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Africa’s share in global agricultural production is very low – report

Agriculture remains one of Africa’s most important economic sectors, accounting for over 15% of the region’s Gross Domestic Product GDP and providing employment to more than two-thirds of the population.

If the sector’s most notable challenges can be overcome, agriculture could play an even larger part in transforming economies. In particular, governments across the continent are working with international organisations to find solutions to the rising effects of climate change. Nevertheless, the overall is quite bright; cultivated areas are expected to expand and farmers are set to increase their use of inputs, such as fertilisers, improved seeds, irrigation systems and mechanisation.

According to Oxford Business Group Agriculture in Africa report 2019, Africa holds more than 60% of the world’s arable land, but the continent’s share in global agricultural production is low. Vast areas of land are not cultivated and productivity is lower than in the rest of the world. Nevertheless, farming is key for the majority of African economies and accounts for at least 15% of the region’s GDP. In addition, around two-thirds of the African population is employed within the agricultural sector, the vast majority working in small-scale plantations that currently produce at least 90% of overall food production.

The report said chronic long-term underinvestment and poor governance have resulted in an agricultural sector that has been unable to play a role in transforming Africa’s economies, either by ensuring food security, creating jobs or reducing poverty. Now, the sector faces many challenges, the most notable of which is low productivity. This results from a variety of factors, some of which include low use of inputs and irrigation systems. In this context, farmers are particularly vulnerable to the effects of climate change- a fact that has shed light on the need for increased attention an investment in the continent’s promising agricultural sector.

It indicated that Africa’s 30.4 square kilometres boast a diverse range of agro-ecological areas and climates. These include rainforest vegetation with tropical weather, found in the south of West Africa and in Central Africa from Sierra Leone to the Congo’s. Other areas are dry and arid vegetation, such as those countries in the continent’s Sahel region.

‘’This diversity is a tremendous asset, but it also poses a substantial challenge for African agricultural development,’’ Abidjan-based African Development Bank stated on its website. ‘’On the other hand, it creates a vast potential with respect to the mix of agricultural commodities and products which can be produced and marketed in domestic and external markets. On the other hand, the diversity implies that there are no universal solutions to agricultural development problems across the continent’’ it said.

According to Washington-based International Food Policy Research Institute, during colonial period- which for most African countries ended around the 1960s- agriculture was the most significant sector in the continent’s economy. At this time, farmers were made to produce cash crops which were then exported to European countries as raw materials for their own growing industries. The exported cash crops included: cocoa, coffee, palm oil and rubber from West Africa: cotton from the Sahel region; tea and coffee from East Africa; and tobacco and sugarcane from the south of Africa.

‘’In general, food crops were not promoted and farmers grew them for subsistence only’’ the IFPRI reported. ‘’During the colonial period, Africa was developed essentially as an agricultural-exporting economy. This goal was achieved with some success, as evidenced by the number of African countries being top global producers of tropical cash crops’’. Cote d’Ivoire, for example, has become the world’s largest producer of cocoa beans. Today, the country accounts for 40 per cent of the world’s cocoa input.

After independence, the report said many African countries focused on financing local manufacturing and considered agriculture to be a less productive food supplier. As a result, the post-colonial period was characterised by underinvestment in the agricultural and rural sectors. Consequently, Africa’s agriculture recorded poor performance throughout the 1970s and 1980s, with production in sub-Saharan Africa growing on average by only 1% annually between 1971 and 1980, compared with the 3% growth seen throughout Asia. Land productivity was also two to three times lower than that observed in Asia.

Throughout the 1980s and 1990s the International Monetary Fund IMF and the World Bank pushed for the implementation of structural adjustment programmes SAPs, which were schemes designed for poor nations and countries in crisis, intended to reduce the role of governments in the economy. Countries were asked to implement these SAPS as a pre-condition for loans or external resources. The report said key measures included liberalisation of the economies, with the abolition of regulations such as price controls; privatisation of state-owned companies that were considered to be inefficient, reduction of public expenses and promotion of foreign direct investment FDI.

