Electricity in Africa, Paris Group 7 PPMBD

Lighting a dark continent

The power shortages that have been holding Africa back are at last easing

September 27th

THE stylishly dressed men and women window-shopping in the air-conditioned cool of the Lagos Palms shopping mall speak of a Nigerian economy and middle class on the rise. But out the back, the stench of diesel fumes hanging heavily in the muggy tropical air is evidence of failings that are holding back Africa’s biggest economy: banks of diesel generators chug away to supply eye-wateringly expensive power because Nigeria’s rickety national grid is so unreliable.

Across Africa investors joke about living in a “bring-your-own-infrastructure” continent, in which firms must provide independent generators, water purification and even sewage treatment when building a factory or hotel. Of these the costliest is often power. Nigeria, which has a population three times larger than South Africa’s, generates just a tenth as much electricity.

Power from private generators costs $0.35 per kilowatt-hour or more, ten times more than electricity from the grid in most other countries. Analysts at Coronation, a South African asset manager, reckon electricity accounts for 6% of costs at Nigeria’s biggest banks (each branch needs a generator) and 10% of the costs of telephone companies (each cellphone mast must have its own power).

Even India’s ramshackle infrastructure looks good by comparison. Nigeria may produce roughly as much output per person as India, but it has only one-fifth the generating capacity per head, according to McKinsey, a consulting firm. China, meanwhile, is building new power plants so rapidly that it is adding the equivalent of an Africa to its grid every two years. The World Bank reckons that power shortages trim more than two percentage points from annual growth in GDP on average in Africa; in Nigeria the loss has been almost four percentage points a year.

After a drought in investment in new generating capacity lasting almost three decades, blooms of new power plants are now sprouting across sub-Saharan Africa like acacia seeds after a rainstorm. A tally by The Economist of announced power projects (under construction or at an advanced stage of planning) suggests that the region’s electricity-generating capacity will increase by more than half by the end of the decade.

In the longer term governments have set what are probably over-ambitious targets. Angola, for instance, wants to increase its annual generating capacity from 1,800mW to 9,000mW by 2025.

South Africa, which already generates about two-thirds of the region’s power, is adding about 15,000mW to its grid—about as much as the rest of sub-Saharan Africa produces now. Most of this will come from massive coal-fired power stations such as the one at Medupi, site of an existing coal mine. It alone will produce more power than Nigeria when it comes into service.

Almost as much new power will be of a greener variety, given that South Africa has approved 64 renewable-energy projects ranging from fields of wind turbines and solar cells to generators that burn sugarcane.

In other countries most of the new energy will be renewable or from gas, which is cleaner than coal. Ethiopia is building Africa’s largest hydroelectric and geothermal plants. Between them the two projects will triple the country’s power production. Kenya is drilling holes deep into the Rift Valley in Hell’s Gate National Park to build what will ultimately be the world’s largest single geothermal plant. At Lake Turkana, a particularly windy spot farther north in the Rift Valley, private investors are building Africa’s biggest wind farm.

Two forces are driving the expansion. First, a number of African countries have either opened their markets to private investors or adopted clearer regulations that encourage investment. Take South Africa. For years it insisted that new capacity should be built only by the state-owned generator, Eskom. But in 2008 the country experienced crippling power shortages that forced mines and factories to cut production and sent millions of South Africans to bed early. The government reversed course and encouraged private investment in renewable energy sources.

Nigeria last year privatised state-owned distribution companies, while Kenya, Ghana and Tanzania are all attracting foreign investment. Anton Eberhard of the University of Cape Town reckons that, although investment by governments in power has largely remained stable, there have been big increases from other investors, including Chinese state-owned firms.

A second factor is the rapidly falling cost of renewable energy. Africa has some of the world’s best potential sites for wind, solar and hydropower. Investors are proving readier to test the market by putting up a few windmills than by committing to big power stations. Wind farms and solar parks can also provide decentralised or “off-grid” power directly to customers, reducing the load on congested transmission lines. Given the high cost of power from diesel generators in Africa, renewable energy can be an attractive alternative.

Ahmed Heikal, chairman of Qalaa Holdings, an investment firm with holdings in several power producers, thinks that in Africa a “new model [of renewable energy] that bypasses the government is emerging”. It is one in which firms are able to offer competitively priced renewable power without the hefty government subsidies needed to encourage investment elsewhere, such as solar parks in cloudy Germany or offshore wind farms in the rough waters of the North Sea. Africa has the potential to jump from being the world’s electricity laggard to a leader in renewables—if inefficient governments don’t hold it back.


