Monthly: October 2023

US Consumers Keep Spending Despite High Prices and their Own Gloomy Outlook

A flow of recent data from the U.S. government has made one thing strikingly clear: A surge in consumer spending is fueling strong growth, demonstrating a resilience that has confounded economists, Federal Reserve officials and even the sour sentiments that Americans themselves have expressed in opinion polls.

Spending by consumers rose by a brisk 0.4% in September the government said Friday — even after adjusting for inflation and even as Americans face ever-higher borrowing costs.

Economists caution that such vigorous spending isn’t likely to continue in the coming months. Many households have been pulling money from a shrinking pool of savings. Others have been turning increasingly to credit cards. And the additional savings that tens of millions of households amassed during the pandemic — from stimulus aid and reduced opportunities to travel, dine out and visit entertainment venues — are nearly depleted, economists say.

Still, the truth is no one knows where things go from here, given the unusual nature of the post-pandemic economy. The “death of the consumer” and an ensuing recession have been forecast by most economists for at least a year. So far, not only is no recession in sight but consumers as a whole appear to be in robust health. Spending might cool in the coming months, yet it’s far from clear it will collapse.

On Thursday, the government said the economy accelerated at a 4.9% annual rate in the July-September quarter, the fastest such rate since 2021, on the back of a jump in Americans’ spending. People spent on used cars and restaurant meals, airfares and hotel rooms. Much of it, even after adjusting for higher prices, was for discretionary items that suggested that many people feel confident in their finances and job security.

The durability of that spending has caught the attention of Fed officials, who have signaled that they will keep their key interest rate unchanged when they meet this week. But they’ve also made clear that they are monitoring the economic data for any sign that inflation could reignite and require further rate hikes.

“I have been consistently surprised at the resilience of consumer spending,” Christopher Waller, an influential member of the Fed’s board, said in a speech this month.

In the meantime, businesses, especially those in the sprawling service sector, are benefiting from what still appears to be pent-up demand, likely driven by higher-income earners, after the restrictions of the pandemic. Last week, Royal Caribbean Group reported robust quarterly earnings. Travelers crowded their cruise ships and spent more even as the company raised prices.

“The acceleration of consumer spending on experiences [has] propelled us towards another outstanding quarter,” said CEO Jason Liberty. “Looking ahead, we see accelerating demand.”

So what’s behind the outsize gains, so far? Economists point to several drivers: Sturdy hiring and low unemployment, along with healthy finances for most households emerging from the pandemic. Wealthier households, in particular, have enjoyed substantial growth in home values and stock portfolios, which are likely juicing their spending.

Steady hiring has sent the unemployment rate down to a near-five-decade low of 3.8% and lifted to a record high the proportion of women in their prime working years — ages 25 through 54 — who are employed. Measures of layoffs are near historical lows. More jobs mean more income, which generally means more spending.

“We continue to believe that you shouldn’t bet against the consumer until actual job losses are on the horizon,” said Tim Duy, chief U.S. economist at SGH Macro Advisers.

In the July-September quarter, Americans ramped up spending on durable goods — furniture, appliances, jewelry and luggage — that people typically cut back on if they’re worried about their jobs or the economy.

With inflation slowing — it’s at a still-high 3.7%, down from a peak of 9.1% in June 2022 — average wages are starting to outpace price gains. By some measures, wage growth hasn’t yet fully offset the inflation surge that began in 2021. But since late last year, pay has risen faster than prices, likely fueling some spending.

In many lower-paying industries, like hotels, restaurants and warehouses, companies have struggled to find and keep workers and have raised pay accordingly. Julia Pollak, chief economist at ZipRecruiter, calculates that for the lowest-paid 10% of workers, wages have jumped 25% since the first quarter of 2020, when the pandemic began. That’s well ahead of the 18% increase in prices over that time.

And most households started 2023 in better shape than they were in before the pandemic erupted, according to a report from the Fed. The net worth of the median household — the midpoint between the richest and poorest — jumped 37% from 2019 through 2022 as home prices shot higher and the stock market rose. That was the biggest surge on records dating back more than 30 years.