Further according to the IFPRI, the austerity measures resulted in a reduction of government spending in the sector. In sub-Saharan Africa the share of public agriculture spending inn the total budget declined to an annual average of 3.3% in the 1990s, down from 7.4% in the 1980s. The expansion of cultivated land meant that production growth climbed higher than in the 1970s, though productivity remained low, with output per ha of land at approximately 180 US Dollars in 1990. This was about one-third of the yields producer in Asia.

The report indicated that in 2003 the African Union launched the Comprehensive Africa Agriculture Development Programme CAADP, a strategy centred on agriculture, with the goal of reducing poverty and ensuring food security. The programme defined agriculture as a main engine of economic growth, and called for African governments to allocate 10% of their annual budget to the sector with the target of 6% annual growth. The Maputo commitments made in 2003 were renewed in 2014 in Malabo Equatorial Guinea.

One of the CAADP’s most notable achievements has been that it ‘’has significantly raised the political profile of agriculture’’ according to the IFPRI. Some 40 countries has signed CAADP agreements by the end of 2014, with many nations designing their own investment plan for the agricultural sector. However, the CAADP’s targets are still far from being met. Countries in sub-Saharan Africa only achieved a 2.6% average annual growth rate in the agricultural sector between 2003 and 2009.

Nevertheless, six countries- Angola, Ethiopia, Guinea, Mozambique, Nigeria and Rwanda- have managed to meet the growth goal of 6%. In regard to the investment target, in 2016 just 13 countries had successfully met their pledge to invest at least 10% of their budget in agriculture.

According to the Alliance for a Green revolution in Africa AGRA: ‘’Progress has generally been slow, mainly because many countries, despite the willingness to do what is right, grapple with capacity challenges that hinder their ability to design and implement a transformational agenda’’ it stated in its 2018 Africa Agriculture Status Report.

AGRA noted that recent policies placing farming at the heart of Africa’s economic development and promoting public investment in the sector are key to developing agriculture across the continent. However, more needs to be done to improve the poor structural governance seen in some African governments: although the private sector dominates the agriculture sector, its success is only made possible with public investments and policies.

‘’The past norm in African countries has been poor governance with respect to the agricultural transformation. Poor government performance has been in part associated with past foreign aid efforts at reducing the size and scope of government. Those policies were felt quite harshly by the agriculture sector, which depends heavily on government actions, and thereby inhibited the growth of the small-scale commercial private sector that dominates the sector. AGRA said. ‘’Fortunately, more recently these foreign aid policies appear to have been reversed, however, the quality of governance continues to be poor in many African countries’’

According to AGRA, Ethiopia, and to a slightly lesser extent Rwanda and Ghana, are positive examples for the continent when it comes to successful large-scale agricultural expansion. For the past 25 years Ethiopia has recorded sector growth above the 6% target defined by the CAADP. The East African nation has massively invested in its agriculture, including in irrigation and made the CAADP in a 50% reduction in rural poverty.

According to Thomas Jaine, professor at Michigan State University, public investments in the agricultural sector have had a direct and measurable impact on productivity. Jaine stated that recent yield improvements were observed in countries that embraced the AU’s CAADP scheme, especially in Ghana, Rwanda, Ethiopia and Burkina Faso.

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Business

Slight growth in GDP as economy battles return

28th July 2021
Peggy-Serame

Botswana’s economy showed slight growth signs in the first quarter of 2021, following a devastating year in 2020.

During 2020, the entire second quarter was on zero economic activity as the country went on total lockdown in an effort to curb the spread of the virus.

Diamond trade plummeted to record low levels as global travel restrictions halted movement of both goods and people and muted trade.

The end result was a significant decline for the local economy, at an estimated 7 percent contraction, just marginally below the 2008/09 global financial crises.

According to figures released by Statics Botswana this week, the country’s nominal Gross Domestic Product for the first quarter of 2021 was P47.739 billion compared to a revised P45.630 billion registered during the previous quarter.

This represents a quarterly increase of 4.6 percent in nominal terms between the two periods.

During the quarter, Public Administration and Defence became the major contributor to GDP by 18.4 percent, followed by Wholesale & Retail by 11.4 percent. The contribution of other sectors was below 6.0 percent, with Water and Electricity Supply being the lowest at 1.6 percent.

Real GDP for the first quarter of 2021 increased by 0.7 percent compared to a contraction of 4.6 percent registered in the previous quarter.

