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[l] at 7/31/20 1:37pm

Constraints include high barriers to entry for small businesses, badly performing State-Owned Entities (SOEs) and a high public sector wage bill

South Africa responded swiftly to the COVID-19 pandemic [PPIO]

The Organisation for Economic Cooperation and Development (OECD) Survey of South Africa launched via a webinar on 31 July highlights the barriers to growth in South Africa.

These barriers mean that South Africa is amongst the worst performers if compared with the 37 OECD countries as well as BRICS peers, the Russian Federation and Brazil. It was the worst of the 40 countries surveyed in jobs, environment and life satisfaction.

The poor ranking for life satisfaction and safety are in part due to high crime rates with the latest crime data for the 1 April 2019 to 31 March 2020 period showing a reduction in 14 crime categories and an increase in 9 crime categories.

The reported cases of carjacking saw the biggest year-on-year (y/y) with a 13.3 per cent y/y rise to 18,162 cases. This was the only crime category to see double-digit growth, with the next largest increase seen in robberies at non-residential premises, which rose by 3.3 per cent to 20 651 cases.

The biggest reduction in crimes were seen in bank robberies (where no such crimes were recorded), cash-in-transit heists (down 10.4 per cent), and instances of arson (down 7.3 per cent). Murders in South Africa remain high, with a 1.4 per cent increase to 21,325 reported cases. This works out to 58 people murdered in the country every day, at a rate of 35.8 people per 100,000 population.

South Africa responded swiftly to the COVID-19 pandemic, but the sharp drop in economic activity adds to long-standing challenges and raises the urgency of structural reforms, according to the OECD survey. The nationwide lockdown enacted from 27 March 2020, a mere three weeks after the first reported case, reduced activity in mining and industry while bringing the tourism, entertainment and passenger transport sectors to a near-standstill.

As growth has collapsed with the OECD expecting a contraction of between 7.5 per cent and 8.2 per cent this year, the unemployment rate rising to the 33 per cent level, the OECD said more will need to be done to strengthen responses to the crisis and ensure that the recovery brings about sustainable and more inclusive development.

The number of monthly salaries paid in June 2020 showed a 20.7 per cent y/y decline data from the BankservAfrica Take-home Pay Index (BTPI) showed.

The OECD recommended that a wide range of measures be undertaken to improve the quality of and access to health care and support businesses and people. This includes lowering interest rates; providing temporary financial support to households and businesses; and extending financial relief in sectors hard hit by the crisis, particularly if there is a renewed virus outbreak later in the year.

OECD Economics Department Country Studies Director Alvaro Pereira said: “South Africa cannot afford to delay reforms. It is essential to undertake reforms to restore long-run fiscal sustainability and growth, while continuing to support the economy in the short run.”

He said macroeconomic and structural policies are needed to put growth on a sound footing going forward.

Bold fiscal measures are needed to curb spending pressures and restore fiscal sustainability, including taking steps to reduce the government wage bill and transfers to state-owned enterprises. Structural policy reforms to boost competition, restructure state-owned enterprises, improve the regulatory framework and improve public investment in transport infrastructure, skills and education are also called for.

The high barriers to entry are in part due to the regulatory burden or red tape, as well as the oligopolistic structure of the South African economy with only Brazil and Argentina being worse than South Africa.

Restoring fiscal sustainability will require measures that will curtail wage bill growth and SOE financing, as well as contain spending growth in higher education, raise revenue and improve the efficiency of public spending.

The general government wage bill, at 12 per cent of GDP, is one of the highest among OECD and partner countries. At 38 per cent of total consolidated government spending, the compensation of employees was the largest spending item in 2019.

Public sector wage increases are the main driver of government spending rather than increases in employment. Wage negotiations have systematically granted above-inflation increases over the past decade. Moreover, promotion policies contributed to wage bill increases.

The OECD recommended that the government could consider indexing public sector wages below inflation for three years. An inflation minus 2 percentage points in the public service could generate around ZAR 30 billion savings over three years.

Given the wage gains of recent years, the real cost to civil servants would be limited as they would still benefit from annual progression in the pay scale. Such a measure could create fiscal space for much-needed investment in infrastructure and education.

The OECD said that a sound growth strategy, which included reforming product markets, boosting investment, infrastructure development, trade policies that augment the benefits from participation in global value chains, more competitive SOEs?, could deliver quick wins in terms of job creation and increase potential growth.

Efforts to improve the business climate, sequencing and prioritisation of reform will be essential for maximising the growth impact.

It however noted that despite the fact that South African President Cyril Ramaphosa was head of the African Union this year and that a South African, Wamkele Mene, was the Secretary General of the African Continental Free Trade Area (AfCTA), progress in terms of improving regional integration had been poor since the 2017 Survey.

Cross-border restrictions due to the pandemic have delayed the implementation of the AfCTA, so exports have pivoted towards ocean freight, which meant that in June 2020, the number of full containers exported exceeded the number of full containers imported for the first time.

In response from The BRICS Post to a question on the evolution of trade, where the OECD sees a 12.5 per cent contraction in exports and a 10 per cent decline in imports this year, Falilou Fall, the senior economist on the South Africa desk responsible for the survey, said it was difficult to forecast accurately as the situation was so dynamic.

“There are lots of uncertainties nowadays, it is hard to forecast the evolution of trade given how the pandemic affects the different countries and the measures they take. Overall, trade is falling globally. South Africa has some specific minerals (such as palladium) where it can perform well but that will depend on demand from partner countries going forward. Falling imports are linked to the severity of the lockdown and the progressive recovery,” he said.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 7/21/20 11:47am

Brazil has the second highest number of COVID-19 cases in the world  

Jair Bolsonaro, right, was recently diagnosed with COVID-19 [Brazil Gov]

The Board of Directors of the BRICS New Development Bank (NDB) approved a COVID-19 Emergency Program Loan of $1 billion to the Government of the Federative Republic of Brazil on July 20, 2020. On the same day, four of the BRICS countries occupied the top five positions in terms of number of cases with the US at the top. Brazil was second with 2, 121, 645 cases, India third with 1, 156, 189 cases, Russia fourth with 777, 486 cases and South Africa fifth with 373. 628 cases according to Worldometers data. China, where the pandemic originated, was 26th with 83, 693 cases.

The loan provided by the NDB will help Brazil safeguard the income of about 5 million people in vulnerable situations, including informal, self-employed and unemployed workers. The basic income guaranteed by the program allows the most economically vulnerable families to gain increased access to food and health-related goods, such as medicines and personal hygiene products, which are vital for the prevention and containment of COVID-19.

The loan will also help the Government of Brazil to ensure that strong fiscal support is in place to combat the outbreak and that priority investment projects will be implemented, thereby contributing to the economic recovery of the country.

NDB’s project in Brazil supplements emergency loans provided by five other multilateral development banks and development agencies – the International Bank for Reconstruction and Development (IBRD), the Inter-American Development Bank (IDB), the Development Bank of Latin America (CAF), the German Development Bank (KfW), and the French Development Agency (AFD) – who joined efforts to provide USD 4 billion of financing, to mitigate the social and economic impacts of the pandemic.

“The COVID-19 Emergency Program Loan to Brazil will contribute to the country’s ongoing efforts to strengthen social safety nets and address immediate socio-economic impacts of the COVID-19 outbreak, particularly on the most vulnerable population in Brazil,” said Mr. Marcos Troyjo, President of the NDB.

The loan marks the NDB’s fourth emergency assistance program to combat COVID-19, following similar loans to China, India, and South Africa, and thus raises NDB’s financial support against COVID-19 to the level of USD 4 billion. It is also NDB’s biggest loan approval to Brazil so far, thus contributing to expanding the share of loan approvals in the country from 8.4% of the NDB’s total portfolio, to 13%.

Helmo Preuss in Makhanda, South Africa for The BRICS Pos

[Category: Brazil, BRICS News]

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[l] at 7/2/20 10:56am

The National Treasury forecasts that the economy will contract by 7.2 per cent in 2020, but that remains dependent on a rapid increase in take up of the bank loan guarantee fund of R200 billion, which is a massive 40 per cent of the R500 billion economic stimulus package.

As of June 13 , only 5 per cent of this fund had been taken up, so over what time period will the remaining 95 per cent be taken up? That is why several economists are looking at a contraction of 10 per cent or more this year.

That means that in 2023 the South African economy will still be 1.9 per cent less than it was in 2019. In per capita GDP terms this implies that the average South African will be 8 per cent poorer in 2023 than they were in 2019 as population growth is above 1.5 per cent per year.

In the past few years, the Treasury has been too optimistic in its GDP growth forecasts, which is why tax revenue has consistently been below target.

The Treasury has used the experience of the Global Financial Crisis to model what happened to tax revenues, but this seems to be too optimistic given that in 2009 the contraction was only 1.5 per cent compared with a 7.2 per cent collapse expected now.

As Treasury said in its Review: “Business confidence will remain near historic lows, and investment and employment will drop below last year’s levels. Household consumption will remain constrained by reduced income – from wages, commissions, bonuses and financial assets – as well as low job growth. The 2020 outlook may deteriorate further if the global economy continues to weaken, or economic activity is curtailed again to protect public health.”

It noted that it is primarily domestic fiscal policy measures and implementation of economic reforms over the next six to 12 months that will determine the growth trajectory over the next several years. These will be outlined in the 2020 Medium Term Budget Policy Statement (MTBPS) due in October.

As at June 23, South Africa has more than 106,000 coronavirus cases, but testing lags as testing by the public sector is supposed to be above 30 000 per day but at the moment only averages 14 000 per day, although more than 1 million tests from both private and public sectors have already been carried out.

The Treasury said that critical risks to the economy include continued volatility in global financial markets, sudden interruptions in capital inflows, the reliability of electricity supply, additional commitments to fund financially distressed state-owned companies, low levels of confidence, policy uncertainty and concerns about government’s commitment to the independence of the central bank.

Pandemic Borrowing

The South African government intends to borrow $7 billion from multilateral finance institutions for its pandemic response. This includes a US$1 billion loan from the BRICS New Development Bank, US$4.2 billion from the International Monetary Fund and US$1.8 billion from other unspecified sources.

Short-term borrowing will increase by R98 billion to R146 billion in 2020/21 and will average R60 billion over 2021/22 and 2022/23. Borrowing in the domestic bond market will increase by R124.8 billion in 2020/21 to R462.5 billion, and average R419.9 billion over the next two years.

It highlighted the risk of a debt spiral because if this spiral is not halted and reversed, it is likely that some state-owned companies and public entities will collapse, triggering a call on guaranteed debt obligations. Failure to substantially reduce costs, address longstanding governance failures, prosecute state-capture participants and undertake profound operational reforms has contributed to already unsustainable financial positions in many public-sector institutions.

The pressure on public finances requires fundamental changes to the manner in which government supports these institutions, and such reforms will be implemented in the near term.

That is why the only additional funds allocated to state-owned companies was R3 billion for the Land Bank.

The government envisions a package of economic reforms that will improve productivity, lower costs and reduce demands of state-owned companies on the public purse. These measures include finalising electricity determinations, unbundling Eskom and taking other steps to open up energy markets, modernising ports and rail infrastructure, and licensing spectrum.

Implementation of proposed reforms has however been lacking since Cyril Ramaphosa became president in February 2018. The rand and the Johannesburg Stock Exchange both ended the day weaker than on the previous day.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News]

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[l] at 6/19/20 5:24am

The $1.5 billion bond has an issue yield of 0.66 per cent and is listed on the Irish Stock Exchange

The NDB has been making emergency loans to help member states combat COVID-19 [NDB]

The BRICS New Development Bank (NDB) COVID-19 Response will be used to finance sustainable development activities in its member countries, including emergency assistance loans to the BRICS member countries.

Such emergency loans could be used to finance direct expenses such as procuring personal protection equipment for health care workers related to the fight against the COVID-19 outbreak or provide support to governmental measures such as income relief measures contributing to economic recovery in the member countries of the NDB.

China and India have already received funds, while South Africa has applied for a $1 billion loan.
The NDB said the transaction met exceptional high-quality investor support, with strong participation from central banks and official institutions, which represented 75% of allocations.

The investor geographic distribution of the final bond book was as follows: 56% – Asia, 29% – EMEA, 15% – Americas.