Source : http://www.economist.com/news/middle-east-and-africa/21620245-power-shortages-have-been-holding-africa-back-are-last-easing-lighting?zid=304&ah=e5690753dc78ce91909083042ad12e30

Group 37@ Sophia: Europe must ‘boost demand’ to revive economy, US warns

The US Treasury Secretary has urged eurozone countries to “boost demand” in order to reduce unemployment and avoid deflation.

Jack Lew was speaking at a meeting of the G20 group, which includes several of the world’s largest economies.

Earlier this month, the European Central Bank introduced new measures to stimulate the area’s flagging economy.

However it has stopped short of adopting the policies favoured by its US counterpart, the Federal Reserve.

As well as launching an asset purchase programme, through which it will buy debt products from banks, the ECB cut its benchmark interest rate to 0.05%.

The bank has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.

“Europe is going to need to solve its problems and resolve differences it has internally,” Mr Lew told reporters at the meeting in Australia, “but what’s clear from the US experience is that the combination of taking action to boost demand in the short run and make structural changes for the long run is an important combination, and it shouldn’t become a choice between the two.

“You really need to pursue both.”

Mr Lew also expressed concern about the political tensions between European countries, and the effect this may have on pushing through urgent policies.

“The concern that I have is that if the efforts to boost demand are deferred for too long, there is a risk that the headwinds get stronger, and what I think Europe needs is more tailwinds in the economy,” he cautioned.

Alibaba IPO Magic (Group 1 – MSc/M2 FMI)

 The Chinese e-commerce giant IPO


Order imbalances over the intensely hyped, widely sought Alibaba IPO delayed initial trading. Nearly 2 1/2 hours later, American depositary shares of Alibaba Group Holding Ltd., priced at $68, opened at $92.70 at 11:53 a.m. ET. Shares quickly jumped to $99.70 before ending the day at $93.89.

More than 100 million shares traded within 20 minutes of its delayed open and over 271 million shares exchanged hands by the market’s close. Early indications had shares opening at $80 to $83, but demand was so strong, the offering price had to be hiked 10 times.

Scott Cutler, NYSE’s global listings chief, said the IPO was repeatedly delayed by massive order imbalances. “We’ve got hundreds of thousands of orders,” Cutler told CNBC after an hour-long delay. “We’re chasing to find sellers. Even at these levels, there doesn’t appear to be a lot of sellers.” 

The IPO raised $21.8 billion, surpassing the $17.8 billion raised by credit card marketer Visa’s 2008 IPO and Facebook’s $16 billion IPO in 2012. Alibaba’s IPO falls just short of the record $22 billion raised in Hong Kong and Shanghai by Agricultural Bank of China’s 2010 stock offering. But given Friday’s demand, Alibaba’s underwriters could add additional 40 million shares, bringing the IPO to $25 billion. At current price levels, Alibaba’s $231 billion market capitalization is greater than blue-chip giants IBM, Procter & Gamble and General Electric.

Alibaba’s business model – unlike other young Internet-focused companies with more prospects and buzz than actual earnings and revenue growth – created swelling demand for its shares. A holding company that combines the sales, merchandising and financial services reach of Amazon, eBay and PayPal, Alibaba had revenue of $8.5 billion in its last fiscal year, up from $5.5 billion in 2013. Revenue for the second quarter ended June 30 jumped 46% to $2.53 billion and net income jumped 137% to $2 billion.

Japanese wireless carrier SoftBank,an early Alibaba investor,which provided the then-startup with $20 million in 2000, has a 37% stake in Alibaba that could be worth more than $60 billion. Yahoo! could eventually be among Friday’s biggest Alibaba winners, but shares slumped nearly 7% in early trading before ending the day down 2.7% to $40.93. The company has previously said it plans to unload about 5% of its 22.4% Alibaba stake.




