Archive for February, 2010
Euro higher at $1.3570 in European morning trade
FRANKFURT
EURO
The euro is higher against the dollar after Federal Reserve Chairman Ben Bernanke this week insisted interest rates would stay low.
The euro is worth $1.3570 in European morning trade, up from $1.3545 late Thursday in New York.
The British pound is buying $1.5260 from $1.5246, while the dollar is worth 89.29 Japanese yen, up from 89.13.
Bernanke said earlier this week interest rates would remain low for some time. Keeping rates low can weigh on the dollar as investors seek higher returns in other markets.
European debt concerns, particularly Greece’s, also weighed on the euro Friday.
German Chancellor Angela Merkel said this week that Greece’s problems have to be tackled at the root, but that the euro will come through the current problems.
Source Business week
Africa’s Ten Fastest Growing Economies
INVEST in AFRICA
1. Angola
GDP Growth Rate (%): 16.30 Global Rank: 4
One of the fastest growing economies in the world, Angola’s high growth rate is driven by its oil sector, with record oil prices and rising petroleum production. A postwar reconstruction boom and resettlement of displaced persons has led to high rates of growth in construction and agriculture as well. Angola is currently rebuilding the country’s infrastructure, which is still damaged or undeveloped from the 27-year-long civil war, with lines of credit from China, Brazil, Portugal, Germany, Spain, and the EU. Corruption, especially in the extractive sectors, and the negative effects of large inflows of foreign exchange, are major challenges facing Angola.
2. Sudan
GDP Growth Rate (%): 12.80 Global Rank: 6
Sudan’s economy is blooming on the back of increases in oil production, high oil prices, and large inflows of foreign direct investment. GDP growth registered more than 10% per year in 2006 and 2007. The Darfur conflict, the aftermath of two decades of civil war in the south, the lack of basic infrastructure in large areas, and a reliance by much of the population on subsistence agriculture remain major challenges to the country.
3. Equatorial Guinea
GDP Growth Rate (%): 12.70 Global Rank: 7
The discovery and exploitation of large oil reserves have contributed to dramatic economic growth in recent years and Equatorial Guinea now has the fourth highest per capita income in the world, after Luxembourg, Bermuda, and Jersey. Forestry, farming, and fishing are also major components of GDP. A dominant subsistence farming culture, underdeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold as some of the key issues facing the economy. Other key issues include the distribution of wealth and corruption as government officials and their family members own most of the businesses.
4. Ethiopia
GDP Growth Rate (%): 9.80 Global Rank: 14
Ethiopia’s poverty-stricken economy is based on agriculture, accounting for almost half of GDP, 60% of exports, and 80% of total employment. The agricultural sector suffers from frequent drought and poor cultivation practices. Drought and Ethiopia’s land laws, the state owns all land and provides long-term leases to the tenants, continue to hamper growth. The drought which struck late in 2002 led to a 3.3% decline in GDP in 2003 but normal weather patterns helped agricultural and GDP growth recover during 2004-07.
5. Liberia
GDP Growth Rate (%): 8.50 Global Rank: 20
Civil war and government mismanagement destroyed much of Liberia’s economy, especially the infrastructure in and around the capital, Monrovia. However since the conclusion of fighting, steps have been to reduce corruption, build support from international donors, and encourage private investment. Embargos on timber and diamond exports have been lifted, opening new sources of revenue for the government.
6. Mozambique
GDP Growth Rate (%): 7.50 Global Rank: 34
Since embarking on a series of macroeconomic reforms designed to stabilize the economy in the late 1980s and achieving political stability since the multi-party elections in 1994, Mozambique has had dramatic improvements in the its growth rate. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government’s revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget, and the majority of the population remains below the poverty line. Mozambique’s once substantial foreign debt has been reduced through forgiveness and rescheduling under the IMF’s Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is now at a manageable level.
7. Egypt
GDP Growth Rate (%): 7.20 Global Rank: 39
In 2005, the Egyptian government reduced personal and corporate tax rates, reduced energy subsidies, and privatized several enterprises. This led to a boom in the stock market, an increase in direct foreign investment and GDP grew about 5% per year in 2005-06, and topped 7% in 2007. Despite these achievements, the government has failed to raise living standards for the average Egyptian, and has had to continue providing subsidies for basic necessities. The subsidies have contributed to a sizeable budget deficit – roughly 7.5% of GDP in 2007 – and represent a significant drain on the economy. However, Egypt’s export sectors – particularly natural gas – have bright prospects.