Most of the savings that Americans have accumulated in the past three years have flowed to the wealthiest households, who have splurged on travel and other experiences. Typically, economists say, the wealthiest one-fifth of Americans account for about two-fifths of all spending.

The net worth of the richest one-tenth of households leaped by $28 trillion — or about one-third — from the first quarter of 2020 to the second quarter of 2023, according to the Fed. The poorer one-half of Americans gained a bigger percentage increase but in total dollars much less, from about $2 trillion to $3.6 trillion. (Those figures aren’t adjusted for inflation.)

“When wealth is growing by the amount that it has been the past three years … I do think that it’s playing a larger role in this spending strength than maybe we thought it would,” said Sarah Wolfe, U.S. economist at Morgan Stanley.

Small-business owners like Bret Csencsitz, managing partner of Gotham Restaurant in New York City, can attest to that. High-dollar spending by middle-age customers has helped replace many of his older patrons who moved out of the city during COVID. These customers, who typically work in technology and finance, are buying $150 to $200 bottles of wine and spending a little over $200 on steak for two.

The average per-person check is up over 20% to roughly $145 compared with the pre-pandemic days, he added, and he has had groups of up to 60 people holding dinners at his restaurant.

“People are back,” he said. “There’s more energy.”

Aditya Bhave, senior economist at Bank of America, noted that the spending isn’t all driven by the affluent. Spending on the bank’s credit and debit cards by households with incomes below $50,000 has risen faster than spending by higher-earning clients.

Some Americans, while keeping a close watch on their finances, still feel they have room to indulge themselves. Consider Valerie Zaffina, a 74-year-old retired teacher who was picking up a piece of jewelry last week at a Kohl’s store in Ramsey, New Jersey. She said she and her husband live on fixed incomes and are cautious spenders.

But Zaffina has nevertheless decided on one big splurge — about $5,000 to decorate her rental apartment, including a $2,500 couch and a $600 rug. It’s her first major decorating project in 18 years.

“I had kind of a frustrating year, and I wanted to do something for myself,” she said. “So, yeah, I’m redecorating. I’m in the throes of that, but I’m sticking to a budget.”

Many analysts still warn of a new crop of headwinds facing consumers and the economy. Nearly 30 million student loan borrowers had to start paying their loans this month, for example. And government dysfunction in Washington could lead to a government shutdown next month.

A report Friday showed that while inflation-adjusted income fell last month along with the savings rate, consumers still ramped up their spending. That trend, economists say, is unsustainable.

Even so, those challenges may not prove as damaging as feared. Student loan payments, for example, jumped even before an Oct. 1 deadline for resuming them, Bhave noted. And few borrowers appear to have taken advantage of a 12-month grace period the Biden administration put in place, suggesting that most borrowers can afford to resume paying the money back — at least for now.

And executives at Visa, which reported strong earnings and a surge of spending by their U.S. credit card customers overseas in the third quarter, have also downplayed the likely impact of student loan repayments.

The company isn’t “factoring in any impacts” from loan repayments “because we’ve yet to see any meaningful impact,” said Visa’s chief financial officer, Christopher Suh. “Consumer spending across all segments from high to low has remained stable since March.”

“There’s a lot of gloom and doom,” around the consumer, Bhave said. “And yet the data keep surprising to the upside.”
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Indonesia to Omit Private Coal Power Plants from Its JETP Investment Plan

Indonesia will exclude coal-fired power plants operated by industrial estates from its investment plan for a G7-led funding program to decarbonize its power sector, sources drafting the document told Reuters.

The decision means Jakarta will not lay out a path to shut the so-called captive coal power plants in its comprehensive investment and policy plan (CIPP) that it needs to secure $20 billion in funding pledged under the Just Energy Transition Partnership (JETP).

The plan is due to be published on Wednesday for public feedback.

JETP, a financing scheme made up of equity investments, grants and concessionary loans from members of Group of Seven (G7), multilateral banks and private lenders, is aimed at helping developing countries shift to cleaner energy in the power sector.