6@ Sophia: Japan in new Antarctic whaling program

THE Japanese government will devise a new plan to resume whale hunts in Antarctic waters, a news report says, after it was banned earlier this year from pursuing its research whaling program in the Southern Ocean.
WHALING experts will meet in October to draw up a new whaling program, Kyodo News agency reported.
The meeting is intended to mollify the opposition from anti-whaling countries and promote transparency, Kyodo reported, citing unnamed sources.
The International Court of Justice (ICJ) in The Hague decided in late March to halt Japan’s whaling program, ruling that it contravenes a 1986 moratorium on whale hunting.
The ruling prompted Tokyo to give up sending a whaling fleet to the Southern Ocean for the current financial year through March 2015.
The International Whaling Commission began a four-day convention in Slovenia on Monday, where Japan and anti-whaling countries such as Australia are clashing over Tokyo’s attempt to seek a continuation of whaling on a smaller scale, Kyodo reported.
Japan needs to submit its new program in early November so that it can be discussed at the whaling body’s scientific committee meeting scheduled for May 2015, the report said.


Group 20 – MSc IMBD Paris: An independent Scotland and economic realities of size on global stage

Photograph: Murdo Macleod for the Guardian

Photograph: Murdo Macleod for the Guardian

Alex Salmond says corporation tax is charged on “the economic activity in Scotland, not where the company is based”. That interpretation allows the first minister to brush off concerns that a yes campaign victory in Scotland’s independence referendum will trigger a flight of banks to London and their tax revenues with them.

It was also a disingenuous answers that misleads. Corporate head offices charge their subsidiaries fees for using the brand, for benefiting from its top management and a host of other costs. It is these fees that would be levied by Royal Bank of Scotland in the event of a move south and would diminish the profits of its Edinburgh subsidiary. Why did Pfizer want to re-domicile in the UK (through the purchase of the pharmaceutical firm AstraZeneca) except to avoid US corporate taxes?

It is a game that lots of multinationals play and it matters.

Unfortunately it matters even more for small independent countries that have little bargaining power in a global economy. And it raises the question, while there are plenty of small countries with high incomes, will an independent Scotland still be one of them in 10 years? A glance at similar-sized developed economies across the world shows life can be more difficult than it first appears, especially when your economy is relatively open, with a large proportion of national income dependent on trade with the rest of the world.

If there are also sizeable post-crash debts to pay, an ageing population and a hungry welfare state to feed, there must be some trepidation about joining the likes of New Zealand, Denmark, Ireland, Norway and the Baltic states in their daily joust with the international money markets. If those countries’ experience is anything to go by, life will be even more of a rollercoaster ride.

Then there is the cultural problem. Where Scotland was once an industrial and mining centre, diligently making things, in recent times it has shown itself capable of matching London’s exuberance – allowing banks off the leash and property to rocket in value at many times the rate of inflation, and plodding wage rises.
How then does Scotland measure up?

Here are a few examples:

New Zealand

Currency New Zealand dollar

Central bank Reserve Bank of New Zealand

Population 4.4 million

Rapid expansion ahead of 2007, when the country tried to wean itself off agriculture and its dependence on the UK, came at a cost. Much of the investment in infrastructure, universities and hi-tech industries was fuelled by consumer borrowing and the sale of state assets.

Since the financial crash and the rescue of several small banks, New Zealand’s rightwing government has wooed international investors by slashing public spending and promising a budget surplus in 2016. This kept its debt-to-GDP ratio from going above 40% but, unsurprisingly, poverty and inequality have jumped.

The economy began growing in 2011 following a boom in demand for dairy products from Asia’s middle class, a construction boom following a series of crippling earthquakes and an influx of migrants. Interest rates have climbed to 3.5%. It remains vulnerable to global dairy prices, which are down 45% since a peak earlier this year. A high Kiwi dollar has also weakened demand for manufacturing and timber.

A general election takes place two days after the Scottish referendum, and despite growing concern at the country’s lack of fairness, the ruling National party, seeking a third term, looks like it will be the largest party in parliament.


Currency Krone

Central bank Danish National bank

Population 5.6 million

Denmark is renowned for being one of the richest of European nations with a large welfare state. It regularly runs a trade surplus and is self-sufficient in energy. Like New Zealand, agriculture plays a big part in its exports.

Also like New Zealand, its riches are to a large degree born of huge consumer borrowing. Six years after the financial crisis, Denmark’s households carry the biggest debt loads in the developed world at about three times disposable incomes, according to the Organisation for Economic Cooperation and Development.

The difference with countries like the US and the UK (and Scotland), is that Danes are also big savers. Yet unlike the Japanese, Danes don’t lend to themselves. Much of their savings are invested abroad, making the country vulnerable when the financial crisis hit. A property boom turned into a severe property crash and as many as 62 community banks went bust.

