Aurelia Butler

JOHANNESBURG (Reuters) – South Africa’s ruling party is being forced to confront a problem that has bedevilled the country since apartheid ended 28 years ago: how to reduce record gross inequality and poverty that hurts the Black majority more than the white minority.While the issue has never gone away, it has come to a head after the COVID-19 pandemic destroyed jobs and livelihoods.Unemployment hit a record of nearly 35% last year and anger at the worsening economy has spilled into violent protests and rioting, including last summer when more than 300 people were killed and hundreds of businesses destroyed in the unrest.The African National Congress (ANC) party is increasingly alarmed at its waning popularity among voters, and a leadership contest is only months away, adding to pressure on President Cyril Ramaphosa to improve the lives of ordinary South Africans.His preference is to give more free money to the poor. The government introduced a social relief grant in 2020 to support those worst hit by the pandemic, and is debating whether to increase handouts and make them permanent.Ramaphosa’s stance pits him against sceptics including his own finance minister, Enoch Godongwana, who fear that a proposed permanent basic income grant could be ruinously costly.Opponents of more generous handouts also say they act as a disincentive to people looking for work and divert resources from basic services like electricity, water and schools.For some South Africans, the small social relief grant of 350 rands ($23.20) a month offered to those who were unemployed and did not receive any other form of grant was a godsend, even if it could not solve their problems longer term.Sunnyboy Moseboa, 53, lives in Diepkloof, one of the poorer parts of the Johannesburg township of Soweto. He set up a stall selling grilled cow feet, using the grant to cover expenses like power to keep his product fresh.Unmarried and without children, he had been dependent on handouts from his family. Now, his business nets him on average 2,000 rands a month, after years of failed job searches and enterprises.”It’s small, but the 350 (rands) helped,” he told Reuters outside his house assembled from discarded wooden planks, glass panels and iron sheets. “Sometimes I have cash flow problems. There are times when there’s no food for me to eat.”Having extended the grant another year in his February state of the nation address, at a cost of 44 billion rands, Ramaphosa is considering making it permanent and increasing it for 10 million beneficiaries – a sixth of the country.Inequality campaigners see it as a global test case, as robots replace jobs and some countries look into providing unearned income as a solution. Many economists are unconvinced.”We face a real danger of … limit(ing) … job creation potential by increasing the system of social grants,” some of Ramaphosa’s advisers wrote in a leaked February report, seen by Reuters.’SOCIAL PROTECTION’After apartheid ended in 1994, the ANC introduced policies aimed at job creation and private sector growth that they hoped would reassure white nationals and international investors and prevent them flooding out of the country.But it also spent heavily on improving benefits for people who were discriminated against under white rule, including building millions of subsidised homes for the poor.Despite the huge spend – at 3.3% South Africa spends nearly three times the global median on social assistance as a share of its GDP, according to the World Bank – unemployment is at a record and, on some measures, inequality has got worse.Economic growth slowed over the last decade as the country struggled with policy uncertainty, political turmoil, an energy crisis and allegations of state corruption under former president Jacob Zuma – who has denied any wrongdoing.    This has piled more pressure on Ramaphosa, both within the ANC and on the streets, where hundreds have protested in recent months to demand the government limit the number of foreign workers in the country and safeguard jobs for South Africa.Some analysts say that expanding social protection would be a vote-winner for the ANC, which last year suffered its worst result in local elections since taking power.Voter support for the ANC dipped below 50% for the first time, raising the possibility that it could lose power for the first time since 1994.Finance Minister Godongwana noted in his budget speech that the social relief grant had expanded an “already extensive social safety net,” now covering half the population.But Alex van den Heever, a social security expert at University of the Witwatersrand in Johannesburg, said the system was stingier than it looked and was less pro-poor when you offset it against tax breaks on private pension income, which funnel 1.7% of GDP back to the top 10% of earners.Accusations of corruption and mismanagement have also dogged South Africa’s welfare programmes, resulting in long backlogs and shoddily-built homes, and preventing help from reaching many of those in need.Defenders of basic income propose at least