Coal-fired power plants operated by industries were being excluded from the plan because authorities needed more time to work out how to protect the nickel smelting sector, said one of the sources, who declined to be identified, adding that the exclusion would be temporary.

The exclusion will make it more difficult for Southeast Asia’s largest economy to meet its JETP target to cap power sector emissions at 290 million metric tons of CO2-equivalent by 2030 because the public sector will now be saddled with a greater share of the reduction burden.

Captive coal power stations with 13.74 gigawatt (GW) of capacity are operating in the Southeast Asian archipelago and 20.48 GW are being planned. The recent surge is due to the expansion of the metal processing sector, according to a July report that the Asian Development Bank commissioned.

Indonesia has pledged to stop commissioning new coal power plants but still allows new ones for smelters.

Indonesia’s decision not to include the industrial coal plants in its plan follows complaints from officials that the JETP financing terms were not as expected, with high interest on loans and only a small portion in grants. Half of the JETP commitments come from private lenders.

Indonesia is not the only country facing problems in implementing a JETP deal. 

G7 members offered Vietnam just 2% of its total $15.5 billion JETP financial package in grants, while the biggest chunk of its loans will carry market-determined interest rates, documents reviewed by Reuters showed.

There have also been questions over the inaugural JETP deal with South Africa, which is facing rolling blackouts. South Africa secured a $8.5 billion financing pledge.

‘Good decision’

Experts have said ensuring the success of Indonesia’s JETP is important not just because it is the biggest deal but it is also seen as a test of G7 commitment to work with developing nations.

Fabby Tumiwa, executive director of the Institute for Essential Services Reform think tank, part of a JETP technical working group, said it was better to exclude the coal-fired plants for now rather than delay the plan.

“If we wait for the analysis for captive power, we’re afraid JETP will not move forward. I think this is a good decision, so we can start with the information that we have,” Tumiwa said.

The International Partners Group of donors and lenders, with which Indonesia is making the agreement, has approved of the decision to focus on decarbonization by the state utility, provided that the carbon reduction targets will remain unchanged, said the source who declined to be identified.

The utility operates a grid with 69 GW power generation capacity, at the end of 2022, half powered by coal.

Indonesia has also said it is concerned about the extent of compensation from Western countries to shut coal power plants early to make way for renewable energy.

The CIPP will show only $2.5 billion of JETP funding is earmarked for closing coal plants, said Pradana Murti, a director at PT Sarana Multi Infrastruktur (SMI), a state-owned financing company managing energy transition funds.

Tumiwa said the plan would show Indonesia needs $95 billion until 2030 to reach JETP goals, while the first source said the figure could reach $120 billion. 
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Water Woes, Hot Summers, Labor Costs Are Haunting Pumpkin Farmers in the West

Alan Mazzotti can see the Rocky Mountains about 30 miles west of his pumpkin patch in northeast Colorado on a clear day. He could tell the snow was abundant last winter, and verified it up close when he floated through fresh powder alongside his wife and three sons at the popular Winter Park Resort.

But one season of above-average snowfall wasn’t enough to refill the dwindling reservoir he relies on to irrigate his pumpkins. He received news this spring that his water delivery would be about half of what it was from the previous season, so he planted just half of his typical pumpkin crop. Then heavy rains in May and June brought plenty of water and turned fields into a muddy mess, preventing any additional planting many farmers might have wanted to do.

“By time it started raining and the rain started to affect our reservoir supplies and everything else, it was just too late for this year,” Mazzotti said.

For some pumpkin growers in states like Texas, New Mexico and Colorado, this year’s pumpkin crop was a reminder of the water challenges hitting agriculture across the Southwest and West as human-caused climate change exacerbates drought and heat extremes. Some farmers lost 20% or more of their predicted yields; others, like Mazzotti, left some land bare. Labor costs and inflation are also narrowing margins, hitting farmers’ ability to profit off what they sell to garden centers and pumpkin patches.

This year’s thirsty gourds are a symbol of the reality that farmers who rely on irrigation must continue to face season after season: they have to make choices, based on water allotments and the cost of electricity to pump it out of the ground, about which acres to plant and which crops they can gamble on to make it through hotter and drier summers.