“We are pleased with the overwhelmingly positive investor feedback and the very top quality order book for our inaugural COVID-19 Response Bond in the international markets. This bond issue is strategically important in addressing the economic and social challenges that our member states are facing in their fight against the COVID-19 outbreak,” Leslie Maasdorp, the NDB Vice President and Chief Financial Officer said.

Citi, Credit Agricole CIB, Goldman Sachs International, HSBC and J.P. Morgan acted as lead managers for the bond. Bank of China, Barclays, DBS Bank Ltd., Industrial and Commercial Bank of China Limited, Mizuho Securities, Standard Chartered Bank, TD Securities acted as co-managers for the bond.

In December 2019, the NDB registered its inaugural US$50 billion Euro Medium Term Note Programme in the international capital markets. The Programme has been rated “AA+” by Fitch and has been assigned “AA+” long-term and “A-1+” short-term issue ratings by S&P.

The NDB aims to provide up to US$10 billion in crisis-related assistance. As at June 17, 2020, the Bank has provided RMB 7 billion Emergency Assistance Program Loan to the Government of China as well as US$1 billion Emergency Assistance Program Loan to the Government of India.

At its fifth annual board meeting in April, the NDB said that is cognizant that the spread of the Covid-19 pandemic has caused unimaginable hardship and suffering for millions of people around the globe.

It noted that the governments of BRICS countries, in close partnership with multilateral fora and international development community, have reacted proactively and pledged unprecedented fiscal and monetary stimulus packages to respond to adversity and challenges caused by COVID-19 outbreak.

“With over US$16 billion in approved projects, and roughly 150 staff compliment, I think we all agree that now is the opportune moment to uncover the full potential and might of this institution,” South African Finance Minister Tito Mboweni said in his speech to the NDB board on 20 April.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: Brazil, BRICS News, China, India, Russia, South Africa]

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[l] at 5/26/20 2:14pm

Will allow Eight million workers to get back to work

Mobile clinics were testing people with symptoms in both the poor and richer areas


President Cyril Ramaphosa announced on May 24 in his televised address to the nation that South Africa would move to a Level 3 (out of 5 levels) on 1 June. Although Ramaphosa had been praised for his swift action to contain the spread of the virus with his first address on March 15, a mere 10 days after the first coronavirus case had been reported, the government had been criticized for its slow response on the economic side.

The national lockdown has seen a drastic reduction in economic activity and during the current Level 4 lockdown many citizens are ignoring the rules and there has been an increase in illicit trading in tobacco and alcohol, both of which are banned currently.

Although the lockdown succeeded in cutting the daily increase from 243 on March 27 to only 17 the following day and then kept the daily increase below 100 until April 17 during the Level 5 lockdown, there has recently been a trend upwards and on 24 May the number of daily cases was 1 240.

Most epidemiologists expect some form of lockdown to continue until after the normal winter flu season, or in other words until September. This reality was acknowledged by Ramaphosa when he said that the worst is still to come.

“The scale and the speed of the public health response to this emergency has been impressive, but there is still much more that we need to do. We have known all along that the lockdown would only delay the spread of the virus, but that it would not be able to stop it,” Ramaphosa said.

Ramaphosa said the move to Level 3 was a “significant shift in our approach to the pandemic”. The move will see some 8 million people return to work amid the significant lifting of restrictions on economic activity, commerce and public transport.

Restrictions on public gatherings and “sectors where the risk of transmission is high” remain in place. At level 3, all manufacturing, mining, construction, financial services, professional and business services, information technology, services and media services, will commence full reopening from June 1. Wholesale and retail trade will be fully opened, including informal traders.

There was a lifting of limitations on exercise, which was limited to the hours of 6am to 9am, and the unpopular ban on alcohol sales. The ban on tobacco sales remains in force. The 8pm to 5am curfew will be removed.

Dawie Roodt, the chief economist at the Efficient Group said lockdown fatigue had already set in and many people were ignoring the rules.
“People were moving out of lockdown anyway. Nevertheless it will help the economy somewhat. But the lost production will take years to recoup,” he said.

South African steel production fell by 99.5 per cent year-on-year in April so the move to Level 3 was welcomed by steel producer ArcelorMittal South Africa (AMSA). At Level 3, AMSA will be able to operate with 100 per cent of its workforce, but the company will only fully restart operations as the demand for steel becomes visible in the order book.

“The health and safety of our employees remains a priority and we used the lockdown period to ensure that the necessary measures are in place, according to national health protocols and World Health Organization (WHO) guidelines, to safeguard our employees as they return to work,” AMSA CEO Kobus Verster said.

Business for South Africa’s (B4SA’s) Martin Kingston said South Africa needed to adopt a new mindset to combat Covid-19.

“The consistent use of nonpharmaceutical interventions (masks, hand washing and sanitising, social distancing) must become second nature for every individual and every organisation. We must all ensure that working practices are adapted to meet the health, safety, and hygiene protocols required to combat Covid-19,” Kingston said.

Business Leadership South Africa CEO Busi Mavuso said the pressure was now on business to innovate and adapt to the crisis.

“If we can demonstrate that operating supports, not hinders, the fight against the disease, then there will be a rapid move through the lockdown phases,” Mavuso said.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 5/7/20 4:05pm

Due to Covid-19 pandemic and lockdown regulations

The African Export-Import Bank (Afreximbank), the African Union (AU) and the Government of Rwanda have decided to postpone the second Intra-African Trade Fair (IATF2020) to September 6 to 12 September 2021 due to the Covid-19 pandemic and consequent lockdown regulations. It will now be branded as IATF2021.

Afreximbank President Benedict Oramah said that the continuing COVID-19 pandemic situation was not conducive to holding such an important pan-African event.

“The COVID-19 pandemic has forced Governments, corporations and individuals to take unprecedented measures to ensure public safety. It is our responsibility to comply with these measures to protect our host country and ensure the health and safety of all delegates, exhibitors and participants who have confirmed or expressed interest in taking part in the second edition of IATF,” he said.

The inaugural IATF was held in Cairo, Egypt from December 11 to 17, 2018 and exceeded the targets set by the organizing committee when they approached the Afreximbank for sponsorship. The ambitious targets the committee set was to attract at least 30 African country pavilions, get at least 1,000 exhibitors and be able to say agreements worth at least US$25 billion were signed at the IATF.

In the event, the IATF attracted 42 African country pavilions, there were just more than 1,100 exhibitors of which 40 were from South Africa and agreements worth US$32.6 billion were signed.

The idea behind the IATF was due to the signing of the African Continental Free Trade Agreement (AfCFTA) in Kigali, Rwanda in March 2018 by 44 out of the 55 African Union member countries. This meant that there was only eight months available to organise the inaugural IATF.

The AfCFTA was supposed to be implemented from 1 July 2020, but this implementation date has also been postponed, but as yet no new date has been set.

The United Nations Economic Commission for Africa estimated that full implementation of the AfCFTA could increase intra-African trade by 52 per cent by 2022, compared with trade levels in 2010.

The AfCFTA aims to remove barriers to trade such as tariffs and import quotas, in order to allow the free flow of goods and services, which should reduce prices for consumers and allow factories to exploit the benefits of scale and increased capacity utilization.

Professor Chris Adendorff from the Nelson Mandela University Business School said he would have preferred to see the IATF postponed to later this year, rather than to September next year.

“They should have kept it till later in the year,” he told The BRICS Post.

Sandile Ndlovu, the CEO of the South African Aerospace Maritime & Defence Export Council, who had attended the 2018 IATF, agreed with the decision to postpone it to September 2021.

“We were planning to be part of the 2020 edition and we will be part of the 2021 edition. This is a very important event for Africa integration and intra-Africa trade. Lives before business – so yes it was a correct decision. Considering the fact that most African countries are yet to reach the peak of covid-19 infections, it would have been very risky to proceed during this period,” he told The BRICS Post.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, South Africa, World News]

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[l] at 4/23/20 4:02am

Equivalent to a tenth of the economy 

Despite quickly moving to combat COVID-19, the government has still be criticized for its slow economic response

President Cyril Ramaphosa in his fifth address to the nation in five weeks announced a R500 billion ($26.1) stimulus package that is equivalent to a tenth of the economy. Although Ramaphosa had been praised for his swift action to contain the spread of the virus with his first address on March 15, a mere 10 days after the first coronavirus case had been reported, the government had been criticized for its slow response on the economic side as the national lockdown has seen a drastic reduction in economic activity.

Although the lockdown succeeded in cutting the daily increase from 243 on March 27 to only 17 the following day and then kept the daily increase below 100 until April 17, there has recently been a trend upwards and most epidemiologists expect some form of lockdown to continue until after the normal winter flu season, or in other words until September.

A survey of 707 firms by Statistics South Africa showed “over 40% of businesses indicated that they are not confident that their business has the financial resources to continue operating throughout the COVID-19 pandemic.”

The survey, which was conducted between March 30 and April 13showed that over 80% of businesses experienced below average turnover, around 37% expected the size of their workforce to decline, with decreased working hours at 28%, temporary layoffs at 20% and with almost half (47%) saying that they had temporary closures or paused trading activity.

The national lockdown has had a severe negative impact on business turnover across all industries, with the construction industry, transportation and storage, real estate and other business services, retail and wholesale trade, manufacturing most affected.

Many companies are barely holding on, and the longer the economic shutdown persists, the more vulnerable household and corporate balance sheets will become, with an escalation in the negative impact on the economy as savings are run down, retrenchments take place and businesses go bust. On almost a third (32%) of South African tenants had failed to pay their rent in full for the month of April as there had been a sudden stop in income, according to the Tenant Profile Network.

The breakdown of how this money will be distributed is as follows:

R20 billion – to fund the health response to fight coronavirus;

R20 billion – an additional amount to be made available to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless;

R50 billion – to be used to relieve the plight of those who are most desperately affected by the coronavirus through social grants;

R100 billion – to be set aside for protection of jobs and to create jobs;

R40 billion – set aside for income support payments for workers whose employers are not able to pay their wages;

R2 billion – to be made available to assist small and medium enterprises and spaza shop owners and other small businesses;

R200 billion – a loan guarantee scheme to be introduced in partnership with the major banks, National Treasury and the South African Reserve Bank to assist enterprises with operational costs, such as salaries, rent and the payment of suppliers;

R70 billion – amount of tax-related cash flow relief or direct payments to businesses and individuals;

R100 million – value of assistance in the form of loans, grants and debt restructuring provided to small, medium and micro enterprises, spaza shop owners and other informal businesses;

R162 million – finance approved by the Industrial Development Corporation to support companies to procure or manufacture personal protective equipment;

A potential R80 billion – the amount unlocked after the South African Reserve Bank cut the repo rate by 200 basis point.

Ramaphosa said that funding for this package will be raised locally through institutions such as the Unemployment Insurance Fund (UIF), and through international groups such as the BRICS New Development Bank, the World Bank and the International Monetary Fund.

He added that cabinet has agreed to the phased reopening of the country’s economy.

“As I have said previously, if we end the coronavirus lockdown to abruptly we face the uncontrollable spread of the disease. We will therefore follow a phased approach in reopening the economy,” he said.

The government has scaled up testing and has conducted more than 110,000 tests so that they can take an evidence-based approach to the easing of the lockdown with some areas having easier restrictions than others.

Professor Chris Adendorff from the Nelson Mandela University Business School said the package, although welcome, was not enough.

“Simply put, it’s not enough. We still need to actually get the monies that we don’t have in our coffers,” he told The BRICS Post.

Peter Attard Montalto, the Head of Capital Markets Research at Intellidex said there were two key omissions in the address.

“First, there was no mention of South African Airways. Secondly, although it has become clear that the lockdown has radically damaged the ecology of the informal sector, there was no attention paid to restoring it as far as possible in the next few months. Perhaps more will become clear by the end of the week,” he said.

Dawie Roodt, the chief economist at the Efficient Group was worried that some temporary support measures would become permanent.

“Although the measures toward supporting the needy will go a long way, the dangers are obvious. Firstly, there are few things as permanent as a temporary increase in ‘support’. There is no way these increases will be temporary. Secondly, the support for those not covered by other projects may well be the beginning of a basic income grant. I am afraid we are probably entering a period of prolonged economic hardship, continued weakness in our currency, higher taxes, and more state intervention, marked and aggravated by an undermining of liberty and safety,” he said.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 4/10/20 11:06am

The lockdown has been extended to the end of April from 16 April.

