Slowdown in China and plunge in commodity markets weaken African currencies
This week, currencies of major African countries went tumbling in the face of China’s sluggish growth outlook, plunging commodity prices, and the imminent increase of U.S. interest rates. Throughout the year, African currencies have been collapsing as central banks of key economic regions made currency market announcements: the drop in the euro in the first quarter, the yen in May, and now the yuan. The three worst performers this week—the Ghanaian cedi, the Zambian kwacha, and the Mozambican metical—depreciated by 3.2 percent, 3.2 percent, and 1.9 percent relative to the dollar, respectively. These volatile currencies threaten to damage business confidence and might add to current inflationary pressures.
Not all is lost, however. Domestic central banks are responding: For instance, the Central Bank of Nigeria has devalued its currency twice over the last year and has now resorted to limiting access to foreign currency on the official interbank market. Analysts have argued that economies that are better diversified, and especially net oil importers, may even gain from this downturn. The West and Central African francs, as well as the Ethiopian birr, were the only currencies to strengthen against the dollar over the week.
Currency markets are only part of the region’s economic troubles, however, with a crunch in commodity markets is adding to its woes. Oil prices have long been a cause for concern and, as the market fears an underlying problem with emerging market economic growth, there has been an ongoing fall in commodity prices. In fact, Botswana halved its 2015 growth forecast due to expected weakness in the diamond market.
South Sudan leaders fail to sign peace agreement
On Monday, the government of South Sudan and rebel forces—represented by President Salva Kiir and rebel leader and former Vice President Riek Machar, respectively—met in Addis Ababa in an attempt to reach a peace agreement to end the country’s 20-month civil war. The regional mediating body, the Intergovernmental Authority on Development (IGAD), opened the latest round of peace talks with the warring parties on August 6 and set an August 17 (Monday) deadline for an accord. Despite increasing pressure from the United States and other international stakeholders, which have been calling for greater sanctions against the key political and military leaders perpetuating the conflict, President Kiir refused to sign a peace deal already agreed upon by Riek Machar and another faction.
Despite this setback, IGAD mediators have stated that the government of South Sudan will return to Addis Ababa in 15 days to finalize the agreement. Outstanding points of contention within the peace accord include disagreements over power-sharing arrangements between the government and rebel parties, as well as the demilitarization of Juba, the nation’s capital. Meanwhile, on Wednesday, the United States distributed a draft resolution for targeted sanctions and an arms embargo on South Sudan that could be implemented in approximately two weeks if President Kiir does not sign the peace deal by the extended deadline, September 6.
South African Development Community summit focuses on industrialization and political stability
The 35th South African Development Community (SADC) heads-of-state summit took place in Gaborone, Botswana this week from August 16-18. Currently SADC comprises of 15 member states, namely: Angola, Botswana, the Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe. Under the theme, “Accelerating industrialization of SADC economies through transformation of natural endowment and improved human capital,” economic transformation took precedence in the discussions, but the key issues of political stability, youth and women’s political involvement, and food security were also addressed. The heads of state called for speedy implementation of an industrialization strategy to eradicate poverty and unemployment. The summit also saw a change in power, as outgoing chairman, Zimbabwean President Robert Mugabe, handed the reins over to Botswana’s President Lieutenant-General Seretse Khama Ian Khama. Khama emphasized that during implementation of the updated strategy, the focus will be on regional value chains, infrastructure and skills development, and technology and innovation.
At a parallel SADC Double Troika’s meeting on Sunday, the security situation in Lesotho was discussed. The prime minister of Lesotho, Pakalitha Mosisili, came under pressure after he objected to the terms of the SADC’s inquiry into security conditions in the country relating to the court martial proceedings against the suspected soldiers behind the murder of ex-army chief of Lesotho, Maaparankoe Mahao.