doubling the COVID-19 grant to hit the food poverty line.In downtown Soweto, the unemployed queue from as early as 2 a.m. to get their grants, forming snaking lines – a stark reminder of how persistent South Africa’s poverty is.Among them is Thandi Shabangu, 53, who has four children. Before the grant she did odd domestic jobs and now uses the money from both to buy snacks and sell them at a kiosk.”The grant helped me to start my business … with today’s, I will buy more stock,” she said.Ramaphosa had such people in mind when he said in his address that some used grant money to start businesses, rejecting the theory that they encourage idleness.Sceptics still worry about the cost.”Affordability is going to be a serious problem, with our debt levels,” said Patrick Buthelezi, an economist at South Africa’s Sanlam Investments. The Treasury will spend nearly 250 billion rands on grants in the financial year starting in April, up from about 225 billion rands in the previous year.But Shaeera Kalla, from activist group #PayTheGrants, said that with political will, South Africa could make the money back in taxes on the wealthy, such as VAT on luxury items.($1 = 15.1395 rands) More

LONDON (Reuters) -A global food crisis looms unless the war in Ukraine is stopped because fertiliser prices are soaring so fast that many farmers can no longer afford soil nutrients, Russian fertiliser and coal billionaire Andrei Melnichenko said on Monday.Several of Russia’s richest businessmen have publicly called for peace since President Vladimir Putin ordered the invasion on Feb. 24, including Mikhail Fridman, Pyotr Aven and Oleg Deripaska.The United States and its European allies have cast Putin’s invasion as an imperial-style land grab that has so far been poorly executed because Moscow underestimated Ukrainian resistance and Western resolve to punish Russia.The West has sanctioned Russian businessmen, including European Union sanctions on Melnichenko, frozen state assets and cut off much of the Russian corporate sector from the global economy in an attempt to force Putin to change course. Putin refuses to. He has called the war a special military operation to rid Ukraine of dangerous nationalists and Nazis.”The events in Ukraine are truly tragic. We urgently need peace,” Melnichenko, 50, who is Russian but was born in Belarus and has a Ukrainian mother, told Reuters in a statement emailed by his spokesman. “One of the victims of this crisis will be agriculture and food,” said Melnichenko, who founded EuroChem, one of Russia’s biggest fertiliser producers, which moved to Zug, Switzerland, in 2015, and SUEK, Russia’s top coal producer.Russia’s invasion of Ukraine has killed thousands, displaced more than 2 million people, and raised fears of a wider confrontation between Russia and the United States, the world’s two biggest nuclear powers.FOOD WAR?Putin warned last Thursday that food prices would rise globally due to soaring fertiliser prices if the West created problems for Russia’s export of fertilisers – which account for 13% of world output.Russia is a major producer of potash, phosphate and nitrogen containing fertilisers – major crop and soil nutrients. EuroChem, which produces nitrogen, phosphates and potash, says it is one of the world’s top five fertiliser companies. The war “has already led to soaring prices in fertilisers which are no longer affordable to farmers,” Melnichenko said.He said food supply chains already disrupted by COVID-19 were now even more distressed. “Now it will lead to even higher food inflation in Europe and likely food shortages in the world’s poorest countries,” he said.Russia’s trade and industry ministry told the country’s fertiliser producers to temporarily halt exports earlier this month.PHYSICS STUDENTMelnichenko, who was just 19 when the Soviet Union collapsed, started out trading foreign currency while a physics student at the prestigious Moscow State University.A gifted mathematician who once dreamt of becoming a physicist, Melnichenko dropped out of university to dive into the chaotic – and sometimes deadly – world of post-Soviet business. He founded MDM Bank but in the 1990s was still too minor to take part in the privatisations under President Boris Yeltsin which handed the choicest assets of a former superpower to a group of businessmen who would become known as the oligarchs due to their political and economic clout.Melnichenko then began buying up often distressed coal and fertiliser assets. His fortune in 2021 was estimated by Forbes to be $18 billion, making him Russia’s eighth richest man.The European Union on Wednesday sanctioned Melnichenko for Russia’s invasion. It said his attendance at a Kremlin meeting with Putin and 36 businessmen organised by the Russian Union of Industrialists and Entrepreneurs showed he was “one of the leading businesspersons involved in economic sectors.”Melnichenko “has no relation to the tragic events in Ukraine. He has no political affiliations,” his spokesman said. “To draw a parallel between attending a meeting through membership in a business council, just as dozens of business people from both Russia and Europe have done in the past, and undermining or threatening a country is absurd and nonsensical,” the spokesman said, adding Melnichenko will dispute the sanctions. On March 9, Melnichenko resigned as member of the board and non-executive director in both EuroChem and SUEK, and withdrew as their beneficiary, the spokesman said. EuroChem has production assets in Russia, Lithuania, Belgium, Brazil and Kazakhstan.Italian police last week seized Melnichenko’s yacht – the 143-metre (470-foot) Sailing Yacht A – which has a price tag of 530 million euros ($578 million). More