Mobile clinics were testing people with symptoms in both the poor and richer areas

President Cyril Ramaphosa ordered an extension to the national 21-day lockdown that started on 27 March despite the fact that the containment measures first announced by the South African government on 15 March, a mere 10 days after the first coronavirus case had been reported, had been able to “flatten the curve”.

In his televised address to the nation on 9 April, Ramaphosa said it was “too early to make a definite analysis”, but he said that since the lockdown had been introduced the daily rate of increase in infections had dropped by a tenth from around 40% to around 4%.

South Africa has recorded 1,934 confirmed cases of Covid-19, the respiratory illness caused by coronavirus, including 18 deaths, but this is way less than the experts The BRICS Post talked to at the  first South African conference on how to deal with the coronavirus pandemic on 24 and 25 February, almost two weeks before the first case was reported.

Then the range of forecasts was for between 10,000 with containment and 40,000 without containment within 30 days of the first case.

South Africa has been far more aggressive in its containment policies as it has a large population of people living with HIV (PLWH) and tuberculosis (TB), whose immune system is compromised and so are 20 times more likely to die than healthy people based on South Africa’s experience with the 2009 H1N1 virus.

The large number of TB cases on the other hand may have given most of the population a degree of immunity as the BCG vaccine administered at birth to combat TB may provide some protection in the same way that smallpox and polio vaccines have done in the past. This BCG immunity is not unique to South Africa as other countries such as Portugal that have national immunisation policy against TB have similar low rates of infection.

Dr Kerrigan McCarthy of the Division of Public Health, Surveillance and Response from the National Institute for Communicable Diseases (NICD) said the South African government had pro-actively prepared for a possible outbreak. She said a national response team had been convened on 24 January, the day after Chinese health authorities placed the city of Wuhan, which is where the virus originated, under quarantine. This was six days before the World Health Organisation (WHO) declared the virus outbreak a Public Health Emergency of International Concern (PHEIC).

On that day, Health Minister Dr Zweli Mkhize declared a Public Health Emergency in South Africa and activated the Emergency Operations Centre. The Incident Management Team was then constituted the following day and has met daily since then.

The national lockdown means that most economic activities cease except those related to public health, food, water, sanitation and electricity. That is why the deep level gold and platinum mines are not operating, but the coal mines supplying coal to Eskom, the national electricity utility, are working.

Residents can go to food stores and pharmacies, but when they do so, they need to meet social distancing protocols, which is why public transport, that is normally jam packed, is running at very much reduced capacities.

Non-food stores are closed, while all restaurants, bars and cinemas are closed, as are schools, churches and universities.  Something that seems to be unique to South Africa is that sales of cigarettes and alcohol have been banned.

The South African Chamber of Commerce and Industry (SACCI) praised the extension, but was awaiting further details on what industries would be exempted as the lockdown is eased in a phased and staggered way. They suggested that a start could be made with the fast food industry as that could demonstrate high levels of social distancing and health control.

“South Africa had entered a technical recession before the start of this health pandemic. In the period since then we have also been downgraded to junk by the ratings agencies.  Even without this pandemic, our economy would have faced significant problems in the areas of macro economy performance and prospects, with negative GDP growth, a worsening exchange rate, adverse rising inflation and interest rates, plus a potential exploding unemployment crisis that can trigger social and political instability,” SACCI said.

The opposition Democratic Alliance (DA) said more evidence was needed to ensure that South Africans would have jobs to return to once the pandemic was over and they believe that it is not a binary choice between lives and jobs.

“The absence of empirical data and modelling makes it very difficult to simply agree that a lockdown extension may be an effective means to curb the spread of Covid-19. The resulting economic fallout now means that it is not only lives which are threatened by the virus, but livelihoods by our economic and financial collapse as a result of further lockdown regulations,” the DA said.

It is to gather this empirical data that the government has expanded its testing and in Makhanda mobile clinics were testing people with symptoms in both the poor and richer areas.

It takes some five days to get the results, but there were multiple forms that had to be filled out so that if a test came back positive, then the contacts that the infected person had with could be easily traced.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

 

[Category: BRICS News]

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[l] at 4/4/20 5:12am

Issue will fund the RMB 7 billion ($990 million) Coronavirus assistance loan granted to China in March

Premier Li Keqiang played a large role in China’s continuing COVID-19 recovery [PPIO]

The BRICS New Development Bank (NDB) on April 2 successfully issued a 3-year RMB 5 billion Coronavirus Combating Bond in the China Interbank Bond Market. The NDB said the bond attracted interest worth more than RMB 15 billion from a high-quality diversified investor base both onshore in mainland China, as well as offshore.

The bond was priced at the lower end of the announced pricing range, and the transaction represents the largest-ever RMB-denominated bond as well as the first RMB-denominated Coronavirus Combating Bond issued by a multilateral development bank in China.

The aim of this bond issue is to support the Chinese Government in the financing of public health expenditure in Hubei, Guangdong and Henan provinces that are hit the hardest by COVID-19. The proceeds of the bond will be fully utilized to finance the RMB 7 billion Emergency Assistance Program Loan to the People’s Republic of China approved by the Board of Directors of the Bank on 19 March 2020.

This loan will contribute in a material fashion to improving the resilience of the public health sector in the three provinces.

“Since the outbreak of the Novel Coronavirus Disease – 19 (COVID-19) in December 2019, the lives of people and the economy have been heavily impacted,” said Leslie Maasdorp, NDB Vice President and CFO.

Industrial and Commercial Bank of China Limited acted as the lead underwriter and bookrunner. Bank of China Limited, Agricultural Bank of China Limited and China Construction Bank Limited acted as the joint lead underwriters for the bond.

The RMB 7 emergency assistance loan to China was NDB’s first emergency assistance program in response to an outbreak in one of its member countries and is also NDB’s largest loan to date, but as other members of the BRICS have also been impacted by the virus, more emergency assistance loans are expected to follow.

The China loan will finance urgent and unexpected public health expenditures and will focus on three provinces in China, including Hubei, Guangdong and Henan that are hit the hardest by COVID-19. The Program will support these three provinces in financing their most urgent needs for fighting the spread of COVID-19, and reducing the adverse impacts of the outbreak on their local economies.

The Program will contribute to reducing the loss of human lives and to improving resilience of the public health sector in the three provinces, particularly to strengthening their health emergency response system. The positive impacts will include mitigation of adverse social and economic impacts from the outbreak and recovery of social and economic activities.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, China]

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[l] at 3/28/20 3:05am

Covid-19 cases exceed 1,000, faster pace than Italy or China in first 20 days

Ramaphosa noted that these measures are vital to flatten the curve of the spread of COVID-19 [PREUSS]

President Cyril Ramaphosa ordered a national 21-day lockdown that started on 27 March as the containment measures announced by the South African government on 15 March had failed to “flatten the curve”, with South Africa reporting a larger number of cases than either Italy or China in the first 20 days since the first case was reported on 5 March. In contrast to the experience of both China and Italy, where most of the deaths took place in the age group older than 65 years, the first two deaths were both female, with one aged only 28 years young and the other 48 years young.

South Africa has been far more aggressive in its containment policies as it has a large population of people living with HIV (PLWH) and tuberculosis (TB), whose immune system is compromised and so are 20 times more likely to die than healthy people based on South Africa’s experience with the 2009 H1N1 virus. That is why South Africa held its first conference on how to deal with the coronavirus pandemic on 24 and 25 February, almost two weeks before the first case was reported.

Dr Kerrigan McCarthy of the Division of Public Health, Surveillance and Response from the National Institute for Communicable Diseases (NICD) said the South African government had pro-actively prepared for a possible outbreak. She said a national response team had been convened on 24 January, the day after Chinese health authorities placed the city of Wuhan, which is where the virus originated, under quarantine. This was six days before the World Health Organisation (WHO) declared the virus outbreak a Public Health Emergency of International Concern (PHEIC).

On that day, Health Minister Dr Zweli Mkhize declared a Public Health Emergency in South Africa and activated the Emergency Operations Centre. The Incident Management Team was then constituted the following day and has met daily since then.

Source: NICD

The national lockdown means that most economic activities cease except those related to public health, food, water, sanitation and electricity. That is why the deep level gold and platinum mines are not operating, but the coal mines supplying coal to Eskom, the national electricity utility, are working. Residents can go to food stores and pharmacies, but when they do so, they need to meet social distancing protocols, which is why public transport, that is normally jam packed, is running at very much reduced capacities. Non-food stores are closed, while all restaurants, bars and cinemas are closed, as are schools, churches and universities.

Nedbank chief economist Nicky Weimar said she had already expected the economy to remain in recession in the first quarter prior to outbreak of COVID19 and the national emergency/disaster declaration.

“The first quarter decline will now just be deeper and likely to extend into the early part of the second quarter.  Thereafter some improvement off a low base is still possible, if the world and South Africa manage to stop the spread of the pandemic and manage to treat the ill effectively. Prior to the pandemic, we had GDP growth of 0.7% for this year, then we revised it to 0.3% after China & Italy imposed their lockdowns.  We will now have to re-examine our forecasts, but the risk of the economy contracting over 2020 is very high,” Weimar said.

John Ashbourne from the UK-based Capital Economics said it was too early to tell what the economic impact on South Africa of the national emergency measures to combat the spread of the coronavirus would be, but noted that the Treasury had limited fiscal maneuvering space.

He also expected a Moody’s downgrade to junk status later in the year, but said it would have little impact.

“The economic and financial dislocation caused by the virus will be much more significant than a downgrade,” he said.

The government has announced several packages to help those impacted by the lockdown and many people anticipate that the lockdown may last longer than 21 days.

Most people have welcomed the lockdown as the government puts saving lives ahead of saving profits. An example of the collective response to the crisis is the R1 billion each that the Rupert and Oppenheimer families are contributing to a Solidarity Fund that will help small businesses and their employees riding out the lockdown, while many commercial banks have said they will provide “repayment holidays” to businesses and individuals, who will experience a large drop in revenue/income.

Another example of the collective response is the agreement negotiated in the National Bargaining Council for the Clothing Manufacturing Industry, which will ensure that workers are paid during the lockdown period. This agreement, which will be made possible with funds drawn from the Unemployment Insurance Fund (UIF), makes provision for the extension of the lockdown to a possible six weeks, with the UIF and clothing manufacturing companies  taking turns to pay workers’ weekly salaries.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 3/27/20 11:33am

As of March 27, 2020, at 2:00 PM EST, there are over 5650,000 infection cases of COVID-19, the novel coronavirus discovered in December 2019, in the world. The number of global fatalities due to the virus has surpassed 26,000.

“Passengers spend their St. Patrick’s Day’s waiting for their luggage at John F. Kennedy International Airport after returning from overseas before a number of airports shut down due to COVID-19 fears [WISE].

The majority of all COVID-19 cases, including those closed, have been concentrated in China, where the virus was first detected, with Italy and Iran trailing close behind. But, as symptoms often present similarly to the common flu, international travel and global trade have allowed the virus to leap between countries undetected—at least at the beginning of the outbreak.

The European Union (EU) is an example of the way that the free movement of goods and people today has enabled contagion; Director-General of the World Health Organization (WHO) Tedros Adhanom called Europe the new “epicenter of the pandemic” last week.

During global crises like COVID-19, there is a consensus that people in all countries must unite against a disease that doesn’t stop at borders. To combat COVID-19,  many states have cancelled or postponed large public events, shifted schools to online learning, and asked anyone feeling under-the-weather to self-quarantine if possible, depending on the severity of the outbreak.

This isn’t the first time that the world has had to respond to a pandemic; countries have grappled with Severe Acute Respiratory Syndrome (SARS), Middle Eastern Respiratory Syndrome (MERS), HIV/AIDS, Ebola, and others just in the past half-century. But, pandemics are not a modern phenomenon; even as far back as 430 BC, the Plague of Athens set fire to Libya, Egypt, and Ethiopia as it made its way to the Roman city-state on the back of the Peloponnesian War. It can be concluded, however, that as humanity grows more interconnected, modes of disease transmission also become more plentiful.

The question is: is there a trade-off between globalization and public health? Or, can we learn from past pandemics—and the world’s response to them—to craft a more conscious, prepared society?

