Year: 2020

Most economists see structural transformation as one of the major routes to Africa’s sustainable development…African leaders have their work reduce out to make the continental free trade area a success. Wikimedia Commons.With this purpose in mind, economists and policymakers need to comprehend what determines structural transformation. They have flagged factors like demand for goods and services, exchange policies, economic development, institutional first-class and monetary integration.But researchers haven’t intently examined the way economic integration via alternate and finance influences structural transformation.

I, therefore, set out to study African countries’ integration with the rest of the world and the impact of that integration on their structural transformation. This study provides clean proof about whether or not integration is good for Africa. It additionally reveals the right degrees of integration fundamental to increase structural transformation.Trade and monetary integration are both about countries exporting to and importing from each other. The two are often referred to as financial integration. Opening countrywide borders to change has a quantity of possible advantages which can promote development. For example it creates comparative advantage, get admission to external finance and possibilities for risk sharing. It also enables technology transfer. Local corporations serving larger overseas and home companies can acquire expertise and capabilities and switch them to the rest of the economy.

All these benefits are imperative for structural transformation. But immoderate openness and integration may additionally additionally come at a cost, mostly from distortions around trade policy. For instance, if positive neighborhood industries have been protected, local firms might also no longer be suit adequate to compete with overseas counterparts. Opening these industries to competition can also damage them.Balancing the workable benefits and dangers of integration is a pressing policy trouble now that African countries have signed the African Continental Free Trade Area agreement, which goals to foster integration.Policymakers want to recognize whether or not there is an ideal level of trade and financial integration that will alternate economies in the preferred ways.

The study: findings and implications

With this background, I examined the results of economic integration on structural transformation in 32 African international locations from 1985 to 2015. The time length and choice of international locations were primarily based on data availability.

I created an index of structural transformation that comprises changes in sectoral value addition and demographic characteristics. The index degrees between 0 (low transformation) and 1 (high transformation). I found that structural transformation on the continent was once low, with an average fee of 0.419, but different throughout countries.The majority of the countries’ indices had been lower, suggesting that structural transformation is solely just beginning.I additionally observed that African nations were less integrated in phrases of alternate and finance than different developing economies.

I measured change integration as the ratio of countries’ imports and exports to GDP. This indicates the degree of openness. I determined that the superior level for alternate integration was 73.29% of GDP. By this I suggest the stage of trade integration that produces an accelerated impact on structural transformation.The facts counseled that change integration encourages the reallocation of assets to extra productive sectors.To measure monetary integration, I used the ratio of countries’ whole foreign liabilities and property to GDP. This suggests the diploma of restrict of capital flows. The superior stage for economic integration was 137.5% of GDP. Ten African countries have been above these stages and 22 have been below.The 10 countries that are above this financial integration threshold are Botswana, Congo Republic, Côte d’Ivoire, The Gambia, Guinea Bissau, Mauritania, Mauritius, Seychelles, Sudan and Togo. Similarly, the 10 countries above the alternate integration threshold are Botswana, Congo Republic, Côte d’Ivoire, Gabon, Mauritania, Mauritius, Seychelles, Eswatini (formerly Swaziland), Togo and Tunisia.

I determined that structural transformation will increase more in international locations that are under these levels of integration in contrast to nations that are above the thresholds. Integration increases structural transformation, but too much integration slows that process, producing undesired effects.The fantastic effect of integration on transformation takes place via improved efficiency, comparative advantage, exterior finance and risk diversification. Countries can have these elements notwithstanding being less integrated and operating beneath the thresholds. The advantages of integration come from effectivity of integration alternatively than unbridled integration.A key implication is that effectivity in each trade and monetary integration is vital to using structural transformation in Africa. This explains the urgent need for African nations to concurrently deepen trade and financial integration. Economies that embark on monetary integration alongside both strains can count on to have expanded transformation for sustainable development.