We’re doing something new, trialling an experiment with audio newsletters. If you would like to listen to Trade Secrets, read by Alan Beattie himself, please click here. Do share your feedback by completing a short survey, or dropping us a line at [email protected]. Thank you.Hello and welcome to Trade Secrets. We have very little happy news to report in these dark times. At least the rich-world democracies are trying almost everything they can to isolate President Vladimir Putin’s regime and cripple the invasion, short of anything like a no-fly zone that’s going to put them at actual war with Russia. Casting around the uninspiring landscape of global governance, the World Trade Organization naturally stands out as a beacon of symbolic salience. Thus Friday’s announcement that the G7 nations will remove most-favoured nation (MFN) status from Russia at the WTO, denying its exporters the right to face the same general tariffs as other members. Today’s main piece looks at the potential downside to that decision, while Charted waters looks at the implications of the international food crisis created by the conflict.As ever I’d love to hear your thoughts, questions and suggestions: the email address is [email protected] Putin no favoursSo, the most-favoured nation thing. I hate to sound like some process-obsessed bore or a journalist captured by the institutions he covers — though I think few in Geneva would call me a mindless cheerleader for the WTO’s membership — but I’ve got some reservations about this. One, it will probably have little practical effect at the margin. Two, as a symbolic gesture it feels a bit redundant. Three, most importantly, it further reinforces the idea that multilateral economic institutions and rules are now entirely at the service of foreign and strategic policy, to their ultimate detriment.First, on the practical point. If the G7 and EU want to stifle Russia’s economy and war machine (and they do), they have better, faster, more precise tools they can choose (and already have) out of a wide range of instruments, including sanctions on individuals and freezes on central bank assets. It’s not clear what marginal tariff increases the MFN decision will place on Russia. It’s worth noting that because of all the extra access on top of WTO rules given by preferential trade deals, of which Russia has none with any G7 country, most-favoured nation status in practice is more like least-favoured nation.As the redoubtable Ed Gresser of the Progressive Policy Institute points out, the kind of stuff Russia sends abroad traditionally doesn’t face many tariffs even for exports from countries outside the WTO. Russia exports hydrocarbons and minerals, which tend to enter at zero tariff, because few countries want to make basic commodity imports more expensive for their companies. There’s a reason Russia didn’t exactly race into the WTO — it joined in 2012 at the same time as Vanuatu after an accession process lasting nearly twenty years, a decade behind Georgia, Moldova and Armenia — which is that it didn’t have much to gain.Second, the symbolic point. Yes, taking away Russia’s MFN would be a big gesture, signalling that you can’t do what Putin’s doing and be treated as a normal country in any major international forum. Expelling Russia altogether would be even more dramatic, but that’s impossible. However, what is the marginal demonstrative value of removing Russia’s WTO benefits now? The rich-world countries have hit Putin’s regime with some of the broadest and deepest set of sanctions anyone can remember. He and his closest cronies can’t travel; they’ve had their bank accounts frozen; yachts are being seized from marinas across Europe; the Russian central bank can’t use its foreign exchange assets; Russian planes can’t fly and Russian cargo boats can’t dock; Russian companies can’t export or import; foreign companies are fleeing Russia; Europe and the US are funnelling arms to Russia’s enemy. Russia’s been banned from the football World Cup, the Paralympics and the Eurovision Song Contest. You can’t get a McDonald’s Happy Meal or a Coke in Moscow. I think Putin’s probably got the message that people don’t like him.And so to what I think is the third and underconsidered issue — the potential damage caused to the WTO and multilateral trade regime. Legally, what the G7 are doing is probably fine. They can invoke Article XXI, which protects countries’ rights to take security measures “in time