Transmitting Disease

Historically, diseases have grown into pandemics through modes of human interaction. For example, the Black Death was carried from Crimea to North Africa, Italy, Spain, and France by Genoese trading ships in 1347 and 1348. Another outbreak of the bubonic plague, the Great Plague of London in 1665, spread through England via trading ports along the Thames River, and the 1855 Plague was spread from Yunnan province in China to Hong Kong and Guangzhou as the cities grew increasingly connected by mining. Sixty years later, in 1918, the Spanish Influenza was spread across North America by laborers using the Canadian rail system to reach Europe.

These are all examples of disease spread through benign means. Yet, there are also examples of pandemics being weaponized. Before it was spread to Europe, the Black Death was brought to Crimea by the army of Kipchak Khan Janibeg, which catapulted infected corpses into the town that is now Feodosiya on the Black Sea coast in an effort to cripple its population. As armies move, they can also pass infection unintentionally; like the armies that transmitted the Plague of Athens, the Huns were key in carrying the Antonine Plague in 165 AD.

Pandemics pose a clear danger to public health; but, they also hold an element of fear that make them a threat to the mental and economic wellbeing of society. This fear is, of course, due in part to potential fatality—but, what we especially fear is the unknown.

This is especially true with COVID-19. As COVID-19 is a novel, or new, coronavirus—viruses named just for the structure of their cells—information about its spread and possible prevention is still developing. With an unclear picture of the future, public health officials around the world are struggling to outline long-term needs and craft policy that will meet them without usurping resources too hastily.

Social Divides: Manifesting Fear

COVID-19 and the pandemics before it have taught us that fear often manifests in scapegoating. The tenth edition of the Journal of Public Health in Africa characterized leprosy, for example—which mushroomed from its minor existence into a European epidemic in the Middle Ages—as a “social killer” for the stigma it carried as opposed to “serial killers” like malaria.

Now, individuals and businesses of Asian origin all over the world are facing stigma associated with COVID-19, which originated in Wuhan, China. On March 9, two months into the hysteria, Twitter user @winyeemichelle asked followers to “pls consider making your weekly takeout a Chinese takeaway. My family’s businesses have all been impacted hugely by coronavirus panic.”

This is going to sound kinda mad, but this week, pls consider making your weekly takeout a Chinese takeaway. My family’s businesses have all been impacted hugely by coronavirus panic ?

— Michelle Chai (@winyeemichelle) March 9, 2020

Similar Sinophobia, or hate of things Chinese, was witnessed during the SARS outbreak of 2002-2003, when a coronavirus originating in Guangdong, China, eventually infected 8,098 people worldwide as reported by WHO.

During the SARS pandemic, “The fact that China’s government initially suppressed information about the virus added to the climate of blame,” Rebecca Onion writes for Slate.

But, racist reactions have not been confined to viruses originating from China. “Our views about race have always colored our views about who is safe or who is contaminated,” Natalia Molina said in an interview with Sean Illing for Vox. “When we already have negative representations of certain groups…then it’s much more likely that we’ll see them as disease carriers or as health burdens.” Think of the stigma associated with Middle Easterners when MERS became an issue in 2012, with Africans during the Ebola outbreak of 2013-2016, and with Hispanics during the Zika craze of 2015-2016.

This ingrained racism manifests even in the way that a virus is named (i.e., “Middle Eastern Respiratory Syndrome”). COVID-19 is being called the “Wuhan Virus.” By marrying a virus with its origin, a label is slapped—intentionally or not—across people from that place identifying them as disease.

Discrimination against Asian Americans and Asian immigrants must stop. Now. https://t.co/edfdHEJH1n

— Kamala Harris (@KamalaHarris) March 12, 2020

Of course, some see “The Wuhan Virus” as a fitting—at the very least, factual—name for a disease that did, in fact, originate in Wuhan. Deputy Editor of USAToday David Mastio wrote for the publication that “Finding excuses to hurl the racism charge over such minor issues as how to refer to a new disease cheapens the currency of a serious allegation.”

Likewise, U.S. president Donald Trump regularly refers to COVID-19 as the “Chinese Virus.” When asked on Thursday to comment on the use of the phrase “Kung Flu” by an unnamed member of his administration—and whether it puts Asian-American community at risk—he said, “I think [the Asian-American community] probably would agree with it 100 percent.  It comes from China. There’s nothing not to agree on.”

Spanish Flu. West Nile Virus. Zika. Ebola. All named for places.

Before the media’s fake outrage, even CNN called it “Chinese Coronavirus.”

Those trying to divide us must stop rooting for America to fail and give Americans real info they need to get through the crisis.

— The White House (@WhiteHouse) March 18, 2020

The Economic Impact of Social Distancing 

To limit the spread of COVID-19 as much as possible, many restaurants have switched to takeout or delivery-only. Schools and universities, from Northeastern University in Boston to Egypt’s American University in Cairo, have transferred their classes online and evacuated their dormitories. Many restaurants and cafes operate under curfews, and some other workplaces are requesting that employees work from home (though, to be clear, working from home has been a white-collar privilege that largely excludes service workers).

These measures are part of the broad “social distancing” measures that are being followed worldwide. In hard-hit countries like Italy, social distancing is federally enforced; NPR’s March 10 episode of its “Up First” podcast describes conditions inside Italy’s “red zone”, or national lockdown. In what contributor Sylvia Poggioli describes as “the most draconian measure ever taken in a Western country, at least in peacetime”, police cars patrol empty streets, entreating residents over a loudspeaker to stay inside. France and Spain have since taken similar measures.

In countries like Egypt, all airports have closed, and air carriers elsewhere have chosen to limit their flights. The Friday prayer, a staple of religiosity in Muslim countries, has been halted by edict from Saudi Arabian Islamic scholars.

Similarly, shipping and manufacturing have been limited; Honda, Ford, General Motors, Fiat-Chrysler, and Toyota have announced their intent to suspend all production in North America. Public gatherings like parades and sporting events have been cancelled, decreasing money flows domestically and internationally. Stocks have fallen and tourism has been depressed.

The United Nations (UN) Center for Trade and Development has estimated that these trigger points could cost the global economy between $1-2 trillion in 2020. But, economic impact is not distributed evenly; mirroring existing socio-economic disparities, low-income countries and individuals are usually hit the hardest.

The Center for Strategic and International Studies warns that, “At the sectoral level, tourism and travel-related industries will be among the hardest hit.” This has implications for tourism-dependent economies, chief of which are developing Caribbean states like the Dominican Republic and the Bahamas. Additionally, materials prepared by Chicago-based law firm Baker Mckenzie point out the reliance of African countries on Chinese demand for raw materials, which has been severely reduced.

That’s not to say that wealthy countries don’t feel the economic effects of COVID-19; in the United States, trading on the New York Stock Exchange, Nasdaq and TSX on March 10 was all halted as “circuit breakers” cut in to mitigate a selling frenzy. On that day, the Dow Jones fell 10 points, its worst performance since the 1987 market crash.

Within countries, inequity also persists. Consumers have devastated the aisles of supermarkets in “panic buys”: large bulk purchases of enough foodstuffs to last them a potential 14-day quarantine. Don Goldmann, Chief Medical and Scientific Officer at the Institute for Healthcare Improvement, describes the madness in Boston: “I can tell you I went shopping today, to Trader Joe’s, and the place was mobbed. All I wanted was frozen peas, and there was no frozen pea to be had in any store I went to.”

These aisle clearouts disadvantage those who don’t have the financial reservoirs to buy hundreds of dollars worth of groceries at a time; when people who shop day-to-day are met with vacant shelves, that may either eliminate the possibility of dinner or force consumers towards fast-food restaurants, where the possibility of contracting disease is higher. Similarly, without the guarantee of paid sick leave, low-income individuals are more likely to go to work when experiencing symptoms of COVID-19 at risk of infecting others.

Moreover, refugee and homeless populations are left exposed to the elements with little ability to self-quarantine. The UN High Commissioner for Refugees (UNHCR) and the International Organization for Migration have suspended refugee resettlement services. Although the UNHCR has implored individual states to enable resettlement to the extent they are able, widespread border closures make intake unlikely.

Similar social distancing measures were seen in the United States during the 1918 Influenza epidemic, but not after Ebola, SARS, or MERS. Gina Kolata reports for the New York Times that public gathering places in Philadelphia as well as schools and theaters in Albuquerque were all closed in 1918.

Political Crossroads

This outbreak of COVID-19 comes in the midst of primary voting for the 2020 U.S. presidential election, attempts to form a coalition government in Israel, and attempts by Russian president Vladamir Putin to extend his time in office.

Iran held its parliamentary elections on February 21—and saw only 43 percent voter turnout, the lowest since the Iranian Revolution in 1979. “Some people might have not gone to the polls because they were worried that they were going to catch the coronavirus,” scholar Holly Dagres explained in a podcast for the Cairo Review.

In countries undergoing election cycles, COVID-19 has many worrying about the integrity of results when many people are afraid to—and in some cases, have been advised not to—leave their homes.

Even in the United States, the Connecticut, Maryland, Kentucky, Ohio, Louisiana, and Georgia state primaries have been postponed. Some states have tried to maintain voting normalcy while taking precautions; for its primary on March 2, Massachusetts directed voting staff to disinfect polling booths with more frequency. Washington switched from in-person to mail-in and drop-box voting.

On the other hand, it is sometimes difficult to insulate pandemics from politicization. When swine flu struck the United States in 1976, Gerald Ford’s campaign for president added mass immunization to its platform. As David S. Jones writes in the New England Journal of Medicine, “When people fell ill or died after receiving the vaccine, and when the feared pandemic never materialized, Ford’s plan backfired and may have contributed to his defeat that November.” Now, U.S. voters are factoring ability to respond to pandemics into their choice between Joe Biden and Bernie Sanders, the two leading Democratic candidates for president.

The ways that countries are able to respond to COVID-19 are also part and parcel of the existing political context. When COVID-19 hit Iran, for example, it hit a country already crippled by corruption, mismanagement, and the U.S. “maximum pressure campaign” of sanctions—conditions ill-equipped for pandemic response.

“Every time U.S. president Donald Trump threatened to withdraw from the Iran nuclear agreement, European companies were hesitant to invest in the country”, Dagres asserted. As the world combats COVID-19, U.S. sanctions on Iran remain ironclad. “U.S. sanctions have hampered Iran’s ability to purchase or access medical equipment or pharmaceuticals in the international market”, Sanam Vakil said to Middle East Eye.

Have we learned anything?

Yes and no.

Take the United States, for example. In 2014, Beth Cameron was appointed to lead the White House’s National Security Council Directorate for Global Health Security and Biodefense, which was established in a “I wish we had had this” moment after the Ebola scare the same year. In 2017, that center was dissolved by the Trump administration.

Because of this, “When this new coronavirus emerged, there was no clear White House-led structure to oversee our response, and we lost valuable time”, Cameron wrote for The Washington Post. “The job of a White House pandemics office would have been to get ahead: to accelerate the response, empower experts, anticipate failures, and act quickly and transparently to solve problems.”

Yet, dissolving post-pandemic initiatives after a cooling period is hardly an administration-specific response. “Theoretically, we should be really well prepared,” Goldmann told the Cairo Review. “But,” he continued, “in my experience, our memory and our state of readiness tends to…I don’t want to use the word deteriorate, but the urgency wanes over time. And every time we have a new threat—like H1N1, which turned out to be less of a threat than we initially thought it might be—we seem to have to relearn the same lessons over and over again.”

With each pandemic, preparedness (or lack thereof), varies in states all over the world. “Unlike Central Africa, Ebola was not a usual occurrence in West Africa; the necessary elements of community trust and public health decision-making weren’t in place to detect and stop it,” Cameron writes. This, combined with the recognizability of Ebola symptoms and the launch of the Global Health Security Agenda, enabled the U.S. to take the global lead in response.

Goldmann contrasts the readiness of the U.S. federal government to respond to COVID-19 with that of the country’s healthcare delivery system, which doesn’t have to mold itself to changing presidential administrations. In Boston Children’s Hospital, where Goldmann works, staff had been running drills to practice response to potential hospital overload.

There are lessons to be learned by comparing Italy and China, handling their time at the front lines of the pandemic very differently.

On Sunday, a video compilation surfaced of quarantined Italians imploring the rest of the world—particularly Americans and Frenchmen reluctant to stay inside—not to underestimate the virus. “This issue is more serious than most of the world believes,” one man said; indeed, than Italians themselves believed at the beginning of the outbreak.