Pumpkins can survive hot, dry weather to an extent, but this summer’s heat, which broke world records and brought temperatures well over 100 degrees Fahrenheit (38 degrees Celsius) to agricultural fields across the country, was just too much, said Mark Carroll, a Texas A&M extension agent for Floyd County, which he calls the “pumpkin capital” of the state.

“It’s one of the worst years we’ve had in several years,” Carroll said. Not only did the hot, dry weather surpass what irrigation could make up for, but pumpkins also need cooler weather to be harvested or they’ll start to decompose during the shipping process, sometimes disintegrating before they even arrive at stores.

America’s pumpkin powerhouse, Illinois, had a successful harvest on par with the last two years, according to the Illinois Farm Bureau. But this year it was so hot into the harvest season in Texas that farmers had to decide whether to risk cutting pumpkins off the vines at the usual time or wait and miss the start of the fall pumpkin rush. Adding to the problem, irrigation costs more as groundwater levels continue to drop — driving some farmers’ energy bills to pump water into the thousands of dollars every month.

Lindsey Pyle, who farms 950 acres of pumpkins in North Texas about an hour outside Lubbock, has seen her energy bills go up too, alongside the cost of just about everything else, from supplies and chemicals to seed and fuel. She lost about 20% of her yield. She added that pumpkins can be hard to predict earlier in the growing season because the vines might look lush and green, but not bloom and produce fruit if they aren’t getting enough water.

Steven Ness, who grows pinto beans and pumpkins in central New Mexico, said the rising cost of irrigation as groundwater dwindles is an issue across the board for farmers in the region. That can inform what farmers choose to grow, because if corn and pumpkins use about the same amount of water, they might get more money per acre for selling pumpkins, a more lucrative crop.

But at the end of the day, “our real problem is groundwater, … the lack of deep moisture and the lack of water in the aquifer,” Ness said. That’s a problem that likely won’t go away because aquifers can take hundreds or thousands of years to refill after overuse, and climate change is reducing the very rain and snow needed to recharge them in the arid West.

Jill Graves, who added a pumpkin patch to her blueberry farm about an hour east of Dallas about three years ago, said they had to give up on growing their own pumpkins this year and source them from a wholesaler. Graves said the pumpkins she bought rotted more quickly than in past years, but it was better than what little they grew themselves.

Still, she thinks they’ll try again next year. “They worked perfect the first two years,” she said. “We didn’t have any problems.”

Mazzotti, for his part, says that with not enough water, you “might as well not farm” — but even so, he sees labor as the bigger issue. Farmers in Colorado have been dealing with water cutbacks for a long time, and they’re used to it. However, pumpkins can’t be harvested by machine like corn can, so they require lots of people to determine they’re ripe, cut them off the vines and prepare them for shipping. 

He hires guest workers through the H-2A program, but Colorado recently instituted a law ensuring farmworkers to be paid overtime — something most states don’t require. That makes it tough to maintain competitive prices with places where laborers are paid less, and the increasing costs of irrigation and supplies stack onto that, creating what Mazzotti calls a “no-win situation.”

He’ll keep farming pumpkins for a bit longer, but “there’s no future after me,” he said. “My boys won’t farm.” 
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UAW, Stellantis Reach Tentative Contract; Union Adds Strike at GM Factory

Jeep maker Stellantis reached a tentative contract agreement with the United Auto Workers union on Saturday. 

The Stellantis deal, which still must be ratified by members, leaves only General Motors without an agreement with the union.  

Later Saturday night, the union walked out at a GM factory in Spring Hill, Tennessee, in an effort to increase pressure on the company to reach a deal. 

The Stellantis deal mirrors one reached earlier this week with Ford. The union says the contract also saves jobs at a factory in Belvidere, Illinois, that Stellantis had planned to close. 

GM said it was disappointed with the additional strike at the Spring Hill assembly and propulsion systems plant “in light of the progress we have made.” The company said in a statement that it has bargained in good faith with the union and wants to reach a deal as soon as possible. 