The improvement in the first quarter 2021 GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic.

The real GDP increased by 0.7 percent during the period under review, compared to an increase of 1.2 percent in the same quarter of 2020.

The recovery in the domestic economy was observed across majority of industries except Accommodation & Food Services, Mining & Quarrying, Manufacturing, Construction, Other Services and Agriculture, Forestry & Fishing.

The overall slow performance of the economy was mainly due to the impact of measures that were put in place to combat the spread of the COVID-19 pandemic.

The Non-mining GDP increased by 4.1 percent in the first quarter of 2021 compared to 4.0 percent increase registered in the same quarter of the previous year.

Agriculture, Forestry and Fishing industry decreased by 2.0 percent in real value added during the first quarter of 2021, relative to a contraction of 5.2 percent registered during the same quarter of 2020.

The main driver of the unfavorable performance stems from a decrease in real value added of Livestock farming by 3.0 percent.

Mining and Quarrying registered a decrease 11.4 percent in the real value added, this was mainly influenced by the drop in the Gold and Diamond real value added by 17.5 and 12.5 percent respectively.

Diamond production in carats went down by 12.1 percent while the tonnage of Gold produced went down by 17.5 percent.

The poor performance of the diamond sub-industry is attributed to the reduction in production due to a lower grade feed to the plant at Orapa in response to heavy rainfall and operational issues, including continued power supply disruptions.

With regard to Gold is due to diminishing resource base which affect production.

The Manufacturing industry recorded a decline of 7.4 percent in real value added during the first quarter of 2021, compared to a decrease of 2.3 percent registered in the corresponding quarter of 2020.

The deep low performance in the industry is observed in the two major sub-industries of Beverages & tobacco and Diamond cutting, polishing and setting by 57.0 and 38.5 percent respectively.

The reduction in Beverages is attributed to alcohol sale ban imposed during the quarter under review in order to reduce the spread of the COVID-19 virus. On the other hand, exports of polished diamonds went down by 24.9 percent compared to a decrease of 11.5 percent registered in the same quarter of the previous year.

The construction industry recorded a decline of 4.8 percent compared to an increase of 4.3 percent realized in the corresponding quarter in 2020.

This industry comprises of buildings construction, civil engineering and specialized construction activities. The industry is still showing signs of the consequences of COVID-19 pandemic. The industry recorded a negative growth of 7.4 percent in the previous quarter.

Water and Electricity Water and Electricity value added at constant 2016 prices for the first quarter of 2021 was P506.2 million compared to P378.2 million registered in the same quarter of 2020, recording a growth of 33.8 percent.

In the first quarter of 2021, Electricity recorded a significant growth of 62.4 percent compared to a decrease of 67.6 percent recorded in the corresponding quarter of 2020.

The local electricity production increased by 22.4 percent while Electricity imports decreased by 33.3 percent during quarter under review. The water industry recorded a value added of P231.3 million compared to P209.0 million registered in the same quarter of the previous year, registering an increase of 10.7 percent.

Wholesale and Retail Trade real value added increased by 11.4 percent in the first quarter of 2021 compared to an increase of 5.5 percent registered in the same quarter of the previous year. The industry deals with sales of fast moving consumer goods.

Diamond Traders recorded a significant growth of 112.7 percent as opposed to a decline of 22.7 percent recorded in the corresponding quarter last year. The positive growth is due to improved demand of diamonds from the global market.

The Transport and Storage value added increased by 0.6 percent in the first quarter of 2021, compared to a 2.4 percent increase recorded in the same quarter of the previous year.

The slight improved performance of the industry was mainly attributed to the increase in real value added of Road Transport and Post & Courier Services by 4.3 and 2.1 percent respectively.

The slow growth was influenced by a significant reduction in Air Transport services of 69.7 percent due to reduced number of passengers carried. Rail goods traffic in tonnes went down by 6.4 percent and passenger rail transport was not operating during the quarter under review.

Accommodation and Food Services Accommodation and Food Services real value added declined by 31.7 percent in the first quarter of 2021 compared to a decrease of 4.4 percent registered in the same quarter of the previous year. The reduction is largely attributed to a decrease of 42.1 percent in real value added of the Accommodation activities subindustry.