“What is happening is much worse than you thought it was,” another woman echoed.

For Italians, measures to contain communicable disease, like social distancing, felt foreign. In China and the areas surrounding it, however, measures like wearing masks were already relatively common. Some experts, like Keiji Fukuda, see China as equipped with muscle memory of its response to the SARS epidemic. “Virtually everybody here has been through the drill,” Fukuda said to Today’s WorldView. Indeed, today was the second day that China recorded no new locally-transmitted cases, though global travel still poses a problem for transmission.

However, though China has been effective in limiting viral presence within its borders since lockdown was declared in Wuhan on January 23, it had a potential to respond even earlier that was hampered by government suppression. Ophthalmologist Li Wenliang sounded the alarm in December, when he began treating patients in Wuhan for SARS-like symptoms; shortly after publicizing his worries, Wenliang and seven colleagues were forced to sign an admission of rumor-mongering by the Chinese security police. Because the Chinese government was reluctant to validate Wenliang’s information—and thereby provide him with personal protection while treating patients—Wenliang passed away after succumbing to the virus on February 7.

By contrast, South Korea—which has the same memory of the SARS epidemic—has seen a “highly coordinated government response that has emphasised transparency”, John Power writes for This Week in Asia. They reported 600 new cases on March 3, and just 110 on March 13.

So, maybe the ‘muscle memory’ of some countries and institutions is better than others when it comes to responding to pandemics. As Goldmann succinctly summarizes: “All we can do now is to remind ourselves of lessons from the past, ramp up prevention and control measures (especially physical distancing) as quickly as possible, and remember this experience when we begin planning for the future.”

An earlier version of this article previously appeared in The Cairo Review of Public Affairs and has been republished with permission.

[Category: BRICS News, BRICS Opinion, World News, #Ebola, Africa, China, coronavirus, COVID-19, COVID19, disease, Donald Trump, economy, epidemic, Europe, global, governance, health, health system, healthcare, Hubei, medical, MERS, Mosque, New york, pandemic, politics, post-war, post-war reconstruction, public health, PWR, SARS, travel, United States, virus, WHO, World Health Organization, Wuhan, Xi Jinping, Yemen]

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[l] at 3/20/20 3:03am

Due to lower inflation forecast and expected recession

The National Treasury building in Pretoria [PREUSS]

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) took the unanimous decision to cut the repo rate by 100 basis points to 5.25 per cent in response due to lower inflation forecast as a result of the collapse in oil prices in March, as well as a forecast recession caused by the global response to the Covid-19 coronavirus outbreak.

A Bloomberg survey had 11 economists expecting a 50 basis points cut with 10 economists looking for a 25 basis points drop. None of the economists forecast a 100 basis point cut. The forward rate market had priced in a 50 basis points reduction.

“The domestic economic outlook remains fragile. At this point, Covid-19 is likely to result in weaker demand for exports and domestic goods and services, but its impact on the economy could be partly offset by lower oil prices. We also expect disruptions to supply chains and to normal business operations,” the MPC said.

The gross domestic product (GDP) growth projections were revised lower to a 0.2 per cent contraction in 2020 compared with the January forecast of a 1.2 per cent expansion. Growth is then expected to return in 2021 with a 1.0 per cent increase compared with the January forecast of a 1.6 per cent gain. Also, inflation forecasts were cut to 3.8 per cent from a January projection of 4.7 per cent in 2020, while there was no change to the 2021 forecast of 4.6%.

“The implied path of policy rates over the forecast period generated by the Quarterly Projection Model (QPM) indicated three repo rate cuts of 25 basis points each in the second and fourth quarter of 2020, as well as in the third quarter of 2021,” the MPC said.

The MPC emphasised that the QPM is a guide to monetary policy and the MPC stood ready to change rates if circumstances change. The next MPC meeting is in May.

Economists and analysts welcomed the cut, but the stock exchange index nevertheless ended weaker.

“The decision by the MPC today to cut the repo rate by 100 basis points is the right one to help mitigate the risks of Covid-19 to the SA economy. The MPC has now followed about 50 central banks around the world that have so far already reduced interest rates and also taken other steps to offset the impact of Covid-19 on their economies. While monetary policy is not a magic wand to eliminate the economic damage being caused by the pandemic, the SARB’s preparedness to take positive steps on this front is welcome,” Professor Raymond Parsons of the North West University’s Business School said.

“We hope it is not too late and that the cut from 6.25 per cent to 5.25 per cent will arrest the downward economic spiral we find ourselves in. The country is already in a recession and the disruption due to the coronavirus will leave nothing and no-one unscathed. This cut will make borrowing more attractive for individuals and businesses alike, encourage consumer spending and hopefully set us on the track of economic recovery,” Stanford Mazhindu, the spokesperson of the trade union UASA said.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 3/4/20 10:18am

Load shedding however meant that production could not keep up

The bad news from a government revenue point of view is that the nominal growth in GDP, on which taxes are based, eased to 4.2 per cent in 2019 from 4.7 per cent in 2018 [PREUSS]


Economists around the world look at real final demand to gauge the strength or weakness of an economy, although non-economists tend to get caught up in the headline gross domestic product (GDP) figure. That is why the South African rand weakened after worse-than-expected fourth quarter 2019 GDP headlines hit the trading screens, even though real final demand rose by 2.1 per cent quarter-on-quarter (q/q) at a seasonally adjusted annualized (saa) rate.

The headline GDP data as measured from the production side showed a 1.4 per cent q/q saa contraction as rotational power blackouts, known as load shedding in South Africa, impacted production. The constrained ability to produce meant that the goods producing sectors such as agriculture, manufacturing and construction all suffered quarterly contractions and that had a spillover effect into the trade and transport sectors.


The only sectors that showed a quarterly increase in the fourth quarter were personal services, financial services and somewhat surprisingly, mining.

In line with the government’s commitment to reduce the number of civil servants, many contracts of temporary staff at universities and other institutions were reduced with the result that government services also contracted in the fourth quarter.

As production could not keep pace with the positive demand there was a large R40.3 billion drawdown of inventories in the fourth quarter of 2019, with most of the inventory depletion taking place in the mining industry and trade.

The fourth quarter 2018 inventory drawdown was the largest for quarterly data going back to 2010. The previous largest drawdown was in the second quarter 2016 when the constant 2010 rand reduction was R37.4 billion. The inventory drawdowns lead to wild swings in gross domestic expenditure (GDE).

In the second quarter 2016 the drop was 4.1 per cent followed by a 5.7 per cent increase the subsequent quarter as inventories are replenished. In the fourth quarter 2018 GDE plummeted by 6.8 per cent. In the fourth quarter 2019 GDE fell by 4.4 per cent q/q saa.

On an annual basis, GDP as measured from the production side only grew by 0.2 per cent, the same growth rate as final demand as household consumption, which accounts for 62.2 per cent of GDP, eased to a 1.0 per cent rise in 2019 from a 1.8 per cent gain in 2018.

The bad news from a government revenue point of view is that the nominal growth in GDP, on which taxes are based, eased to 4.2 per cent in 2019 from 4.7 per cent in 2018.

The good news is that prospects for 2020 were looking good prior to the global panic resulting from the coronavirus outbreak.


The maize crop was expected to be 29 per cent larger this year, which should boost agriculture, while citrus exports were forecast to be 10 per cent larger. Government revenue jumped by 15.1 per cent y/y in January after only a 2.2 per cent y/y rise in December.

Now unfortunately, forecasts are necessarily murky, as production managers brace for the disruption caused by the quarantine in China. Automobile production managers have been pro-active and imports of original equipment components surged by 169 per cent m/m in January.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

[Category: BRICS Business, BRICS News]

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[l] at 2/26/20 9:36am

“Our economy has won before, and it will win again” –  Finance Minister Tito Mboweni Budget Speech February 2020

“This Budget is about cleaning up our house,” Finance Minister Tito Mboweni said

In his briefing to journalists before his Budget Speech, Finance Minister Tito Mboweni pointed out that preparing a Budget Speech was an iterative process, as he would propose certain things and his team would either accept or reject them. In the event, the speech that was given to journalists was labelled version 10.

“This Budget is about cleaning up our house. It is very far from austerity, as we are not closing schools or hospitals. We have decided not to raise any new taxes as we push for growth,” he said at the media briefing.

“Those economists who expected a Value-Added Tax (VAT) rate increase will be disappointed, but it would have been foolhardy to increase the VAT rate now. Our focus instead will be on addressing the scourge of wastage and corruption,” he added.

In the 2018 Budget the government announced that it would raise the Value-Added Tax (VAT) rate from 14 per cent to 15 per cent, which puts it on a par with neighbouring states. That was the first VAT rate increase since 1993 and the first done by an African National Congress government. It added around R23 billion to revenue every year.

He was in a jovial mood at the media briefing and his Budget Speech had a similar positive tone as he referenced Miss South Africa, who became Miss Universe last year, the Springbok rugby team, which won the Rugby World Cup in Japan last year and the Proteas cricket team which beat the Australian cricket team this week as he was preparing his Speech.

“In the five years from 2003 to 2008, growth averaged around 5 per cent, and South Africa was amongst the fastest-growing major economies. The unemployment rate improved by 5 percentage points.  Now, even after a decade of weak economic performance, South Africa still boasts deep and liquid capital markets, strong institutions, the most diversified economy on the continent, and a young population.  We are part of the most vibrant continent in the world. As Pliny the Elder said: ‘Ex Africa semper aliquid novi’. Winning requires hard work, focus, time, patience and resilience,” he said in his Budget speech.

Despite the positive tone, Treasury reduced its GDP growth forecast to 0.3 per cent for 2019 from the 1.5 per cent forecast a year ago. It now expects GDP growth of  0.9 per cent in 2020 from 1.7 per cent forecast a year. It has remained conservative in its forward projections and forecasts 1.3 per cent in 2021 and 1.6 per cent in 2022.

Treasury noted that the impact of low growth on revenue collection has been considerable and it now expects to collect R63.3 billion ($4.2 billion) less revenue than projected at the time of the February 2019 Budget. Furthermore it does not expect the debt to GDP ratio to stabilize over the medium term, with debt-service costs now absorbing 15.2 per cent of main budget revenue and the expectation that it will shortly be the single largest expenditure item.

Treasury said halting the fiscal deterioration required a combination of continued spending restraint, faster economic growth, and measures to contain financial demands from distressed state-owned companies. Therefore as a first step, the 2020 Budget makes net non-interest spending reductions of R156.1 billion ($10.3 billion) in total over the next three years compared with last year’s budget projections. This includes large reductions to the public service wage bill, which will probably be fiercely resisted by the civil service trade unions. Treasury noted that the voluntary retirement scheme proposed last year had received a very muted response with only the Police Service seeing a significant uptake.

Non-interest expenditure is forecast to grow at 3.8 per cent over the next three years, down from an average of 8.4 per cent over the past three years.  The reduction in state expenditure is equivalent to 1 per cent of GDP per year.

The proposed adjustments to expenditure mean that the government keeps to its expenditure ceiling.

Treasury said that to achieve faster economic growth, South Africa required structural reforms in a number of areas. Most urgently, the regulatory path should be cleared to enable the private sector to generate electricity, contributing both financial and technical capacity to the country’s energy needs.

In that respect, Treasury officials told The BRICS Post that the commitments made at the 2018 and 2019 Investment Summits had not been factored into their GDP growth forecasts. In addition that did not include any investment that would flow from bid window 5 for renewable energy.

In other areas, cumbersome and unpredictable regulatory frameworks are undermining private investment. The President’s State of the Nation Address made several announcements in this regard, and more decisive steps will be required in the months ahead.

The bottom line is that until the economy starts “winning” again, the debt metrics will continue to deteriorate.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

[Category: BRICS Business, BRICS News, South Africa]

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[l] at 2/10/20 9:49am

“This will help close the energy gap caused by deteriorating Eskom plant performance,” says Gwede Mantashe.

Minister of Mineral Resources and Energy Gwede Mantashe told delegates at the Mining Indaba in Cape Town that government would allow mining companies to produce energy for their own use.

“This will help close the energy gap caused by deteriorating Eskom plant performance. Depending on the circumstances, the generation plant may only require registration and not licensing,” Mantashe said.