8. Democratic Republic of Congo
GDP Growth Rate (%): 7.00 Global Rank: 40
The economy of the Democratic Republic of the Congo is slowly recovering from two decades of decline. The government reopened relations with international financial institutions and international donors, and has begun implementing reforms, although progress is slow. Renewed activity in the mining sector, the source of most export income, boosted the government’s fiscal position and GDP growth. Government reforms and improved security may lead to increased government revenues, outside budget assistance, and foreign direct investment, although an uncertain legal framework, corruption, and a lack of transparency in government policy are continuing long-term problems.
9. Cape Verde
GDP Growth Rate (%): 7.00 Global Rank: 41
This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought. The economy is service-oriented, with commerce, transport, tourism, and public services accounting for about three-fourths of GDP. In 2007 the United Nations graduated Cape Verde from the category of Least Developed Countries, only the second time this has happened to a country.
10. Gambia
GDP Growth Rate (%): 7.00 Global Rank: 42
Gambia has no confirmed mineral or natural resource deposits and has a limited agricultural base. Gambia’s natural beauty and proximity to Europe has made it one of the larger markets for tourism in West Africa. Unemployment and underemployment rates remain extremely high with small-scale manufacturing activity featuring the processing of peanuts, fish, and hide.
Source: Click Afrique.com
Why gold and not paper Money?
By Written by John Mangun 
Two days ago I wrote that there is a fundamental change coming in the global monetary system as the use of fiat money—currency not convertible by the government to a hard asset—is replaced with currency that is backed and convertible to something of value.
There is no more an emotional debate in economic and financial circles than this topic. You can find a thousand well-researched opinions on both sides of the issue.
For example:
The question if gold works as an inflation hedge always comes up. No, gold is not a hedge against inflation. Sometimes the nominal price of gold lags behind. Had you bought gold at $800 an ounce in 1980, you would have had to wait 20 years to break even. On the other hand, using 2000 as the starting point, crude oil dominated in gold costs exactly the same today whereas it takes 3.5 times as many US dollars to buy the same amount of oil. And why do we even talk about gold at all?
A little history.
The Egyptians traded goods for gold with the Nubians in Ethiopia. In ancient times, virtually every society loved gold for its ornamental and decorative beauty. In other words, there was a demand for gold every place that you might go. No matter what goods were produced in a particular region, you could buy those goods with gold.
A trader could take gold to Persia and buy textiles. Move the textiles to Egypt and exchange them for gold. Buy salt in North Africa with that gold and sell the salt in West Africa again for gold. Gold was and is the universally desired commodity.
The demand for gold has never decreased throughout history. That is why gold has always been a useful way to store wealth. The demand has been constant (or increasing) and as a result, the purchasing power of gold has been relatively constant in comparison to currency in the modern era.
It is an old story, and maybe a bit simplistic, but it is true. In 1900, a man’s suit of clothes cost about $15 and an ounce of gold was priced at $25. 1n 1940, the prices were $25 and $35. In 1980, $450 and $600 while in 2007 a suit cost about $600 and gold traded at $700 an ounce.
However, it must be said that had you put $25 in the bank at 3-percent interest in 1900, by 2007, it would have grown to $620, or enough to buy that same suit of clothes.
Nonetheless, it is also true that the amount of goods that could be purchased with gold has remained fairly constant through almost any time frame, whereas the amount of goods purchased with non-asset-backed currency has decreased over the same time period.
This fact is not noticeable to the average person and seems unimportant, because as prices have risen, so, too, have wages. Wages have risen almost as fast as the price increase for goods, and technological advances through the decades have brought down the nominal price of almost all goods. Food is actually less expensive in comparison to wages than 100 years ago because of more efficient, cost-
effective production. Look at the “high tech” items such as computers and televisions. Thirty years ago, a television cost a month of wages; now it takes less than a week for the average American wage earner to make enough to buy a TV set.
But for purposes of international trade, currency must retain a constant value. Imagine my business is washing cars. You sell chickens. I print my own “money.” Each one “Mangun money” is worth one car wash. I give you my money in return for two chickens. I redeem the money the following week by washing your car. But then I print thousands of “Mangun money” and buy goods all over town. Eventually, there is no way that I can wash all those cars and redeem all my money in a reasonable amount of time.