The suspension of air travel occasioned by Covid-19 containment measures impacted on the number of tourists entering the borders of the country and hence affecting the output of Hotels and Restaurants industry. COVID-19 restriction measures resulted in reduced demand for leisure and conferencing activities, as conferences are largely held through virtual platforms.

Finance, Insurance and Pension Funding industry registered a positive growth of 8.3 percent due to the favorable performance from monetary intermediation and Central Banking Services by 16.4 and 5.4 percent respectively during quarter under review.

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Business

Chobe Holdings secures P16 million for dark days

28th July 2021
Chobe Holdings

It is still tough in the tourism industry — big players in this sleeping giant are not having it easy, but options are being explored to keep the once vibrant multibillion Pula sector alive until the world gets back to normalcy.

One of the primary measures against the spread of Covid-19 is to stay home; this widely pronounced precaution against the global contagion that has claimed over 4 million lives across the world is however a thorn in the flesh of one of the major industries in the global economy — the tourism sector .

This sector is underpinned by travel – an act which is the virus‘ number one mode of spread, especially across borders.

Chobe Holdings Limited, one of Botswana’s leading high end eco-tourism giants said its survival strategies are underpinned by well-crafted stakeholder engagements in the mist of these unprecedented times of muted trading activity.

“Throughout the COVID-19 pandemic, Chobe continued to invest in and strengthen its relationships with key stakeholders in both its traditional markets and the SADC region,” the company directors updated shareholders this week.

To keep the business afloat, the company which owns and operates some of the exquisite tourism destinations along the banks of the mighty Chobe said it has triggered its existing available debt financing avenues.

Chobe revealed that its current overdraft of BWP 25 million has been extended on favourable terms.

The company shared that it has negotiated a further USD 1.5 million (over P16 million) standby loan with a flexible settlement terms and preferable cost implications to the bottom line.

“We are confident that the Group has sufficient cash inflows, cash reserves and un-utilized prearranged borrowing in place to settle any liabilities falling due and support the smooth recovery of operations in the short and medium term,” the company directors said, noting that they will retain the flexibility to vary operations should market conditions change.

Early this year, Chobe announced that the ongoing crisis in the tourism industry forced the company to draw from its prearranged overdraft facility of P25 million to the extent of P11.6 million.

Last year Chobe’s occupancy levels around its lodges and hotels went down 89 percent. This resulted in unprecedented revenue decline of 93% to P27.78 million from the P373.94 million in the previous year ended February 2020.

Operating profits went down 159% with profit after tax down 170%, mirroring a loss of over P67 million.

Chobe management said during the last half of the financial year they have done all they could to contain costs across the company’s operations.

During the last half of the year Chobe’s marketing and reservations teams continued to pursue the “don’t cancel but defer policy”.

“We thus continue to hold advance travel receipts, to the value of about P34 million at the financial year end,” the company revealed early this year.

Chobe said it continues to engage Government, through HATAB and BTO to prioritize the vaccination of workers in the tourism sector.

“Throughout the pandemic we have ensured that employees are trained in and comply with COVID-19 infection mitigation protocols as well as ensuring that all visitors to our remote camps and lodges as well as our staff and contractors are tested for COVID-19 before reaching the camp or lodges,” the company said.

However, the company said vaccinating the tourism staff will provide the best way to ensure that both employees and guests are protected from the virus.

“We continue to manage our cashflow through stringent cost control measures, balanced against the protection of the Group’s physical assets and the wellbeing and retention of its people,” the company said.

Chobe has successfully retained its top management through the pandemic.  To this end the company directors continue to closely monitor the Group’s recovery from COVID-19 and adjust salary reductions to support operations and aid retention.

Domestic and regional travel resumed during the second quarter of the 2020/21 financial year with the Group opening a strategic mix of camps and lodges.

A comprehensive domestic, regional and international marketing plan was put in place to support these openings.

International travel resumed in the first quarter of the 2021/22 financial year with occupancies forecast to steadily increase, albeit from a low base, through the second quarter.

The company is optimistic that forward bookings are strong for the 2022/23 financial year.