According to Andrew van Zyl, director and principal consultant at SRK Consulting, there is no better time to consider such opportunities.

“While Eskom’s base-load supply is still vital to keep mines running, independent power generation from renewable sources holds value for a few reasons. These relate to issues of rising electricity prices from the grid, as well as to mines’ environmental commitment and future carbon tax liabilities,” van Zyl said.

State-owned electricity utility Eskom had to institute a Stage 6 load-shedding schedule, which meant that they were short 6 000 Megawatts (MW) on December 9 2019 to a variety of breakdowns at its plants. In response to this crisis, a variety of players have suggested solutions, as in their view, this crisis could be mitigated if regulatory hurdles were eliminated.

Eskom instituted load-shedding on an intermittent basis since November 29 2018 after the connection with Mozambique broke down and it lost 700 MW of power imports. For most of 2019 however it has been its own plant availability that has constrained supply with the Energy Availability Factor (EAF) dropping to only 56.61 per cent in the first week of 2020. This compared with an average of 66.94 per cent for the full year and 71.84 per cent in 2018 and 78.61 per cent in 2017. The EAF in the first week of 2020 was made up of planned outages at 11.46 per cent, unplanned outages at 29.86 per cent and other outage factors at 2.07 per cent.

The South African Wind Energy Association (SAWEA) said then that current operating wind farms could add 500 MW immediately to the national grid, but more than 50 days later, there has been no movement on this front.

The wind industry is not allowed to do so currently due to the regulatory Maximum Export Capacity (MEC) on all operating wind farms, which governs how much energy is permitted to be exported by wind farm power generators. Currently wind farms can only export the pre-agreed maximum capacity into the grid and are forced to curtail any additional capacity.

“The operational wind energy plants have excess capacity of about 500MW available immediately. These can also be short term contracts that can be signed in this interim capacity constraint period and it doesn’t have to be viewed as long term commitments,” said Ntombifuthi Ntuli, CEO of SAWEA.

“Our current state of power shortage is threatening multiple sectors and especially small businesses that employ over half of the country’s labour force. Small businesses struggle to recover from extended periods of load shedding, especially stage 4, which allows for up to 4 000 MW of the national load to be shed,” added Ntuli.

The South African Photovoltaic Industry Association (SAPVIA) said that up to 2 000 MW of small-scale capacity could be added to the energy mix over the next 12 months. However, while the Integrated Resource Plan (IRP) 2019 had identified small-scale generation as the means to bridging the electricity supply gap, SAPVIA stated that it believes the bureaucracy associated with the licensing and registration of embedded generation facilities would hamper the rapid absorption of this much-needed supply source into the generation mix. SAPVIA also called for municipal bylaws to be amended to better clarify the requirements for grid connection, to reduce the timelines and uncertainties associated with grid access.

The association explained that, while facilities generating less than 1 MW only require municipal or Eskom technical sign-off to supply their owners or feed into the grid, facilities above 1 MW still need to undergo the strenuous National Energy Regulator of South Africa (Nersa) licensing process, which can take between nine months and a year to run its course, before the facilities can be commissioned.

SAPVIA believes the cap of 1 MW is “arbitrary” and said it “has no technical or commercial basis”.

According to the association, in most developed power markets, self-generators can develop their own embedded facilities and these can connect to the grid if they technically meet the relevant grid codes, without any cap on the size of the facilities. Consequently, SAPVIA proposed that 10 MW be set as an initial cap on projects, as long as the use of system approvals are granted.

The official opposition, the Democratic Alliance (DA), said the government could easily solve the electricity crisis by removing regulatory hurdles.

“The most efficient immediate step is using Section 34 of the Electricity Regulation Act (4 of 2006) which allows the Minister of Mineral Resources and Energy to issue a determination that allows qualifying municipalities to bypass Eskom and procure electricity directly from Independent Power Producers (IPPs).

Contrary to the President’s views, this can be done overnight and would go a long way to resolving energy shortages and pressure on the grid. Introducing IPPs into the mix is now a necessity. In fact, right now Minister Mantashe is sitting with at least seventeen section 34 applications for private generation and purchase of electricity on his desk waiting to be signed – from municipalities, mines and corporations,” DA leader John Steenhuisen said.

New Eskom CEO André de Ruyter has warned South Africa to expect increased load-shedding over the next 18 months, as Eskom will no longer defer required maintenance, and will aggressively move to prevent the deterioration of its power plants.

“As Eskom continues with the problems, we must have a fail-safe. We must continue to ensure that we get back to the days when we have a surplus of energy and when we lower the price of electricity,” Mantashe said.

Minerals Council of South Africa CEO, Roger Baxter, welcomed Mantashe’s comments as
mining companies have a project pipeline of some 600 MW for self-generation, but this could grow to 1,500 MW once there was regulatory certainty.

Helmo Preuss in Cape Town, South Africa for The BRICS Post

[Category: BRICS News, South Africa]

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[l] at 2/3/20 10:27am

Demand expected to decline by 3 million tonnes (Mt), but it could drop by 20 Mt

Coal trader Noble Resources head of research Rodrigo Echeverri Cardozo had penciled in a 3 Mt drop in Chinese import demand for 2020, but it could drop by 20 Mt depending on how long the disruption caused by the so-called “Wuhan flu” continued, he told the 15th Annual Southern African Coal Conference in Cape Town, South Africa.

“I normally have my presentation ready at least one week before the conference, but this time, I have had to update on a daily basis, as the number of cases is spreading so fast. The bad news is that the first quarter of 2020 is going to be pretty poor, because Chinese traders hold back from buying as they wait for the economic impact to stabilize,” he said.

The coronavirus outbreak, which originated in Wuhan, China, has exceeded a grim comparison milestone, as the number of confirmed cases in mainland China has now surpassed that of the severe acute respiratory syndrome (SARS) during the 2002-2003 epidemic.

It took six months for the number of SARS cases to exceed 5,000 in mainland China and the coronavirus surpassed that in just one month. SARS infected more than 8,000 people and killed some 800, resulting in estimates of global economic costs from disrupted trade and travel of R400 billion to R1.4 trillion.

“European coal burn has been on a downward trend for more than three years and this will continue in 2020, so the only good news is that we are unlikely to see the export supply surge from Indonesia that we saw last year, as domestic demand ramps up, so there will be less extra supply coming for that quarter,” he added.

“From my point of view, South African exports are the easiest to forecast as they have been flat for the past few years. I have got a small 0.4 Mt increase for this year,” he concluded.


The South African coal industry mines some 260 Mt of which some 72 Mt is exported and employs more than 86,000 miners who get R25 billion in salaries.

Richards Bay Coal Terminal (RBCT) achieved an annualised throughput of 95 Mt in December 2018 when they loaded 105 vessels, even though for the year, RBCT coal exports fell to 72.15 Mt in 2019 from 73.47 Mt in 2018 and a record 76.47 Mt in 2017.  The rail line to RBCT has a current capacity of 81 Mt, while the port has a capacity of 91 Mt.

South African coal producers will need to boost productivity as competition intensifies in coal export markets, Mike Teke, CEO of coal mining company, Seriti Resources, said.

“The drive to be efficient and best in class regarding exporting coal is imperative,” he said.

Helmo Preuss in Cape Town, South Africa for The BRICS Post

 

[Category: BRICS News, China, South Africa, World News]

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[l] at 1/9/20 4:21am

South Africa is the world’s second largest exporter of citrus


The United States Department of Agriculture (USDA) expects South Africa’s fresh citrus exports to jump by 10 per cent in 2020 to 2.24 million tonnes. The revenue growth from citrus exports should be even higher, as growers shift production to high value lemons and soft citrus such as mandarins and away from oranges.

In 2018, the average export price for soft citrus was R13,498 ($952) per tonne, for lemons/limes it was R11,151 ($786) per tonne, while for oranges it was R8,600 ($606) per tonne according to the Citrus Growers’ Association (CGA).

The USDA expects soft citrus exports to rise by 11.9 per cent to 330,000 tonnes, oranges to increase by 10.6 per cent to 1.25 million tonnes, lemons and limes to grow by 7.9 per cent to 370,000 tonnes and grapefruit exports to climb by 7.4 per cent to 290,000 tonnes.

The proviso to this of course is that South Africa has a normal rainfall this year and there is no recurrence of the port disruptions that took place last year.

South Africa’s share in the top six citrus exporting countries more than doubled from 6.6 per cent to 15.7 per cent between 2001 and 2017 and it is now the second largest exporter of citrus globally behind Spain. That growth was fuelled by an increase in land devoted to citrus and the USDA said that one of the reasons for the recent strong growth is that trees are now entering their prime fruit producing years. As an example, the land devoted to soft citrus has more than tripled from just under 6,000 hectares in 2012 to an expected 18,000 hectares in 2020.

Overall, USDA noted that a total of 81,603 hectares was planted to citrus in South
Africa in 2018, which was an 8 per cent increase from 74,902 hectares in 2017 and the USDA expected this growth trend to continue based on the significant investments and aggressive new plantings of soft citrus, lemons, and new varieties of oranges.

The Limpopo province is the largest citrus production area accounting for 43 per cent of the total area planted, followed by the Eastern Cape (26 per cent), Western Cape (18 per cent), Mpumalanga (8 per cent), KwaZulu-Natal (3 per cent), Northern Cape (1 per cent), North West (less than 1 per cent), and the Free State (less than 1 per cent).

The Western Cape and Eastern Cape have a cooler climate, which is better suited for the production of navel oranges, lemons, limes, and soft citrus, while the Mpumalanga, Limpopo and KwaZulu-Natal provinces have a warmer climate, which is better suited to the production of grapefruit and Valencia oranges.

Harvesting is from February to September, which helps smooth logistics and seasonal work opportunities, as deciduous fruits, tropical fruits and table grapes are harvested in the summer months of October to March.

Although the European Union remains the largest market for South African citrus exports, South Africa has diversified its export markets in recent years, in particular to its BRICS partners. Russia is now the third largest destination in grapefruits, oranges and soft citrus and fifth in lemons, while China is second in oranges and grapefruit.

Prior to 2019, South African citrus exports to China were only permitted on container shipping, but it then granted permission for South Africa to export citrus to China using break-bulk shipping. Around 85 per cent of South African exports to China are now through break-bulk shipping, as it is easier to maintain the temperature at the required level due to better airflow. In addition there are more break-bulk ships available, and there is less congestion at ports as break-bulk ships do not have to use quays with container cranes.

Helmo Preuss for The BRICS Post in Makhanda, South Africa

[Category: BRICS News, South Africa, World News]

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[l] at 12/20/19 9:19am

New Development Bank loan to Eskom for battery storage follows technical assistance for small hydro project in India

The first president of the New Development Bank K. V. Kamath [NDB]


At its board meeting on December 16, 2019, the board approved three projects aggregating to approximately $1 billion bringing the BRICS New Development Bank (NDB)’s portfolio to 52 projects with loans aggregating to $14.7 billion.

The NDB will provide a loan of ZAR 6 billion (some $400 million) to Eskom Holdings SOC Ltd. (Eskom) for setting up Battery Energy Storage System comprising 360 MW of distributed battery storage sites across four provinces of South Africa. The project is primarily aimed at meeting peak electricity demand, increasingly through renewable energy, and avoiding emissions associated with utilization of fossil fuels. NDB’s financial support to this project will be provided along with that of the World Bank and African Development Bank.

Currently Eskom uses expensive diesel-fired Open Cycle Gas Turbines (OCGT) and hydro-electric pumped storage schemes to meet peak period demand, but recently, unplanned breakdowns at coal-fired power plants have meant it has been unable to meet demand and so has had to institute load shedding to balance demand with supply.

Earlier in December, the NDB approved technical assistance of $300,000 to the Republic of India for Mizoram Tuirini Small Hydro Project. The NDB’s technical assistance will provide consulting services aimed at preparing the Mizoram Tuirini Small Hydro Project. The project envisages construction of a small hydropower plant with an installed capacity of 24 MW in the state of Mizoram, to increase installed power generation capacity of Mizoram.

The NDB approved a loan of CHF 500 million (approx. $500 million) to Joint Stock Company Russian Railways for the Locomotive Fleet Renewal Program.