Only the government’s austerity programme (and relatively low government debt of 47%) has persuaded international investors that it qualifies as a safe haven. Denmark’s decision to track the euro is another feature of the country’s disciplined attitude to money, though it has forced the central bank to introduce negative interest rates and led to calls for caps and other measures to restrict still sky-high borrowing.

Keeping interest rates and the exchange rates low is a common recipe for export-led growth. But Denmark’s economy has flatlined before contracting in the second quarter of 2014.


Currency Euro

Central bank Central Bank of Ireland/European Central Bank

Population 4.6 million

Ireland’s story is a familiar one. The crash brought down all its banks, more than halved property values and left debts that the country will still be paying in 30 years.

The deal with Brussels – and backed by the International Monetary Fund – that ties Dublin to its debts for decades shows how currency unions work for small, weak countries. Germany, the EU’s largest economy and a major holder of Irish bank debt, encouraged Dublin to prevent bondholders from losing their shirts. But Ireland didn’t have the money, so Brussels – with Berlin its largest paymaster – said don’t worry, we’ll lend you the money. At almost 5% interest, the cost of the loan is running at more than double 2014’s projected 2.1% GDP growth rate.

Salmond is an admirer of Dublin’s 12.5% corporation tax rate. His Scottish National party plans to cut corporation tax from the UK’s 21% to 18% should the SNP hold Holyrood following independence. But investigations by the Irish Times have shown that most of the big US companies domiciled in Ireland barely pay 1%, let alone 12.5%. This situation has become common in countries seeking first-world status by attracting large multinationals to produce commoditised goods. These goods could be produced anywhere, leaving Ireland in a similar position to Turkey, which has effectively waived corporation tax on foreign companies and many others.

By keeping their public debts low. And should their economy look tired or in need of nourishment, then low running costs and privatisations are the solution.

Scots looking beyond the transition costs will tell themselves that prudence with a purpose, Gordon Brown’s old mantra, can work. But these examples show everyone struggles to maintain a decent standard of living without spending beyond their means, consigning fairness to the bin or indulging in some reckless gambling. How they cope with the aftermath depends on how badly they lost and whether they are inside or outside a currency union.

The Nobel prize-winning economist Paul Krugman, who is no fan of austerity or free market thinking, cautioned that it was better to be Florida than Spain when the chips are down. It is easy to see why.

The Guardian’s online datablog has presented some comparisons to aid the debate .

• This article was amended on 15 September 2014. Paul Krugman cautioned that when the chips were down it was better to be Florida than Spain, not Canada as an earlier version said.


6@Sophia:New sanctions against Russia to take effect on Friday.

BRUSSELS/LONDON, Sept 11 (Reuters) – European Union governments agreed on Thursday that new economic sanctions on Russia will take effect on Friday but held out the prospect of cancelling some or all of them next month if they believe a peace plan is working.

EU ambassadors agreed in principle to the new sanctions last Friday but implementation was held up by a dispute over whether they should take effect now or whether the EU should give more time for a ceasefire in Ukraine to take hold.

The ambassadors agreed at a meeting in Brussels that the new sanctions should take effect on Friday, when they will be published in the EU’s Official Journal.

“The ambassadors reserve the right to revise their decision at any time in response to events, on the basis of the opinions of relevant institutions,” one EU diplomat said.

European Council President Herman Van Rompuy said EU officials would conduct a review before the end of September of how a peace plan was working in Ukraine and, if Russia was complying, some or all sanctions could be lifted.

“If the situation on the ground so warrants,” he said, officials may submit to EU leaders “proposals to amend, suspend or repeal the set of sanctions in force, in all or in part”.

That enticement to Moscow to cooperate, while immediately imposing new measures, reflects impatience on the part of some leaders not to pull punches after less than a week of a truce but also concern among others, especially those most heavily dependent on Russian trade, not to provoke Moscow’s retaliation.

The breakthrough followed a phone call on Thursday involving Van Rompuy, British Prime Minister David Cameron, German Chancellor Angela Merkel, French President Francois Hollande and Italian Prime Minister Matteo Renzi, Cameron’s spokesman told reporters in London.

“(They spoke) to discuss the subject of sanctions against Russia in the context of Ukraine and agreement to proceed with the implementation of the sanction package that was agreed earlier in the week,” he said.

“If Russia genuinely reverses course then of course the European Union and others will return to the subject but there unfortunately has been very little evidence so far and that is why you have the European Union going ahead.”


Moscow would take comparable measures in response to new EU sanctions, Russian news agencies quoted a Foreign Ministry spokesman as saying.