“There is pent-up demand from our traditional source markets to travel now, but this is tempered by uncertainty and access constraints,” the company stated.

“Both the domestic and international markets are sensitive to such uncertainty, and it is critical that both the private and public sector work together to develop and publish clear, authoritative and consistent travel information in order to build confidence”

Chobe entered the pandemic with the Shinde camp rebuild in progress — one of its high end camps and this was completed in the first half of the 2020/21 financial year accounting for the majority of the Group’s capital expenditure for that period.

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Business

De Beers Q2 production jumps in response to strong rough diamond demand

28th July 2021
De-Beers -jwaneng-mine

De Beers Group, the world’s leading rough diamonds producer by value and Botswana’s partner in the diamond business, ramped up its production in the second quarter of 2021, in response to stronger demand for rough diamonds in the global markets.

The London headquartered diamond mining giant revealed in its production report this week that rough diamonds output  increased by 134% to 8.2 million carats in the three(3) months  of quarter 2 2021, “reflecting planned higher production to meet stronger demand for rough diamonds”.

This was against the backdrop of curtailed demand in the same quarter last year, mirroring the impact of Covid-19 lockdowns across southern Africa during that period.

In Botswana, where De Beers sources majority of its rough diamonds through partly government owned Debswana, production increased by 214% to 5.7 million carats. The percentage jump mirrored planned low production in the second quarter of 2020 where output was adjusted to market demands and implemented Covid-19 protocols.

Debswana operates four (4) Mines: Jwaneng Mine- being its flagship producer and largest revenue contributor. Jwaneng Mine which is the wealthiest diamond mine in the world by value is envisaged for multi-billion expansion to an underground operation in future to stretch its existence by few more decades.

The underground project which is anticipated to cost a whooping P65 billion will be the world‘s largest underground diamond mine.

The company which accounts for over 65 % of De Beers’s global production also operates Orapa Mine- one of the world’s largest by area, Letlhakane Mine currently a tailings treatment operation and Damtshaa Mine which is under care and maintenance following market shrink in 2020.

Namibia production decreased by 6% to 0.3 million carats, primarily due to planned maintenance of the Mafuta vessel which was completed in the quarter and another vessel remaining demobilized.  In Namibia De Beers sources diamonds both in land and marine through Namdeb and Debmarine respectfully.

In South Africa-the spiritual home ground of De Beers Group, production increased by 130% to 1.3 million carats, due to planned treatment of higher grade ore from the final cut of the Venetia open pit, as well as the impact of the Covid-19 lockdown in Q2 2020.

Production in Canada increased by 14% to 0.9 million carats, primarily reflecting the impact of the Covid-19 measures implemented in Q2 2020.

De Beers said consumer demand for polished diamonds continued to recover, leading to strong demand for rough diamonds from midstream cutting and polishing centers, despite the impact on capacity from the severe Covid-19 wave in India during April and May.

Rough diamond sales totaled 7.3 million carats (6.5 million carats on a consolidated basis), from two Sights, reflecting the impact of the reduced Indian midstream capacity on Sight 4, compared with 0.3 million carats (0.2 million carats on a consolidated basis) from two Sights in Q2 2020, and 13.5 million carats (12.7 million carats on a consolidated basis) from three Sights in Q1 2021.

The H1 2021 consolidated average realized price increased by 13% to $135/ct (H1 2020: $119/ct), driven by an increased proportion of higher value rough diamonds sold.

While the average price index remained broadly flat, the closing index increased by 14% compared to the start of 2021, reflecting tightness in inventories across the diamond value chain as well as positive consumer demand for polished diamonds.

Full Year Guidance Production guidance is tightened to 32–33 million carats (previously 32-34 million carats (100% bases)), subject to trading conditions and the extent of any further Covid-19 related disruptions.

When commenting to 2021 quarter 2 production figures, Mark Cutifani, Chief Executive of Anglo American- De Beers parent, said the entire Anglo American Group delivered a solid operational performance supported by comprehensive Covid-19 measures to help safeguard the lives and livelihoods of its workforce and host communities.

“We have generally maintained operating levels at approximately 95% of normal capacity and, as a consequence, production increased by 20% compared to Q2 of last year, with planned higher rough diamond production at De Beers” he said.

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