The NDB will also make an investment of up to $100 million in the Patria Infrastructure Fund IV, L.P. in Brazil. The investment will catalyze investments in Brazil’s key infrastructure sectors such as transportation and logistics, data infrastructure, and environmental services.

In 2018, the NDB approved 17 loans totalling about US$ 4.6 billion, building on its base of 13 loans worth US$ 3.4 billion as of the end of 2017. That brought the total loan book of the bank to 30 projects worth approximately US$ 8 billion by the end of last year.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS Business, BRICS News, World News]

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[l] at 12/10/19 10:15am

Eskom instituted an unprecedented Stage 6 loadshedding schedule on Monday

Eskom’s Arnot power station [Courtesy: Eskom]

State-owned electricity utility Eskom had to institute a Stage 6 loadshedding schedule, which meant that they were short 6 000 Megwatts (MW) on December 9 due to a variety of breakdowns at its plants.

These included the loss of power supply to the incline conveyors feeding coal to the silos at Medupi power station, which caused coal-feeding issues resulting in a loss of a number of units, while at Kriel, there was flooding at both the Kriel mine and the power station leading to no coal deliveries via the conveyor belt.

Camden power station experienced abnormally high rain at some 250 millimetres (mm) over the past week leading to flooding, which impacted the boiler and turbine hall and other critical infrastructure that is connected to coal supply and handling inside the station.

In response to this crisis, a variety of players have suggested solutions, as in their view, this crisis could be mitigated if regulatory hurdles were eliminated.

The South African Wind Energy Association (SAWEA) said on Tuesday that current operating wind farms could add 500 MW immediately to the national grid. It is not allowed to do so currently due to the regulatory Maximum Export Capacity (MEC) on all operating wind farms, which governs how much energy is permitted to be exported by wind farm power generators.

Currently, wind farms can only export the pre-agreed maximum capacity into the grid and are forced to curtail any additional capacity. If the restrictions were lifted, government could buy that additional energy at a tariff it was prepared to pay. In any case, this is surplus energy that can be bought at marginal cost, as low as R0.40c per kilowatthour (KWh).

“The operational wind energy plants have excess capacity of about 500MW available immediately. These can also be short term contracts that can be signed in this interim capacity constraint period and it doesn’t have to be viewed as long term commitments,” said Ntombifuthi Ntuli, CEO of SAWEA.

In addition to permitting additional wind power into the grid, SAWEA suggested that the government allow the industry to fast-track wind farms that are currently under construction, meaning that they can provide power that is being produced to Eskom, before their agreed commercial operations date.


This ‘early generation’ electricity can be sold to Eskom at a rate approximately 40% cheaper than the agreed tariff, ensuring that the much-needed electricity is fed into the grid much earlier than anticipated and achieve short term savings for government/Eskom.

SAWEA also suggested that the government open the market for private Power Purchase Agreements (PPAs). The wind sector can provide energy at a rate 25% lower than Eskom mega-flex tariffs to intensive energy users. The wind industry can supply electricity through signing private PPAs, which should address a lot of the short-term capacity challenges and ultimately avoid load shedding, but this would need to be clearly spelt out in the ministerial determination for new generation capacity.

“Our current state of power shortage is threatening multiple sectors and especially small businesses that employ over half of the country’s labour force.  Small businesses struggle to recover from extended periods of load shedding, especially stage 4, which allows for up to 4 000 MW of the national load to be shed,” added Ntuli.

The South African Photovoltaic Industry Association (SAPVIA) said that up to 2 000 MW of small-scale capacity could be added to the energy mix over the next 12 months.

However, while the Integrated Resource Plan (IRP) 2019 had identified small-scale generation as the means to bridging the electricity supply gap, SAPVIA stated that it believes the bureaucracy associated with the licensing and registration of embedded generation facilities would hamper the rapid absorption of this much-needed supply source into the generation mix.

SAPVIA also called for municipal bylaws to be amended to better clarify the requirements for grid connection, to reduce the timelines and uncertainties associated with grid access.

The association explained that, while facilities generating less than 1 MW only require municipal or Eskom technical sign-off to supply their owners or feed into the grid, facilities above 1 MW still need to undergo the strenuous National Energy Regulator of South Africa (Nersa) licensing process, which can take between nine months and a year to run its course, before the facilities can be commissioned.

SAPVIA believes the cap of 1 MW is “arbitrary” and said it “has no technical or commercial basis”.

Self-generators


According to the association, in most developed power markets, self-generators can develop their own embedded facilities and these can connect to the grid if they technically meet the relevant grid codes, without any cap on the size of the facilities. Consequently, SAPVIA proposed that 10 MW be set as an initial cap on projects, as long as the use of system approvals are granted.

“We believe this cap can be reviewed in time,” the association said.

It urged the Department of Mineral Resources and Energy to “swiftly implement” any of the legislative or regulatory changes that would be required to allow generators of less than 10 MW to generate without undergoing the Nersa licensing process.

Stanford Mazhindu from trade union movement UASA said that Public Enterprise Minister Pravin Gordhan’s valiant efforts to bring Eskom under control about a year ago have failed miserably and South Africa is in deep trouble.

“We know there is no magic formula, and we don’t want a magic formula. What we want is a power utility that is responsibly managed, enabling South Africans to live quality lives and get on with their business enterprises. As a nation, and more specifically UASA as a union that looks out for its members, we had hoped that the Eskom crisis would be solved by now, but instead we have to live with Stage 6 load shedding. Clearly the power utility has no idea how to resolve its current issues,” he said.

“What happened to the technical review task team, assisted by independent engineers, that was appointed months ago to examine plant unavailability due to scheduled maintenance; plant unavailability due to unplanned outages and unscheduled maintenance; operator errors resulting in power plants tripping and shutting down; and technical and operator-associated inefficiencies resulting in lower than optimum electricity output from the power station units? Are they still active?” he asked.

The official opposition, the Democratic Alliance (DA), said the government could easily solve the electricity crisis by removing regulatory hurdles.

“The most efficient immediate step is using Section 34 of the Electricity Regulation Act (4 of 2006) which allows the Minister of Mineral Resources and Energy to issue a determination that allows qualifying municipalities to bypass Eskom and procure electricity directly from Independent Power Producers (IPPs),” DA leader John Steenhuisen said.

He explained that contrary to the President’s views, this can be done overnight and would go a long way to resolving energy shortages and pressure on the grid.

He also believes that introducing IPPs into the mix is now a necessity.

“In fact, right now Minister Mantashe is sitting with at least seventeen section 34 applications for private generation and purchase of electricity on his desk waiting to be signed – from municipalities, mines and corporations. The President must intervene and ensure these are acceded to within the next 48 hours,” Steenhisen said.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

[Category: BRICS News]

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[l] at 12/6/19 2:48am

Previous experiences of post-war reconstruction (PWR) inform us that it will always fall short of the expectations of donors and recipients alike. There is not one experience of such reconstruction where things went according to plan.

Experts and writers have to go all the way back to post-WWII reconstruction in Europe and Japan to find successful examples, only to discover that their contexts were fundamentally different from any subsequent post-war scenarios.

Recently, the concept of fragile states has been introduced to the field, not only to encapsulate the differences between post-WWII reconstruction and other subsequent situations, but also to highlight the challenges arising from rebuilding in countries where even peacetime governments were too weak or incompetent to manage the needs of the state.

The most recent PWR regional examples in Iraq and Afghanistan did not live up to expectations, to put it mildly. When this happens there is always the pointing of fingers—blame directed at donors for not providing enough resources; at governments for not having absorption or deployment capacities, or for being corrupt; at international and local NGOs for manipulating the situation to acquire wealth at the expense of human tragedy; or at local communities and local political actors for not getting their act together in time to benefit from the short-lived focus of the international community.

Considering the realities of post-war reconstruction, instead of calling out failure, it may be more useful to focus on what was achieved given a catastrophic situation, limited capacities, and meager resources. After all, PWR is supposed to come to a place struck by the tragic destruction of livelihoods, market networks, health, sanitation, and education infrastructures, and turn all of those around. It must do so through processes implemented in an environment of insecurity, instability, fragile negotiated settlements, post-conflict competition between actors, rearrangement of power structures, existing war economies, new reconstruction economies, weak central governments, multiple donor priorities, and local perceptions of favoritism.

It is hardly surprising that this usually leads to a limited capacity for implementation, waste of resources due to corruption or lack of coordination, concentration of wealth among those with existing deployment capacity, and most seriously, the sowing of new seeds for future conflict or a breakdown of peace. Yemen, or any other country for that matter, such as Syria, is no different.

The Tragedy of Yemen

It is widely acknowledged that the conflict in Yemen has led to one of the greatest preventable disasters facing humanity. The extent of the tragedy is difficult to measure due to the scarcity of reliable data, but the estimates are staggering. Deaths due to direct violence reach up to seventy thousand and indirect deaths from disease, hunger, or simply lack of medical resources are in the hundreds of thousands, of which some eighty thousand are children.

Millions have been either internally displaced from their homes and sources of livelihood, or were lucky enough to find a way to flee the country. The educational system is as good as broken and nearly five years of schooling or university education have simply been wiped out from the futures of millions of children and youths.

Up to fifteen million Yemenis, including millions of malnourished children, are close to famine and most will suffer long-lasting consequences to their health and wellbeing. As a consequence of the breakdown of the country’s health system, Yemen has witnessed the worst cholera outbreak in recent human history. The economic system has also collapsed, leaving about 50 percent of the population living in extreme poverty. The political order has been reduced to a situation where there is no vision or leadership.

The conflict will eventually come to an end. But of course, no one expects that a negotiated settlement will bring immediate security or stability to the country. One may even expect a rise in insecurity due to the transfer of power from local militias to a central government and the transition from a war-based security arrangement to a state-based one. The current security order in Yemen—if one can call it that—is based on militia enforcement under the guise of wartime logic. Once that order is dismantled, there will potentially be a transition period with extreme levels of insecurity, especially in urban areas that lack cohesion and strong community-based security arrangements.

Moreover, a political settlement, even if it is perfectly designed, will not eliminate the deep hostilities between the warring factions and negative memories between communities. This is a given in any conflict. To make matters harder, the war in Yemen was largely due to a total breakdown of a power arrangement, which created a power vacuum that the Houthis tried and failed to exploit for their benefit.

After a negotiated settlement is achieved, the attempt to reconfigure a new power structure will resume, and a key tool of that will be control and allocation of resources, especially those for rebuilding. Subsequently, any government that is born out of a Yemeni political settlement will be no more than a collective of officials answering to rival factions—old and new—with competing interests.

Reconstruction will be driven by a systemic favoritism, and it will take a strong president—if Yemen is lucky enough to obtain one in the immediate or near future—at least three years to streamline the government and represent the interests of the country as a whole. The long war has given birth to a thriving war economy that is benefiting the militias, politicians, and some merchants. The war’s conclusion will not bring an abrupt end to this class of merchants of war. Those same actors exploiting the tragedy of Yemen to enrich themselves will change tactics and leverage their financial powers, contacts, and networks to create a new post-war economy.

There is already a great deal of experience in exploiting international aid, and that experience will be used to capitalize on vast amounts of donor money and the economic potential of a PWR economy. These merchants’ wealth will put them in a better position to implement large projects that require deep pockets and sustained cash flow, while thousands of professionals and impoverished business men and women will be relegated to spectators who lost during the war and will continue to lose. All of this would occur at the expense of genuine needs, whether of the economy at large or the immediate sustenance of millions of Yemenis barely surviving today.

Add to that the political and security consideration of donor allocations to rebuild. Estimates for Yemen’s reconstruction vary, but, according to recent figures from the country’s planning minister, could reach $28 billion in the short term and $60 billion in the long term. Regardless of the estimates, what matters is how much will actually be given to Yemen. Whatever that number is, it will within a year or two inevitably empower some groups over others, especially those with a large popular base and who depend on their base’s financial support. This alone creates a security challenge for donors keen to support Yemen’s communities in a way that does not translate into more power for factions, especially factions whose interest is a weak Yemeni government in the long run.

Some Dos and Don’ts

Yemen’s post-war reconstruction will not meet donor/recipient expectations and will face colossal challenges to avoid total failure. Based on the above and on the specific nature of Yemen’s politics, a number of steps can be taken to maximize the positive effects and minimize the inevitable negative outcomes.