The function of the free trade area

The learn about suggests that Africa has possibilities to integrate further. The African free exchange place has the doable to defragment the continent and deliver its economies into the international economy.The free alternate place ambitions to gradually cast off tariffs and non-tariff boundaries to exchange in goods and to liberalise change in services. It will establish a single continental market for items and services: a better and extra aggressive market.A higher free trade place will now not solely boost intra-regional trade, it will also hasten the development of regional supply chains. These have pushed structural transformation in other regions, for example Asia. It is additionally necessary for coverage to address the non-tariff limitations to trade. Among these are bad logistics and infrastructure (such as roads, rail, ports, power and digital connectivity).Countries be focusing on getting rid of such bottlenecks. The African Union, United Nations Economic Commission for Africa and the African Development Bank need to get the free exchange region working as soon as possible.

The United Bank for Africa Plc (UBA) has announced a $200 million facility support to boost Nigeria’s crude oil production capacity.The facility is part of a $1.5 billion Pre-Export Finance Facility supplied through consortium of Nigerian industrial and global banks, with UBA as the lead arranger, for the Nigerian National Petroleum Corporation (NNPC) and its upstream subsidiary, the Nigerian Petroleum Development Company (NPDC).The financial institution in a announcement, announce the deal said it will provide $200 million to help funding growth and liquidity requirements.

It stated: “The facility will grant a whole lot wished capital for investment in NNPC’s manufacturing capacity, which is of strategic importance to the Nigerian financial system and the country’s leading supply of overseas exchange earnings. UBA’s role as Lead Arranger recognises the Group’s energy in structuring and deploying financing to the oil and gas sector, and the depth and liquidity of the Group’s balance sheet.

“The $1.5 billion facility is structured in two tranches. The first tranche of $1 billion, to be repaid over a period of five years, will be supplied in dollars, with UBA acting as the Facility Agent Bank. The 2nd tranche of $500 million, will be provided in nearby currency, over seven years, with UBA performing as Lead Bank, supplying $200 million in naira equivalent.
“Both services will be repaid from an allocation of 30,000 barrels per day of NPDC’s crude oil. UBA has a robust music report in the resources area across Africa, having facilitated oil prepayment deals with the NNPC, including its 2013 $100 million participation in the PXF Funding Limited transaction, and a in addition $60 million in the 2015 Phoenix Export Funding Limited transaction. In Senegal, UBA was once accountable for the EUR 240 million revolving crude oil financing facility for the Société Africaine de Raffinage and in Congo Brazzaville co-funded the $250 million crude oil prepayment facility for Orion Oil Limited.
“Other members in the NNPC deal include Standard Chartered Bank, Afrexim Bank, Union Bank and two oil buying and selling companies, Vitol and Matrix.”Speaking on this development, UBA Group Chairman, Tony O. Elumelu cited “This has been one of the most economically challenging years that Nigeria has witnessed. With the sharp drop in the charge of oil and the ensuing hardship that accompanied the onset of the Covid-19 pandemic, the non-public area should come collectively and make a contribution meaningfully to the economy.

Government can make bigger positive factors in stabilising its debt by means of focusing on lifting increase through structural reforms as antagonistic to reining in public expenditure, stated by IMF senior representative of SA, Montfort Mlachila.During a webinar hosted by means of asset managers Ninety One on Wednesday, Mlachila unpacked small print on the $4.3 billion loan the multilateral institution extend to SA final week to fight Covid-19.During the discussion, Ninety One head of SA investments Nazmeera Moola pointed out that the have an effect on of a 1% lift in growth would decrease the debt-to-GDP ratio substantially, to which Mlachila agreed. “The pay-off from growth is so tons extra than the pay-off from fiscal consolidation. Fiscal consolidation is wanted – however it is virtually no longer sufficient. Too much fiscal consolidation undermines growth and makes attaining debt ambitions a lot more difficult,” said Mlachila.

Government can begin by means of doing the simpler matters such as the emergency spectrum which used to be rolled out during lockdown, some thing which used to be spoken about for years.Part of lifting increase capability reviving commercial enterprise confidence, he added. Government ought to take a lesson from first-year medical students and “do no harm”, he quipped. “Speak with one voice, be consistent, supply on few concrete actions,” he said. Investors and customers want to be capable to see matters are changing.”In SA there is a excessive correlation between growth in non-public funding and the diploma of investor confidence. We are clearly in a scenario the place both of them are low,” said Mlachila. He highlighted that authorities is mission to improve business and consumer self belief with the aid of challenge the reforms in Treasury’s financial paper, launched final year. “SA has a top music file on producing first-class plans, they just want to execute on them.”

