Read more about the article Financializing Commodity Markets: Consequences, Advantages and African Case Study

Financializing Commodity Markets: Consequences, Advantages and African Case Study

Africa has a wealth of natural resources, including minerals, agriculture, and energy commodities, which offers an opportunity to harness commodities’ financialization in the continent, a concept that has gained global attention, with debates surrounding its potential benefits and drawbacks. Although the financialization of commodities has been studied in various contexts, including in African countries, challenges such as liquidity constraints and market readiness have emerged as critical impediments to its widespread adoption. This paper examines the existing literature to clarify the positive and negative aspects of commodity financialization, drawing on global examples and specific cases within Africa. By examining best practices and lessons learned, the paper offers guidance on how African countries can navigate the complexities of preparing for and embracing commodity financialization to unlock its potential benefits while mitigating associated risks.

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Read more about the article Addressing Africa’s Persistent Debt Problem

Addressing Africa’s Persistent Debt Problem

Due to the stagnation of official development aid following the global financial crisis, and the challenges faced by African countries in mobilising domestic resources to finance their massive needs for infrastructure and socio-economic development, a re-accumulation of debt in the region began in 2011. To effectively tackle the massive challenges, it is imperative to contemplate a reconfiguration and expansion of existing debt relief programmes. Rather than viewing debt-related difficulties solely as matters of short-term liquidity, it is essential to acknowledge the underlying solvency problems that necessitate long-term remedies. A well-established sovereign bond market will enable African countries to mobilise extra financial resources for their increasing social and economic needs. The current context, marked by tightening financial conditions, especially for developing countries, has shown how favourable it would be to leverage a domestic and deep local-currency sovereign debt market. Unless Africa adopts an ambitious tax policy, enabling authorities to raise the due amount of tax, the funding issue will remain unresolved.

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Read more about the article Central Bank Digital Currencies in Africa

Central Bank Digital Currencies in Africa

Central Bank Digital Currencies (CBDCs) are digital versions of cash issued and regulated by central banks. They correspond to digital money denominated in the national unit of account and liability of the central bank. By mid-2022, almost 100 CBDCs were being subject to research or testing. Two had already been launched, one of them in Nigeria (eNaira) and the other in the Bahamas. According to a survey by the BIS (Bank for International Settlements) last year, 90% of central banks there approached were undertaking CBDC analysis or projects in the previous year, with 26% already implementing pilot projects (Kosse and Mattei, 2022). Potential benefits from CBDCs include the facilitation of financial inclusion, more resilient domestic payments, and enhanced competition. Beyond improving access to money, payment efficiency and lower transaction costs may be attained. On the other hand, some risks and challenges will have to be faced. As we approach in this chapter, African central banks are part of such a global trend. Most are yet in the beginning (research and analysis), while Nigeria has already issued a retail CBDC, and South Africa and Ghana are implementing pilot projects (wholesale and retail, respectively). Without CBDCs can enhance the public good nature of the monetary system, with the central bank at the core of safe, low-cost, and inclusive payments. Some broad risks and challenges are also highlighted. First, we summarize how a monetary system can be strengthened with digital finance and new private forms of digital money if not being based on cryptocurrencies. Second, we approach the motivations of African central banks for CBDCs. Finally, we call attention to some of the challenges and risks accompanying such a move to CBDCs.

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Read more about the article Fiscal Space in African Economies and Base Erosion and Profit Shifting (BEPS)

Fiscal Space in African Economies and Base Erosion and Profit Shifting (BEPS)

Base erosion and profit shifting (BEPS) involving multinational companies is a complex, multi-dimensional problem resulting from loopholes and inconsistencies between countries’ tax systems. Addressing it requires coordinated action at the international level. Several organizations have taken initiatives in this direction, including the Organization for Economic Co-operation and Development (OECD), which, with the support of the G20, launched an ambitious project to combat BEPS in 2013. The OECD has proposed 15 measures to strengthen international tax rules in various areas, including transfer pricing, combating harmful tax practices, preventing treaty abuse, and promoting transparency and tax information exchange. This study analyzes the challenges related to the fiscal space in Africa and examines the impact of BEPS on African economies. We examine the factors that exacerbate BEPS in the region, including the absence of relevant international tax laws, the dynamics of tax treaty negotiations, and limited tax administration capacity. We will also assess the negative impact of BEPS in Africa and discuss current initiatives to address BEPS in Africa, such as those proposed by the OECD. Finally, we discuss the challenges and offer policy recommendations for increasing fiscal space and reducing BEPS in Africa.

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Read more about the article External Debt Management in Africa: A Proposal for a ‘Debt Relief for Climate Initiative’

External Debt Management in Africa: A Proposal for a ‘Debt Relief for Climate Initiative’

A decade of poor growth, increased poverty, and political instability followed the serious debt difficulties that emerged worldwide in the 1980s. There are concerns that the looming debt crisis could create similar challenges and result in even more severe consequences. However, the current economic climate differs in many ways from that of the 1980s, when international banks and Paris Club creditors held most of the external debt. Today, the profile of creditors is more diverse, and the mechanisms established by the G20 and multilateral development banks to address this new crisis are partly based on outdated approaches that are no longer effective in adapting to new realities. As a result, a more holistic and integrated approach is required to address the challenges of external debt faced by developing countries, particularly in Africa. Such an approach should take into account the issue of over-indebtedness while also addressing climate protection, the most pressing issue of the 21st century. A promising solution to tackling these challenges could be a new debt reduction initiative focused on climate action. This policy brief recommends a ‘Debt Relief for Climate Initiative’ that will link debt reduction with investments in climate adaptation and mitigation projects.