That response could include caps on used car imports and other consumer goods, Kremlin economic aide Andrei Belousov was quoted by state-run RIA news agency as saying. But he added: “I hope common sense will prevail and we will not have to introduce those measures.”

The Ukraine conflict has provoked the worst crisis in East-West relations since the Cold War and deepened fears over possible disruption to Russian gas supplies to Europe.

Poland’s state-controlled gas importer PGNiG said on Thursday it had received 45 percent less natural gas than it requested from Russia’s Gazprom on Wednesday. A Gazprom spokesman said Russian gas flows to Poland were unchanged from the previous week.

A spokeswoman for the European Commission said the EU was looking into the details and the possible cause of disruption. She said Ukrainian, Russian and EU officials would meet in Berlin on Sept. 20 to discuss gas supplies.

Ukraine imports around half of its gas needs from Russia, and the EU meets a third of its demand through imports from Russia, with 40 percent of that gas flowing through Ukraine.

The new EU sanctions are expected to put Russia’s top oil producers and pipeline operators Rosneft, Transneft and Gazprom Neft on a list of Russian state-owned firms that will not be allowed to raise capital or borrow on European markets, an EU diplomat said.

EU sanctions, however, do not include the gas sector and in particular state-owned Gazprom, the world’s biggest gas producer and the biggest gas supplier to Europe.

Battle-tank maker Uralvagonzavod, aerospace company Oboronprom and state-controlled United Aircraft Corporation (UAC) are also expected to face sanctions, according to a draft obtained by Reuters.

The EU sanctions would prohibit the companies from raising capital in Europe via “financial instruments with a maturity exceeding 30 days”, the draft document said.

A further 24 people will be added to a list of those barred from entry to the bloc and whose assets in the EU are frozen.

While Germany had been pushing to have the new sanctions implemented, several other EU countries had wanted to hold off because a ceasefire in Ukraine had been holding for some days.

EU diplomats said countries with close ties to Russia such as Italy, Austria and Finland are reluctant to implement the new sanctions.

Merkel said sanctions could always be suspended later if there was progress towards a peace plan for Ukraine.

Ukraine’s president said on Wednesday Russia had removed the bulk of its forces from his country, raising hopes for a peace drive now underway after five months of conflict in which more than 3,000 people have been killed.

However, a NATO military officer said there were still around 1,000 Russian troops inside Ukraine and 20,000 near the border.

The rouble hit a record low against the dollar on news of the new sanctions.

Link: http://www.reuters.com/article/2014/09/11/ukraine-crisis-idUSL5N0RC36O20140911?feedType=RSS&feedName=everything&virtualBrandChannel=11563

6@Sophia: Is Globalization Making Us More Tolerant?

Growing up in the U.S. with foreign parents was like getting a glimpse into other universes. Each summer, when we would visit Israel, I would marvel at the artists on MTV Europe — who was Robbie Williams? And why wasn’t TLC on? Every four years, my Chilean father would hole up in the basement watching the Mundial on Univision. These cultural phenomenon, which were huge in other parts of the world, were completely disconnected from Fair Lawn, New Jersey.

Nowadays, music, sport and culture spread easily across the globe. Everyone knows Shakira. The biggest hit of 2012 was Gangam Style, which was sung by a Korean artist in Korean. Memes such as the Harlem shake were recreated by YouTube enthusiasts everywhere. And the American team in the World Cup is followed closely by fans from home.

Do these universal elements of culture make us more tolerant? Can we really look at cat videos and feel like we have more in common than ever before? What about increasing protectionism, nationalism, and rising Islamophobia?

I’d like to suggest that these are two sides of the same coin. As our world becomes more closely intertwined, we want to hold on to the elements of our identity that define who we are. That is what makes today’s globalised success stories so wonderful- they are uniquely and identifiably local.

As I head to Washington DC now for the Plus Social Good Gathering at the UN Foundation, I am excited to meet change makers from around the world, all working to make their communities a bit better. I want to learn more about them — who they are, how they work — and to adapt these best practices in a way that works for my own environment. Because in this globalised world, the local element matters more than ever.

Huffpost impact

Posted by Noa Gafni (co-Managing Director at Global Tolernace): 06/25/2014 5:18 pm EDT Updated: 08/25/2014 5:59 am EDT

Link: http://www.huffingtonpost.com/noa-gafni/is-globalization-making-u_b_5527128.html