Faced with the aid of a ballooning budget deficit, National Treasury beneath the management Tito Mboweni has had to undertake a R500 billion stimulus package, while at the same time cutting again expenditure with a specific center of attention on public area wages that has considered tensions upward push with labour unions.Transparency.One of the necessities of the IMF Covid-19 relief loan is transparency and accountability by using government on how the fund are spent.”We sincerely have not let our shield down in the pandemic. As our MD [Kristalina Georgieva] says, ‘Spend as tons as you need to fight the pandemic and make sure people’s livelihoods however hold the receipts,'” stated Mlachila.The IMF will be making sure government keeps to its commitments, with more than a few mechanism, such as authorities submitting periodic reports on the rolling out of a number of programmes, specific reporting on authorities spending on a quarterly groundwork and it will depend on Audits with the aid of the Auditor-General of South Africa. Government will also be required to disseminate how tenders have been awarded.
“We do no longer have an investigating capability as an institution. We would like to matter on the country’s personal investigating establishments like the NPA (National Prosecuting Authority), the Hawks and the SIU (Special Investigating Unit),” stated Mlachila. “The laws of the country need to be applied without worry or favour.” He delivered that the commonplace public and media will be relied on to ensure proper governance and accountability to

According to Claude Grunitzky, a renowned Global media entrepreneur, regardless of your business idea, the entrepreneur ought to ask him or herself, “what is the single critical and ample situation for a business?”

It no longer a product, a technology, a consumer need, a enterprise plan, a vision, a strong team, investors, or competitive advantage. While all those things are necessary for a corporation to have, none of them is the right answer.
The single essential and ample situation for a business is a PAYING CUSTOMER – the man or woman who will pay your corporation cash for its product or service.
Before any precise commercial enterprise design is hatched, the first element that comes to thinking is the goal customer.
Ironically, in our setting, some customers can cave in a business of the young entrepreneu with their self-seeking gains, with the help of some careless, self-seeking or short-sighted personnel engaged by way of an entrepreneur.
Every entrepreneur would desire to be successful in business, but unfortunately, greed can push some to orchestrate to convey down colleague entrepreneurs in their quest to be successful at all cost.

he motive why most Ghanaian organizations do not live to tell the tale is as a result of these issues – lack of integrity, dishonesty, bad planning and self-centeredness, which have eaten deep into our moral fiber.
There have been numerous tries with the aid of political or enterprise leaders geared towards encouraging Ghanaians to assume of proudly owning their very own business. Examples are the Presidential Pitch, McDan Entrepreneurship Challenge etc., plus a whole Ministry set up to push this agenda.
However, many start-ups are also confronted with numerous challenges ranging from money glide management, time management, capital etc.
But in my view, one of the most challenging challenges in entrepreneurship mainly in the Ghanaian society, is having the right personnel, mainly for entrepreneurs who are engaged fully in their professions, but control a enterprise on the side.
Aside from get entry to to capital which is certainly a hard hurdle most start-ups are confronted with, the next massive hurdle as I cited earlier; is the quest to have the right personnel. Most of personnel these days, in particular the youth, have exclusive motivations for work, and have turn out to be self-seeking.

For this reason, they can effortlessly abandon the commercial enterprise or stifle it from growing.
A ‘Side-Entrepreneur’ Friend’s Experience
A friend who works with one of the authorities organizations shared his bitter trip of his failed facet business with me. He started his ‘Iced Kenkey’ enterprise and employed a few humans to handle it.

Although he performed a essential position in the running of the business, he fingers over to the personnel and goes to work in his expert house each morning.
According to him, he realized later that, his team of workers conspired to produce the same product on his blind side, and then after that, used his resources (Van, Ice chest) to promote theirs – allowing his (‘Iced Kenkey’) to go bad.

This man went to the extent of registering with the Food and Drugs Authority, FDA, and yet had to wind down his commercial enterprise after the disappointment.
My ‘Side-Entrepreneur’ Experience
As the owner of a start-up in the courier space myself, one component I identified in my enterprise is that, some customers are in a position to collaborate with personnel to short-change a business.
They do this by dealing directly with the office or the field staff to shortchange the enterprise owner.
In this case, some area team of workers i.e. riders; pocket monies meant for the commercial enterprise and deliver objects to clients at the price of the company.