The next time I come to “buy” your chickens, you charge me two “Mangun money” because you know it will take me several months to get around to washing your car. My money is now devalued and the “price” of your chickens has gone up.
I have devalued the value of my money by printing too much of it.
Those who believe currency does not need to be asset backed would say, “So what?” It really does not matter if the chickens cost one or two “Mangun money” as long as we keep doing business with each other.
But if I keep printing more money, at some point, it will be very hard to
determine the “true value” of my currency. The people that I do business with will not be sure if they should charge me two, three or how many “Mangun money” for the goods they sell me. If the trend of my printing unlimited amounts of currency continues, you will lose confidence and eventually stop accepting my currency.
That is exactly what has happened to the US dollar. The US dollar is the world’s reserve currency, meaning, that like gold of ancient times, every country is supposed to desire dollars and accept the dollar for all trade purposes.
But countries now are creating currency/trade agreements that do not include the dollar. China is signing deals around the world that will allow its trading partners to settle trade obligations in local currencies and not the dollar.
The dollar’s days as the “world’s currency” are over and the next world reserve currency must include a hard asset, like gold, no matter what form that currency may eventually take.
Ethiopia’s coffee exports rose an annual 9.7 percent last month on sales
By Jason McLure
Fine Coffee
Feb. 23 (Bloomberg) — Ethiopia’s exports rose an annual 9.7 percent last month on sales of coffee, pulses and the narcotic leaf khat, the Ministry of Trade and Industry said.
Exports increased to $144.5 million in the 30 days to Feb. 7, the ministry said in an e-mailed report today. The ministry didn’t provide data on imports.
Ethiopia devalued its currency, the birr, 4.8 percent against the dollar on Jan. 29, a move that makes the Horn of Africa country’s exports more competitive. In September, the International Monetary Fund forecast that Ethiopia’s trade gap would widen to $7 billion in the fiscal year to July 7 from $6.1 billion a year earlier, even as exports climbed 11 percent.
Coffee shipments rose 12.5 percent to 8,342 metric tons last month, while revenue increased 53 percent to $29.5 million, the report said. Shipments of khat, a narcotic leaf popularly chewed in East Africa and the Arabian peninsula, gained 25 percent to $16.9 million.
Sales of flowers climbed 24.6 percent to $16.9 million from $13.5 million.
To contact the reporter on this story: Jason McLure in Addis Ababa via Johannesburg on pmrichardson@bloomberg.net.
Egypt private equity firm is buying Ethiopian food unit
By Humeyra Pamuk
CAIRO (Reuters) – Egyptian private equity firm Citadel Capital’s food unit is in advanced talks to buy an Ethiopian food firm in its bid to boost self-sufficiency in raw materials, the unit’s chief executive told Reuters.
Gozour’s Mohamed El Rashidi did not name the Ethiopian company, but said talks could be concluded in four months.
“It is a perfect fit for us,” he said late on Sunday, referring to the Ethiopan market. “There are 80.7 million people in Ethiopia, with a heavy consuming base and 60 percent of the country’s GDP (gross domestic product) is from food.”
The move would follow the acquisition in November of a majority stake in a Sudanese biscuit and sweet maker by Gozour, the consumer foods business of Citadel, which manages $8.3 billion in investments.
“This company (in Ethiopia) operates in a market that hosts one of our main raw materials,” Rashidi said.
The purchase would mean Gozour could start “contract farming” in Ethiopia, which Rashidi said involved financing farmers and in return reaching agreement to use the produce in factories in Egypt and eventually plants in Ethiopia.
Gozour has three primary lines of business: agri-foods and dairy, fast-moving consumer goods and intermediate industries such as flour milling and production of skimmed milk powder.
INTEGRATION
In addition to Sudan and Ethiopia, Rashidi said the firm’s other areas of interest were Uganda and Kenya. “In these countries we take a platform because they’re strategic for us in terms of raw materials,” he said.
He said the firm would have to continue relying on some imports to supply its Egyptian plants but said it aimed to raise the number of its food lines integrated from farmer to shop shelf to protect it from global commodity price fluctuations.