Spring Hill is GM’s largest manufacturing facility in North America with about 1 million square meters of building space and almost 4,000 employees. It makes the electric Cadillac Lyriq as well as the GMC Acadia and Cadillac XT5 and XT6 crossover SUVs. 

A message was left Saturday night seeking comment from the union. 

‘We have moved mountains’

UAW President Shawn Fain confirmed the Stellantis agreement in a video appearance Saturday evening and said that 43,000 members at the company still have to vote on the deal. 

About 14,000 UAW workers who were on strike at two Stellantis assembly plants in Michigan and Ohio, and several parts distribution centers across the country, were told to drop their picket signs and return to work. The agreement will end a six-week strike at the maker of Jeep and Ram vehicles. 

The pact includes 25% in general wage increases over the next 4½ years for top assembly plant workers, with 11% coming once the deal is ratified. Workers also will get cost-of-living pay that would bring the raises to a compounded 33%, with top assembly plant workers making more than $42 per hour. At Stellantis, top-scale workers now make around $31 per hour. 

Like the Ford contract, the Stellantis deal would run through April 30, 2028. 

Under the deal, the union said it saved jobs in Belvidere as well as at an engine plant in Trenton, Michigan, and a machining factory in Toledo, Ohio. 

“We’ve done the impossible. We have moved mountains. We have reopened an assembly plant that was closed,” Fain said. 

The deal includes a commitment by Stellantis to build a new midsize truck at its factory in Belvidere, Illinois, that was slated to be closed. About 1,200 workers will be hired back, plus another 1,000 workers will be added for a new electric vehicle battery plant, the union said. 

“We’re bringing back both combustion vehicles and electric vehicle jobs to Belvidere,” Fain said. 

Vice President Rich Boyer, who led the Stellantis talks, said the workforce will be doubled at the Toledo, Ohio, machining plant. The union, he said, won $19 billion worth of investment across the U.S. 

Fain said Stellantis had proposed cutting 5,000 U.S. jobs, but the union’s strike changed that to adding 5,000 jobs by the end of the contract. 

In a statement, the UAW said the Stellantis agreement has gains worth more than four times the improvements in the 2019 contract with the UAW. Through April of 2028, a top-scale assembly plant worker’s base wage will increase more than all the increases in the past 22 years. 

Starting wages for new hires will rise 67% including cost-of-living adjustments to more than $30 per hour, the union said. Temporary workers will get raises of more than 165%, while workers at parts centers will get an immediate 76% increase if the contract is ratified. 

Like the Ford agreement, it will take just three years for new workers to get to the top of the assembly pay scale, the union said. 

The union also won the right to strike over plant closures at Stellantis, and it can strike if the company doesn’t meet product and investment commitments, Fain said. 

Workers expected to OK deal

Bruce Baumhower, president of the local union at a large Stellantis Jeep factory in Toledo, Ohio, that has been on strike since September, said he expects workers will vote to approve the deal because of the pay raises above 30% and a large raise immediately. 

The union began targeted strikes against all three automakers on Sept. 15 after its contracts with the companies expired. At the peak, about 46,000 workers were on strike against all three companies, about one-third of the union’s 146,000 members at the Detroit three. 

With the Ford deal, which established the pattern for the other two companies, workers with pensions will see small increases when they retire, and those hired after 2007 with 401(k) plans will get large increases. For the first time, the union will have the right to go on strike over company plans to close factories. Temporary workers also will get large raises, and Ford agreed to shorten to three years the time it takes for new hires to reach the top of the pay scale. 

Other union leaders who followed more aggressive bargaining strategies in recent months have also secured pay hikes and other benefits for their members. Last month, the union representing Hollywood writers called off a nearly five-month strike after scoring some wins in compensation, length of employment, and other areas. 

Outside the Sterling Heights plant, some workers said they looked forward to a ratification vote and going back to work. 

“The tentative agreement is excellent,” said Anthony Collier, 54, of Sterling Heights, Michigan. “We hear that it’s going to be parity, at least, with Ford, so we believe a lot of people are looking forward to signing. Most of us had to dip into savings, get loans. Everybody knows the economy went up on all of us, so it’s a little tight to be out on strike pay.” 
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Ugandan Economists Say Country Still Investment Destination Despite US Advisory

Ugandan economists and officials expressed confidence in the country’s economy and urged investors to ignore a U.S. government advisory about risks they may face if they conduct business there.

