
to make it easier for the self-employed to claim the benefit and to ensure
they will not lose out as their earnings dry up.

 

Labour has urged ministers to go much further, saying the verification
process for new claimants should be speeded up and upfront cash advances -
available for those in urgent need - should not have to be repaid.

 

"People need help now," said shadow work and pensions secretary Margaret
Greenwood.

 

"The government should turn advances into non-repayable grants to end the
five week wait and make sure people get the support they need quickly at a
level that genuinely protects them from poverty."--BBC

 

 

Will coronavirus reverse globalisation?

Globalisation has been one of the buzzwords of the past 25 years.

 

It may seem a rather strange concept, since any economic historian will tell
you that people have been trading across vast distances for centuries, if
not millennia.

 

You only have to look at the medieval spice trade, or the East India
Company, to know that. But globalisation is really about the scale and speed
of international business, which has exploded in the past few decades to
unprecedented levels.

 

Easier travel, the world wide web, the end of the Cold War, trade deals, and
new, rapidly developing economies, have all combined to create a system that
is much more dependent now on what is happening on the other side of the
world than it ever was.

 

Which is why the spread of coronavirus, or Covid-19 to be specific, has had
such an immediate economic effect.

 

Professor Beata Javorcik, chief economist at the European Bank for
Reconstruction and Development, says that the pace of change in the global
economy over just the past 17 years has been profound.

 

"When we look back at 2003, at the Sars epidemic, China accounted for 4% of
global output," she says. "Now China accounts for four times as much, 16%.
So that means that whatever is happening in China affects the world to a
much larger extent."

 

Globalisation helps to explain while nearly every major car plant in the UK
has shut down - they are dependent on sales and components from around the
world. When both collapsed, they just stopped making cars.

 

China's wealth and health therefore matter to us all far more than they used
to, but this is not just a matter of scale - there is also a deeper problem
with globalisation.

 

Ian Goldin, professor of globalisation and development at Oxford University,
and author of "The Butterfly Defect, How Globalization Creates Systemic
Risks, And What To Do About It", says that "risks have been allowed to
fester, they are the underbelly of globalisation".

 

That, he says, can be seen not only in this crisis, but also in the credit
crunch and banking crisis of 2008, and the vulnerability of the internet to
cyber-attacks. The new global economic system brings huge benefits, but also
huge risks.

 

 

While it has helped raise incomes, rapidly develop economies and lift
millions out of poverty; that has come at the increased risk of contagion,
be it financial or medical.

 

So what does this latest crisis mean for globalisation?

 

For Prof Richard Portes, professor of economics at London Business School,
it seems obvious that things will have to change, because firms and people
have now realised what risks they had been taking.

 

"Look at trade," he explains. "Once supply chains were disrupted [by
coronavirus], people started looking for alternative suppliers at home, even
if they were more expensive.

 

"If people find domestic suppliers, they will stick with them
 because of
those perceived risks."

 

Global Trade

 

Professor Javorcik agrees, and believes a combination of factors will mean
Western manufacturing industry will start bringing work back home, or
re-shoring it as it is called.

 

"I think that the trade war [mainly between the US and China], combined with
the Coronavirus epidemic, will lead companies to actually take re-shoring
seriously," she says.

 

"They will re-shore activities that can be automated, because re-shoring
brings certainty. You do not have to worry about your national trade policy,
and it also gives you an opportunity to diversify your supplier base."

 

However, this is not all good news for Western economies, which may now
believe they have become too dependent on globalisation. Instead this cuts
both ways.

 

A great deal of globalisation is not about moving manufactured goods around
the world, but moving people, ideas and information; something that we in
the UK and other Western economies are very good at.

 

As David Henig, director of the UK Trade Policy Project at the European
Centre for International Political Economy, points out: "The service sector
must have fallen off a cliff, and just look [in particular] at tourism and
universities.

 

"There must be real concern about the number of new entries to Western
universities this autumn. This is a huge export industry
 many universities
are dependent on Chinese students, for example."

 

The idea that globalisation is just about moving manufacturing or supply
chains to cheaper Asian countries is too simple. It has also led to massive
increases in foreign students willing to pay to study at our colleges and
universities, and a huge influx of wealthy tourists who want to spend money
here, to name just two service sector businesses.

 

Slowing or even reversing globalisation would hit those industries very hard
indeed. But even so, Prof Goldin thinks that this pandemic marks a sea
change and that "2019 was the year of peak supply chain fragmentation".

 

Although, some factors such as 3D printing, automation, the demand for
customisation, and quick delivery, as well as protectionism were already
being felt; it seems that Covid-19 can only accelerate that process.

 

The real concern is, however, not whether these changes happen, but how far
they go, and how they will be managed?

 

Prof Goldin has a simple and clear way of explaining the options - will the
result be more like what happened after World War One, or after World War
Two?

 

We could, like after 1918, get weak or weaker international organisations,
the rise of nationalism, protectionism and economic depression. Or, as
followed 1945, more cooperation and internationalism, like Bretton Woods,
the Marshall Plan, the UN and the General Agreement on Tariffs and Trade.

 

There was much optimism that the world would become a better place after
World War Two, with the Bretton Woods conference, pictured, aiming to ensure
a fairer economic order

Prof Goldin remains cheerful, but worries about who is going to take the
lead. "We can be optimistic, but we are not seeing leadership out of the
White House certainly," he says. "China can't step up to the plate, and
Great Britain cannot lead in Europe."

 

This is a worry shared by Prof Portes, who points out that: "The London G20
Summit of 2009 agreed a $1tn (£800bn) package of international cooperation,
even Germany joined in. But now there is no leadership in the G20, and the
USA is absent from the international scene."

 

Will globalisation be reversed? Probably not, it is too important an
economic development for that to happen, but it could well be slowed down.

 

The bigger question is, however, have we learnt the lessons of this crisis?
Will we learn to spot, control and regulate the risks that seem to be an
integral part of globalisation? Because the cooperation and leadership
necessary to make that happen seem to be in short supply.--BBC

 

 

 

 

 


 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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been compiled from sources believed to be reliable, but no representation or
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any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


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