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Read more about the article Africafé : Evolving economic trends and the impact on African economies

Africafé : Evolving economic trends and the impact on African economies

In this episode, Otaviano Canuto talks about a perfect storm coming toward African economies. With inflation soaring and global uncertainty looming from a world economic perspective, Otaviano Canuto shares his thoughts on the crisis and his recommendations to mitigate the adverse effects of the crisis on the African continent.

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Read more about the article Financial Globalization and Inequality

Financial Globalization and Inequality

Inequality is nowadays one of the most important issues facing many economies around the world, not only in developing countries but also in advanced and emerging ones. Today, there is a new evidence that has been highlighted by several economists and international institutions and that shows that the fight against rising inequality is not only beneficial from an equity, political and social point of views but it is also beneficial from an economic point of view and can boost economic growth in the long run. In this podcast, Mr. Otaviano Canuto, Senior fellow at the Policy Center for the New South and a former vice-president at the world bank joined our economist Hamza SAOUDI to discuss the root causes behind the increase of within countries inequality and the main policies that African countries should prioritize in this critical time so to ensure a sustained and inclusive recovery.

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Read more about the article Natural Wealth and Growth in Sub-Saharan Africa

Natural Wealth and Growth in Sub-Saharan Africa

The conceptual framework of natural wealth that we approached in the previous video may be illustrated with cases drawn from Sub-Saharan Africa. With at least 250 million inhabitants in resource-rich African countries, natural assets are responsible for more than 80% of exports and 50% of government revenues in the region. As such, the high concentration of resource-rich countries in the area allows for direct comparisons with their resource-poor counterfactual regional neighbors. We compare rates of economic growth, poverty reduction, governance, and sources of productivity growth in resource-rich and resource-poor countries. We contrast the landscapes during the commodity boom with the current one during the pandemic crisis.

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Read more about the article Climbing a High Ladder – Development in the Global Economy

Climbing a High Ladder – Development in the Global Economy

This book approaches the opportunities and challenges faced by developing countries to raise their per capita income levels during the recent phase of globalization. After dealing with the post-global financial crisis economic landscape in advanced economies, it deals with the windows of opportunity opened by trade and financial globalization for developing countries to climb the income ladder. Domestic preconditions for a developing country to benefit from those windows are then pointed out. China, Brazil, and Sub-Saharan Africa are presented as case studies. The book ends with an assessment of the impact of the coronavirus crisis on the global economy.

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Read more about the article Africa’s Infrastructure Finance

Africa’s Infrastructure Finance

Africa’s infrastructure investment gap has widened over time. Addressing the mismatch between developed countries’ “global savings glut” and African countries’ “investment dearth” might be a win-win. To facilitate that matching, some risk mitigation tools can be used. In this brief, we propose that by providing such risk mitigation tools, development institutions and governments can crowd-in private investment rather than crowd them out by providing full financing.

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Read more about the article Africa After Covid-19: Key Economic Challenges

Africa After Covid-19: Key Economic Challenges

THE AFRICA SESSIONS CYCLE TOOK PLACE ON SATURDAY 13TH JUNE AT 17H00 (GMT+1)! WE HAVE PUT TOGETHER A FANTASTIC PANEL TO DISCUSS “AFRICA AFTER COVID-19: KEY ECONOMIC CHALLENGES”. - Otaviano Canuto – Senior Fellow at Policy Center for the New South and Brookings Institution, and former Vice-President of the World Bank - Jan Isaksen – Emeritus Researcher at Chr. Michelsen Institute (CMI), Norway - Alan Hirsch – University of Cape Town, Nelson Mandela School of Public Government, South Africa - Jean Louis Arcand – Graduate Institute of International and Development Studies –Geneve; - Grant Harris – Harris Africa Partners and Former Assistant to White House for African Affairs. - Assis Malaquias - Global Studies and Maritime Affairs at the California State University (Maritime Academy). - Elsa de Morais Sarmento - associate Researcher at NOVAFRICA, Nova Business School of Management and Economics, Portugal - Joel Costa – Expansão, Angola - Shrikesh Laxmidas - Deputy Editor-in-Chief of Jornal Económico, Portugal - Salim Valimamade - Director of the executive programs of Catholic Luanda Business School, and Lecturer of Corporate Finance of Catholic University of Angola

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Read more about the article Natural wealth and economic growth – the case of sub-Saharan Africa

Natural wealth and economic growth – the case of sub-Saharan Africa

This note approaches the relationship between natural wealth and economic growth, using the case of Sub-Sahara African economies as an illustration. Delving into recent World Bank reports, it highlights how a sustained positive correlation between natural capital and GDP growth happens through the transformation of the former into other forms of assets: produced capital, human capital and other intangible assets. Governance features and the quality of macroeconomic policies are of the essence for such a benign trajectory to take place.

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