The advisory, in the U.S. 2023 Investment Climate Statements, warned of the financial and reputational risks posed by endemic corruption in Uganda.

The statement also noted Uganda’s enactment of the Anti-Homosexuality Act in May, a move condemned by LGBTQ+ advocates worldwide.

Morrison Rwakakamba, chairperson of the Uganda Investment Authority, a government arm mandated with promoting investment in the country, told VOA that organizations such as the Oxford University Center of African Economies have ranked Uganda as one of the least risky economies on the continent.

The African Development Bank’s 2023 report also ranked Uganda among the top investment destinations in East Africa.

According to the African Development Bank, Uganda’s gross domestic product is projected to grow 6.5% in 2023 and 6.7% in 2024, assuming any global growth slowdown will be short lived.

Rwakakamba said current investors are rational and know they will continue to make money in Uganda.

“Investors follow money. Investors don’t follow geopolitics,” he said. “They don’t follow cultural wars that seem to be what is embedded in that advisory. … We even also continue to encourage our American investors that there is money to be made in Africa. There’s money to be made in Uganda because of the market, because of the return on investment. We are not worried about these advisories.”

The Uganda Investment Authority said the country has seen exponential growth in direct foreign investment over the past four years from investors in United Arab Emirates, China, Germany, Japan and the Netherlands, among others.

However, Corti Paul Lakuma, a senior research fellow and head of the macroeconomics department at the Economic Policy Research Centre in Kampala, said the advisory is a disadvantage for Uganda because the country still wants to attract investors.

Despite investments from China, India and Europe, Lakuma said, Uganda cannot disregard the fact that the United States is still the biggest social and public investor in the sectors of health and education.

“Those other countries, yes, they are good and dependable, but their kind of investments are different from the investments America makes,” Lakuma said. “America makes investments with long-term repayment period and return period. Not many countries are willing to take that risk.”

Rwakakamba argued that even though there is corruption in Uganda, the East African country has set up online mechanisms that enable direct contact between potential investors and Ugandan officials, in an effort to cut out middlemen who demand bribes.

Regarding the Anti-Homosexuality Act, Uganda has experienced a political backlash for what has been described as the harshest law against the LGBTQ+ community in the world.

Lakuma said Uganda may need to reconsider the law.

“The world is becoming very sensitive [to] issues of diversity, inclusivity,” he said. “I think it demanded for some sensitivity from our lawmakers. We don’t live in a vacuum, even though we want to keep our cultures and morals. But also, you must observe what is the changing world order.”

In August, the World Bank said the Anti-Homosexuality Act contradicted its values. The bank said it would halt new loans to Uganda until it could test measures to prevent discrimination in the Ugandan projects it finances.
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US Economic Growth Accelerates in Third Quarter

The U.S. economy grew at its fastest pace in nearly two years in the third quarter as higher wages from a tight labor market helped to power consumer spending, again defying dire warnings of a recession that have lingered since 2022.

Gross domestic product increased at a 4.9% annualized rate last quarter, the fastest since the fourth quarter of 2021, the Commerce Department’s Bureau of Economic Analysis said in its advance estimate of third-quarter GDP growth. Economists polled by Reuters had forecast GDP rising at a 4.3% rate.

Estimates ranged from as low as a 2.5% rate to as high as a 6.0% pace, a wide margin reflecting that some of the input data, including September durable goods orders, goods trade deficit, wholesale and retail inventory numbers were published at the same time as the GDP report.

The economy grew at a 2.1% pace in the April-June quarter and is expanding at a pace well above what Fed officials regard as the non-inflationary growth rate of around 1.8%.

While the robust growth pace notched last quarter is unlikely sustainable, it was testament to the economy’s resilience despite aggressive interest rate hikes from the Federal Reserve. Growth could slow in the fourth quarter because of the United Auto Workers strikes and the resumption student loan repayments by millions of Americans.