I found out that many customers, in particular in the courier carrier area I find myself, reduce corners simply to make unusual profits.
A wide variety of these customers operate in the Small and Medium Scale Enterprises (SMEs) sector, comprising restaurants, retail shops, fashion designers among others.
A traditional situation is the place employees supply out their private Mobile Money numbers to customers; instead of providing the workplace Money Transfer number; and then divert the enterprise proceeds for their private gain.
They do these in collaboration with some of these dishonest customers.
Some of my customers, particularly the restaurants, ended up poaching my firm’s riders. Unfortunately, they lose them to other courier companies; and you discover these equal clients returning to us to interact in business.
How does this client count on the commercial enterprise proprietor to pay these identical employees at the stop of the month?
How do they anticipate the commercial enterprise proprietor to stay in business, whiles these clients whom I presume are non secular or profess to be morally upright, pray to God for their agencies to flourish?

How do they count on the enterprise to finance everyday upkeep of the bikes?
And how do they prefer the commercial enterprise to extend the fleet of motorcycles to meet the desires of customers?
I understand that every so often employees are callous to their employers or the commercial enterprise because they are not paid properly or dealt with better.
But some employees are usually dishonest, ungrateful and adverse regardless of how properly they’re treated.
As a start-up, I did my great in making my staff comfortable.
There’s additionally the scenario the place the customer, upon seeing a new enterprise setup, would go there and examine their services with the “giants” in the industry, and punch holes in all your tactics just to take benefit of the younger entrepreneur. They will no longer provide you any risk at all to grow.
There was an occasion where a patron walked into my office, and created the impact that she was in a hurry. She hurriedly dropped her object for onward delivery, and then provided contacts to the supposed recipients, however she failed to leave at the back of her private contact details.
She then again made price and quickly left.
Apparently, all the two contacts of the said recipients have been incorrect and could not be reached.
The workforce used to be for this reason unable to deliver the object (A Wreath), for the reason that each the sender and the supposed receiver should now not be reached.

The Sender extraordinarily back to the shop to demand charge of GHS300.00 for the wreath due to the fact it should no longer be delivered, even although we’re now not to blame.
In the end, the agency had to painfully section away with GH¢300.00 simply to save photograph after she created a scene.
Clearly, this was nothing but a well-orchestrated method to extort cash from us.
These are just a few of the many hurdles a younger business owner has to go through just to maintain a business afloat in this country.
In the end, some of my younger riders broke into my office and made away with two of my motorbikes just a day after they all acquired their salaries.
It’s unlucky that a giant quantity of our youthful populace are searching for money, but obviously do not want to work honestly. They have the ‘get rich rapid mentality’, and so they interact in suppression of cash, thievery, insubordination etc.
Although my Comprehensive Insurance Policy has taken care of these stolen bikes, I am in the system of winding up this enterprise because it appears pretty clear that for as long as I will preserve the commercial enterprise as my side job barring my full attention, I can’t discover sincere human beings whether as supervisors or ordinary employees to run the commercial enterprise properly.
So, a lot of start-ups in Ghana proceed to struggle with an extremely unfriendly business environment that hits from all angles whether from customers, employees or authorities agencies, whilst the excessive cost of deposit remains a bane for businesses.

You can in no way be sure that any kind of business will be successful. But starting a side commercial enterprise and ultimate in employment, can supply you some peace of idea that if your commercial enterprise doesn’t work out, you will nevertheless have work and be producing an income.
It additionally offers you a competitive gain in your career, as beginning a commercial enterprise requires you to analyze new skills. Such skills can be used to enhance your own career and provide you a competitive advantage.
And starting a side business can be the ideal way to unleashing the creativity internal you; even though it additionally comes with some dangers such as you no longer having much spare time to spend with household and friends, and less time for your side enterprise and your primary job as well.
Nonetheless, in dealing with the aforementioned challenges of employee dishonesty and the likes, I dare say that one of the most necessary options for any start-up is to be utterly current and absolutely involved in the customary growth of the business.
This will supply you the proprietor the danger to thoroughly admire better the nooks and crannies of the new business.
The Author, Felix Ekow Eshun, is a Banker and Supply Chain Professional. He is also member of the Young African Leaders Initiative (YALI) and an entrepreneur.