of war or other emergency in international relations”, which obviously fits the bill. The definition is also traditionally self-judging: countries decide their security needs for themselves. It’s been invoked during conflict before, including by the EU during the 1982 Falklands war between the UK and Argentina.But this is a particularly unfortunate time to use it. Recent abuse of the exemption has endangered the integrity of the WTO. Former US president Donald Trump’s (and now President Joe Biden’s) invocation of national security for the very obviously protectionist purpose of imposing steel and aluminium tariffs, including on exports from foreign policy allies, has threatened to unravel the web of international law.As I wrote the other week, in 2016 the Trump administration lined up on the side of Russia against Ukraine in a case about blocking transit across Russia. The US took this stance to defend countries’ rights to self-judge their security needs to help pave the way to its own steel and aluminium decision. As uses of Article XXI go, the legal argument for invoking it against Moscow is very solid. But solid cases can create expectations and habits on which shakier cases rest. The WTO could probably do without being automatically treated as a tool of foreign policy right now, however morally justified this particular instance. This is a very good overview of the intersection of war and the WTO by the redoubtable Mona Paulsen at the London School of Economics.In fact, the Russia MFN issue looks like a twist on the traditional problem with the WTO during the 1990s and 2000s. Back then, because the WTO was basically the only international institution by which the US allowed itself to be bound, it was continually being eyed up by bright sparks quixotically wanting it to fix tangentially related issues such as free speech. The current situation feels more like rich-country governments, one of which (the US) has already undermined the WTO by crippling its dispute settlement system, feeling free to load the institution up with political baggage because it’s already basically on its knees. If the national security exemption becomes routine, there won’t be a functioning WTO left to strike postures with at all.So that’s the case against withdrawing MFN preferences. I certainly wouldn’t go to the wall for it; reasonable people can disagree on these things. But it’s not the self-evidently right course of action that it might appear.Charted watersThe Ukrainian war has exposed the extent and importance of global trade, and how sanctions on Russia cut both ways. Russia and Ukraine supply almost a third of the world’s wheat exports. Ukraine is known as the “bread basket of Europe” and many countries in the Middle East and north Africa are also heavily reliant on it for wheat supplies. Moreover, prices have soared to record highs as Black Sea ports are at a virtual standstill amid the Russian assault.This is of particular concern to Turkey, which relies on Russia for more than 60 per cent of its wheat imports, according to COMTRADE. Even before the Russian invasion of Ukraine, inflation in Turkey had hit a 20-year high of 54.4 per cent in February. The war in Ukraine will only exacerbate the problem of the rising cost of living, which will stoke civil unrest. (Jonathan Moules)Trade linksMatthew Yglesias at Bloomberg says the Ukraine war is accelerating a decline in world trade, and we’ll miss globalisation when it’s gone.The Russian invasion of Ukraine will have a massive impact on global food supply.“Germany had outsourced its security to the United States, its energy needs to Russia and its export-led growth to China,” the Brookings Institution’s Constanze Stelzenmüller tells The Economist, summing up in 21 words what we’ve been trying to convey in hundreds.Russia has authorised its companies to steal patents from any of dozens of countries it deems “unfriendly”.Russia is warning it may pay external debtors in roubles, threatening the country’s first debt default since 1998. More

China’s economy faces new downward pressure and difficulties and challenges increase, the cabinet was quoted as saying after a regular meeting.China will “strengthen cyclical adjustments and put stabilising growth in a more prominent position, deepen reforms and opening up to strive to achieve the full-year targets and tasks”, the cabinet said.China is targeting slower economic growth of around 5.5% this year as a property downturn and lacklustre consumption cloud the outlook for the world’s second-largest economy.China will enhance the availability of financing for small firms and lower comprehensive financing costs, the cabinet said.China will closely monitor changes in the international situation and commodity prices and the possible impact on China’s economy, and take steps to cope with it, the cabinet said.The government will quicken the pace of tax refunds to help firms, the cabinet added.China has pledge to deliver tax cuts and tax rebates totalling around 2.5 trillion yuan ($393 billion) this year.($1 = 6.3644 Chinese yuan renminbi) More