Decentralize Reconstruction

Centralizing rebuilding efforts would essentially mean creating a single reconstruction authority that works independently of, or at least parallel to, the newly formed Yemeni government. This would most likely lead to a systemic preference for certain PWR models over others. For example, some consider the priority to be the revitalization of the economy through mega infrastructure projects such as roads, airports/ports, and city water and sewage systems. Others prioritize smaller scale issues that have an immediate relief and sustenance impact for affected communities.

Since it is given that there is no universally applicable PWR model that provides perfect results, the best rebuilders should opt for is one that facilitates the funding and implementation of multiple models. Decentralizing is better in that regard. Moreover, no one central body could ever be equipped to deal efficiently or effectively with different international, state, and community priorities. Centralizing reconstruction would lead to the dictatorship of that body over the process without any guarantee that it could deliver more than could a variety of government bodies.

One justification for centralization is that the Yemeni government has always had a limited capacity for both absorbing aid and implementing projects, and that the war has only made the situation worse. The assumption is that a newly created body would do better, but there is no evidence to support this, and efforts to do so in Iraq and Afghanistan tell us otherwise.

We also to note that government bodies are not equal; some are more efficient than others, and decentralizing allows for those who can fare better to function better. Finally, investing in existing government institutions will strengthen them, and in so doing strengthen the system of checks and balances.

Put Communities First

A second step is to put communities first, and the interests of international NGOs (INGOs) second. As much as we prefer to think otherwise, there exists a relief and reconstruction complex of some local, but mainly international, NGOs who do good, but also make massive amounts of money by acting as intermediaries for much of the funding coming into a country from donors. The final beneficiary in Yemen may only receive a fraction of the original allocated amount, the rest going to a chain of intermediaries for what is dubbed “management costs”.

This will certainly continue as it is almost institutionally impossible to manage the transfer of funds from donors to projects without INGOs with the right expertise. That said, local communities should play a role in determining which projects are to be implemented in their area. They should even be empowered to nominate the right INGO for the task.

One way Yemen’s Ministry of Planning could facilitate this is by setting up a portal, with both a website and mobile app, to map the needs of each small locality. This platform would connect each area’s needs with interested donors and relevant INGOs, with a map reflecting where and how existing funds have been allocated. It would also provide users with a way to give publicly accessible feedback, empowering local communities down to the level of the individual to determine their needs and priorities.

The technology for such a process is available, and once disseminated, Yemenis would quickly learn how to use it.

Beware Donor Conditionality

Donors normally set conditions on recipients to guarantee that their funds are properly spent. Some require that the recipient country make far-reaching reforms that impact, among other things, the political system (i.e. democratization), the size of government, and taxation and public spending. More often than not, financial support comes with demands for austerity measures which may be destabilizing. Donors are not unaware of the disruptive power of some of their conditions, but tend to brush these off as short-term survivable challenges with long-term economic benefits. Yet, this is not always the case, and in Yemen some conditions enforced by the International Monetary Fund (IMF) had destructive outcomes that could have been avoided.

The IMF unintentionally impeded the transitional process in Yemen following the 2011 uprising, and in the view of some, set the stage for the current conflict by pushing the government in 2014 to lift fuel subsidies. They were of course aware of the fragile context of Yemen’s political environment, and expected short-term unrest, but ultimately decided to accept the risk and move forward. This is a subject of great contention, and one can always find counterarguments that do not place blame on the IMF.

Yet, it deserves serious consideration by all who would seek to place conditions on their rebuilding packages for Yemen. While conditions must and will be set, donors must be extremely attentive to the political context of their conditions—they should always question the ability of Yemen’s government to survive the social and political backlash. One war is enough.

Support Start-Ups and SMEs

Post-war reconstruction presents a country with an opportunity to create a new merchant class and diversify the accumulation of wealth. This could be achieved if start-ups and small and medium-sized enterprises (SMEs) are given the opportunity to participate in the effort and benefit from cash injection into the country. The current approach favors contractors who have track records and strong financial capacities. A quick glance into the usual terms of reference for donor-funded projects shows eligibility requirements that exclude almost everyone except well-established firms.

While this makes sense for some of the larger projects, the terms of reference should allow for recent entrants into the market, especially if they provide innovative solutions that compete in cost and quality. This is especially important when we consider that much of the professional and merchant class lost everything they had in Yemen’s civil war. This process can begin by acknowledging start-ups as key actors in the reconstruction process. Existing models recognize government, foreign states, donor organizations, and INGOs as the main actors in the process. Some may add contractors. Recognizing start-ups would be a major step toward giving them a role and facilitating a fair distribution of wealth in the process.

Invest in Wartime Innovation

War pushed Yemenis toward innovation and entrepreneurial initiatives. One important example is in the energy sector. The destruction of the power system forced people to find alternative sources of energy to keep their fridges, irrigation pumps, and communication tools functioning. Luckily, this became such a widespread phenomenon that it has been recognized internationally and received support from some international organizations. It is important to continue supporting this trend after the war ends.

At this point, the solar alternative to fuel-powered electricity is neither efficient nor advanced enough to compete with conventional electric power sources, and thus people may quickly turn back to traditional sources once they are available again. In addition to the environmental benefits of solar power, there are economic and developmental ones. Alternative sources of energy would save the country billions of dollars that can be allocated elsewhere. Moreover, the majority of Yemen’s population—especially in rural areas—has no access to electricity, making alternative sources an opportunity to expand that access.

This is just one example. Throughout the past four years, many young Yemenis have come up with solutions to the war-related problems they are facing: low-cost prosthetics, alternative techniques for dialysis and water purification, among others. Mapping those innovations, validating those that actually work, and supporting them should be one of the mandates of donor funding.

Heal the Environment, Prioritize Health

The environmental footprint of modern warfare is staggering. A bomb is not simply a bomb. Each one of the millions upon millions of bombs used in this war leaves a chemical residue that sticks in the air, seeps into the soil, and is transferred by rain and wind across vast geographies, wreaking havoc in disease for the population at large, and especially children. In a country such as Yemen, where almost two-thirds of the population live in rural areas, this crisis becomes more urgent than ever.

In the absence of healthy alternatives, people will resort to the food and water resources available, which are likely to be contaminated by disastrous chemicals. The accumulated impact on individual health and the wellbeing of the economy is beyond anyone’s capacity to measure.

The focus of donor money on this must be a priority. Innovative start-ups can play a special role here by providing low-cost solutions that can be implemented on a wide scale. For example, some start-ups have developed accessible technologies that predict mosquito-related health risks. Others have provided inexpensive solutions for water purification, especially in areas that do not have access to a supply network.

The possibilities are endless, and networks of global innovators with existing solutions, or who can tailor unforeseen ones, are out there. Donors and the Yemeni government should encourage experts who understand the country’s health and environmental challenges to engage with those innovators and to introduce them to Yemen’s challenges.

Weaken, Don’t Strengthen, Sectarianism and Regionalism

Yemen, like any other country, is composed of a complex mosaic of communities with diverse yet overlapping cultures and interests. It is simply impossible to draw borders for such a mosaic. Regrettably, the tendency has been to divide Yemen into neatly defined categories of Southern/Northern, Zaydi/Sunni, and Tribal/Urban. Yemeni political actors in the past four decades found it useful to mobilize based on these categories and weaponize them against their contenders, leading to the explosion of sectarian and regional politics with devastating consequences.

Yet, for many of us today, Yemen’s division along these lines seems ubiquitous, historical, entrenched, and natural. Sectarianism and regionalism are even used to explain the roots of the existing conflict. Some peace initiatives start from the premise that these categories should be recognized and institutionalized. But a closer look reveals sectarianism and regionalism to be local, fleeting, weak, and most importantly, contingent upon political weaponization. They are the tools and façade of the conflict, not the cause of it, and legitimizing them will certainly not enhance prospects for peace or social harmony. On the contrary, legitimizing them will sow the seeds for future conflict.

Yemen’s post-war reconstruction can either aggravate or mitigate sectarian and regional divides. To ensure the latter, funding distribution should firmly honor the fact that Yemen’s mosaic defies neat and clear divisions.

There are Yemeni politicians, consultants, and activists who will demand that funds be divided according to these categories, under the pretext of fairness and equal opportunity for all groups and regions. The greatest risk of post-war reconstruction efforts in Yemen is that it accedes to such demands and thus solidifies sectarianism and regionalism. This agenda, which sounds natural and looks appealing, only requires a closer look to realize that equal opportunity for all groups and regions is not the same as equal opportunity for Southern/ Northern, Zaydi/Sunni, and Tribal/Urban-based binaries.

Equal opportunity founded on these divisions is merely another weaponization of difference using international funds. PWR should avoid allowing itself to become a catalyst for further fragmentation in the political identity of Yemen’s communities. If there is anything this author would insist on, it is this.

Finally, it is vital to continuously reflect on how we think when we approach reconstruction. Reconstruction is not an exact science. It is essentially an art whose key tool is a deep, localized understanding of the social fabric, political structure, cultural context, and economy of a country. Being an art, at its heart lie not theories and models (especially economic ones), but rather passion and imagination—a passion for human prosperity and wellbeing, and an imagination for how to achieve this in different localities.

The hope now is that artists with imagination and passion as well as reflection and understanding will lead or significantly contribute to the process of Yemen’s reconstruction.

This article previously appeared in The Cairo Review of Public Affairs and has been republished with permission.

[Category: BRICS Opinion, World News, Donald Trump, Mosque, post-war, post-war reconstruction, PWR, Yemen]

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[l] at 12/6/19 2:25am

Technical assistance for projects in India and Russia

BRICS leaders attend the NDB Summit in Brasilia on November 14, 2019 [NDB]

 

The BRICS New Development Bank (NDB) has moved into technical assistance similar to the mandate of other multilateral development finance institutions such as the International Monetary Fund and the World Bank.

At its board meeting on December 2, 2019, the board approved two technical assistance projects worth $700,000 and three projects with loans aggregating to approximately $937 million, bringing the NDB’s portfolio to 49 projects with loans aggregating to $13.7 billion.

The NDB will provide technical assistance of $300,000 to the Republic of India for Mizoram Tuirini Small Hydro Project. The NDB’s technical assistance will provide consulting services aimed at preparing the Mizoram Tuirini Small Hydro Project.

The project envisages construction of a small hydropower plant with an installed capacity of 24 MW in the state of Mizoram, to increase installed power generation capacity of Mizoram.

The NDB will provide technical assistance of $400,000 to the Russian Federation for Krasnodar Cable Car Project. The NDB’s technical assistance will provide consulting services aimed at preparing the Krasnodar Cable Car Project up to the stage when it can be considered by external financiers to seek approval for its financing.

The project envisages the construction of a cable car network to be used as an alternative public transportation modality in Krasnodar city, Russia to relieve traffic congestion.

The NDB will provide a loan of RMB 2.76 billion (around USD 400 million) to the People’s Republic of China for the Huangshi Modern Tram Project. It will address urban transport connectivity problems in Huangshi, a municipality in the southeastern part of Hubei Province, through the construction of a modern tram network with a total length of 27.33 km.

The components of the Project include: i) laying of tracks, construction of stations and installation of associated facilities for the tram network; ii) procurement of rolling stock; and (iii) consultancy support for commissioning, preparation of operations and maintenance plan, capacity building and project management.

The NDB will provide a loan of $312 million to the Republic of India for the Manipur Water Supply Project. It will address serious challenges in clean drinking water supply in Manipur, a small mountainous state in the northeastern region of India, through construction and upgrade of drinking water supply infrastructure. The components of the Project include construction and upgrade of drinking water supply systems in: i) Imphal Planning Area, the capital city of Manipur; ii) additional 25 towns; and iii) 1,731 rural habitations.

The NDB will provide a loan of $225 million to the Republic of India for the Indore Metro Rail Project. The Project is to implement a metro line of approximately 31 km in the city of Indore. The Project will provide mass rapid transit capacity for the city’s major mobility corridors, thereby contributing to local economic development and an improved urban environment by reducing traffic congestion and pollution.

In 2018, the NDB approved 17 loans totalling about $ 4.6 billion, building on its base of 13 loans worth $ 3.4 billion as of the end of 2017. That brought the total loan book of the bank to 30 projects worth approximately $8 billion by the end of last year.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

[Category: BRICS News, India, Russia]

As of 8/9/20 1:36pm. Last new 7/31/20 2:02pm.

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