“We will have a level of 50-60 percent self-sufficiency at the end of 2012 that eliminates a large part of the volatility of raw material prices,” he said, adding Gozour now sourced about 28-30 percent of raw materials from its own production.
The global downturn has driven food prices off all-time highs hit in 2008 but they are still close to the peaks.
The Food and Agriculture (FAO) Price Index, which measures monthly price changes for a food basket composed of cereals, oilseeds, dairy, meat and sugar, was at a 15-month high in January and December but 20 percent below the June 2008 peak.
The company wanted to double its sales this year, after 30 percent growth in sales volumes last year, and boost profitability, Rashidi said without giving overall figures.
He said the food industry in Egypt needed better regulation to improve food safety in the most populous Arab country.
“The milkman passes by, brings the milk but you don’t know where it’s coming from,” he said, adding branded players accounted for only 15-35 percent of Egypt’s food industry.
Japanese buyers are keen to resume imports of Ethiopian coffee
Japan to Help Ethiopia Improve Coffee Quality to Boost Trade
By Fred Ojambo
Ethiopian Coffee
(Bloomberg) — Japanese buyers are keen to resume imports of Ethiopian coffee and will help farmers to improve the quality of their beans and to comply with required standards, a Japanese food-trading company said.
A team of Japanese coffee importers will visit Ethiopia next week to meet government officials, coffee farmers and exporters to help them improve quality, Tomohiro Ishiwaki, of Ishimitu Co., said today in an interview in Kenya’s coastal city of Mombasa.
Japan halted deliveries of coffee from Ethiopia in May 2008 after finding “abnormally high” pesticide residues in a shipment of the beans. Japanese officials demanded that Ethiopia find the source of the chemical and prevent future contamination.
Ethiopia is Africa’s biggest coffee producer. Japan had previously purchased about 20 percent of the country’s exports, making it the nation’s third-largest market after Germany and Saudi Arabia, Ethiopian Trade Minister Girma Birru said in an interview in the capital, Addis Ababa, in February last year. Ethiopia exported $525.2 million of coffee in the fiscal year ending July 7, 2008, according to the Trade Ministry.
Japanese coffee imports from Ethiopia are now “very small” compared with the “big volumes” of a few years ago, Ishiwaki said. Importers need to be given guarantees that the beans supplied will be of top quality and without contamination of any sort, he said.
–Editors: Athol Bolleurs, Karl Maier.
Source: bloomberg.net.
How will Chinese culture influence Africa?
So far, media coverage of China’s involvement in Africa has mostly been about investment. Stories of Chinese engineers in hard hats standing by roads up mountains in Ethiopia. Stories of Chinese farmers moving to Zambia.
But, in a push to extent its economic reach, China is now making a very real effort to export its culture to the world’s poorest continent. Last year the Asian giant overtook the U.S. as Africa’s top trading partner, confirming to the West that it has a real battle on its hands to maintain its influence over African nations.
But, while China’s economic influence is now mighty and its cheap goods can be bought everywhere from Lagos to tiny tribal villages in remotest Ethiopia, Africans, especially young ones, still admire and try to copy U.S. culture.
Middle class teenagers in Nairobi dress like suburban kids from Atlanta, posters of Obama adorn minibus windows in Kinshasa, and American hip-hop is everywhere.
China now seems to have realized this.
Here in Addis Ababa this week China and Ethiopia signed an agreement to work on a “cultural exchange program” from 2010 to 2013. Ethiopia’s state news agency said the countries will dispatch “art troupes, artists, writers and art exhibitions” to each other. It will be interesting to see how mutual the traffic is.
And it’s not just China trying to use culture to secure access to a continent overflowing with mineral resources and a largely untapped consumer market of nearly 1 billion people with more money in their pockets each year.
Addis Ababa is host to Chinese, Indian and even Turkish schools where Ethiopian children must sing the national anthems of those countries every morning, where they learn their languages, their dances, their songs, and their particular set of manners. And where they learn a foreign history alongside their own.
Such schools and “cultural exchange programs” are mushrooming all over the continent as the war for influence over African countries heats up.
Similar schools from the European powers have, of course, existed for years, educating and, sometimes indoctrinating, Africa’s elite. But the British, the French, the Germans and the Spanish are losing ground to the world’s emerging powers.
So how will this all play out? What will the impact of these new cultural imports are on the individual cultures of African countries, arguably still the most unique and preserved in the world? Is this really just imperialism version 2.0?
Source: Reuters
For U.S.A Exports Typically Double Every Ten Years.
By THE NUMBERS: U.S. Exports, Goods and Services -
EXPORT
1950:$12 billion
1960: $26 billion
1970: $57 billion
1980: $271 billion
1990: $535 billion
2000: $1.070 trillion
2008: $1.827 trillion
2009: $1.550 trillion
What They Mean:
From last month’s State of the Union address:
“Tonight, we set a new goal: we will double our exports over the next five years, an increase that will support two million jobs in America.”
This means raising exports of goods and services from $1.5 trillion in 2009 to $3 trillion by 2014, with annual growth in exports averaging 14.8 percent. This is almost double the 8.7 percent yearly average since 1960, a rate under which exports have doubled about every decade. Only once since the 1940s have exports doubled within five years: from 1975 to 1980 (a poor model, as a massive burst of inflation made actual export growth look bigger than it really was).
The goal is ambitious, then. But “ambitious” is not a synonym for “unreachable.” In recent years, exports have nearly doubled in two six-year periods: from $310 billion to $616 billion between 1986 and 1992, and from $1.0 to $1.8 trillion from 2002-2008. In the most recent jump, exports grew by about 12.3 percent annually — still too slow for a five-year doubling, not impossibly short. And three objective facts bring the goal closer: (a) the 2009 jump-off point is unusually low, with exports down about $200 billion from the 2008; (b) last year’s rapid increase in American family savings, from 1 percent to 5 percent of income, are forcing businesses to work hard at finding foreign customers; and (c) U.S. dollar rates are relatively low against other rich-country currencies, meaning American planes, software, wheat and MRI machines sell abroad for less.
Source: Trade Fact
AFRICA-ASIA TIES FLYING HIGH
It is very much seen as a critical driver for Africa’s future growth prospects as well.
China has repeatedly emphasised its commitment to Africa through the global troubles and is emerging even more solidly implanted on the continent now. Other Asian countries are also pushing hard, as a recent high-level Indian visit showed.
As one of the main links between Africa and Asia, Ethiopian Airlines offers an interesting indicator as to how the ties have held up and are expected to grow.
Early last year it was talking of cuts, but it is now at 14 flights a week to China and 12 to India. It is planning flights to more destinations in both countries.
Unlike many airlines elsewhere, it also managed to double its profits in its last business year.
Picture: A visitor walks past a map of Africa at the African Development Bank meeting in China in 2007. REUTERS/ Aly Song
Ethiopia’s 2009 Coffee crop
Ethiopian Best Coffee
By Jason McLure
Feb. 5 (Bloomberg) — The coffee harvest in Ethiopia, Africa’s biggest producer of the crop, was at least 25 percent higher than a year earlier, Ethiopia Commodity Exchange Chief Executive Officer Eleni Gabre-Madhin told reporters today in the capital, Addis Ababa.
She didn’t say what quantity of coffee was harvested during the season, which runs from October through December.
Volumes of specialty washed coffee traded on the exchange more than doubled last month to 2,173 metric tons, compared with a year earlier, because of the introduction of a new quality- certification system, improved support to farmers from government agents and greater use of the exchange by traders, she said.
Ethiopian farmers can expect better prices this year because of higher global coffee prices and improved quality, she said.
The exchange will open a new market Feb. 17 for specialty buyers that wish to buy directly from specific farmers and cooperatives. Coffee sold on the exchange’s current trading floor is identified only by region and grade.
Colorado-based Allegro Coffee Co., a supplier for Whole Foods Inc., Portland, Oregon-based Stumptown Coffee, and Switzerland-based Schluter SA are among the importers who have registered for the direct market, she said.
“Now there is an incentive for people to do the post- production processing more carefully,” Eleni said.
Coffee exports from Ethiopia fell to a six-year low in the year to July 7 after drought and disease cut shipments to 133,993 tons from 170,888 tons a year earlier. Ethiopia consumes about half the coffee it produces.
–Editors: Athol Bolleurs, Paul Richardson.
To contact the reporter on this story: Jason McLure in Addis Ababa via Johannesburg on +27-11-286-1999 or pmrichardson@bloomberg.net.