Most economists have revised their forecasts and now believe that the Fed can to engineer a “soft-landing” for the economy, pointing to strength in worker productivity and moderation in unit labor costs growth in the second quarter, which they expected carried through into the July-September period.  

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was the main driver.

A strong labor market is providing underlying support to spending. Though wage growth has slowed, it is rising a bit faster than inflation, lifting households’ purchasing power.  

Labor market resilience was highlighted by a separate report from the Labor Department on Thursday, showing the number of people filing new claims for state unemployment benefits rose to a seasonally adjusted 210,000 during the week ending Oct. 21 from 200,000 in the prior week.

The GDP data likely has no impact on near-term monetary policy amid a surge in U.S. Treasury yields and stock market selloff, which have tightened financial conditions.  

Financial markets expect the Fed to keep interest rates unchanged at its Oct. 31-Nov. 1 policy meeting, according to CME Group’s FedWatch. Since March, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25% to 5.50% range. 
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Zimbabwe Says It Lost in Excess of $150 Billion to Sanctions

Zimbabwe’s vice president on Wednesday said the country has lost more than $150 billion due to sanctions imposed by the European Union and countries such as the United States following reports of election rigging and human rights abuses in the early 2000s.

Speaking to protesters rallying against the sanctions, Vice President Constantino Chiwenga said the measures were also hurting the entire southern Africa region.

He called the sanctions an “albatross” around Zimbabwe’s neck, as they include financial restrictions that isolate Zimbabwe from global access to capital.

“Since 2001, we estimate that Zimbabwe has lost or missed over $150 billion through frozen assets, trade embargos, export and investment restrictions from potential bilateral support, development loans, IMF and World Bank balance of payments support and commercial loans,” Chiwenga said, calling the sanctions “heinous and illegal.”

Stevenson Dhlamini, an economics professor at National University of Science and Technology in Zimbabwe, said the figure of $150 billion is consistent with what the Zimbabwean government has been saying over the years.

“The cumulative effect of the sanctions by the U.S., EU and the U.K. do have a cumulative impact that could be to that level,” Dhlamini said.

Not everyone agrees. 

Prosper Chitambara, senior economist with the Labor and Economic Development Research Institute of Zimbabwe, said multiple factors have affected the country’s economy, not just the sanctions.

“How do you then separate the effects of sanctions, say, from the effects of corruption, or from the effects of external shocks or climate-induced shocks?” he said, “Coming up with a number is a very difficult and tedious exercise to do.”

After the protest, which attracted mainly civil servants and ruling Zanu PF supporters, Chiwenga vowed that Zimbabwe’s economy will prevail over the sanctions.

“Sanctions are really hurting Zimbabweans,” he said. “By now, we could have gone far in terms of our economic growth. Our sin is that we took land [from white commercial farmers] and gave it to our people. Nothing else. The rest they are talking about is nonsense.

“But we think outside the box,” he said. “So, sanctions or no sanctions, Zimbabwe will prosper.”

Hopes of lifting the sanctions were dashed after many observer missions to Zimbabwe’s August 23 general election, including the Southern African Development Community, said the polls were not credible.
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UNCTAD Report: Billions Needed to Rebuild Gaza’s Shattered Infrastructure, Economy

Billions of dollars in international economic aid will be needed to reverse decades of border closures, military operations and de-development in Gaza, according to a report published Wednesday by the United Nations Conference on Trade and Development, UNCTAD.

“While lifting all restrictions is a necessary condition for sustainable recovery, it is by no means sufficient,” the report said.  

“Donors and the international community need to extend significant economic aid to repair the extensive damage Gaza has experienced under prolonged restrictions and closures and frequent military operations, which has stifled the economy and decimated infrastructure,” it said.

The report documents economic conditions in the Occupied Palestinian Territories through the end of 2022, prior to the current chain of disastrous events triggered by the October 7 assault on Israel by Hamas militants.

“The economic consequences of the current and ongoing humanitarian crisis in Gaza are important to determine,” said Richard Kozul-Wright, UNCTAD director, division on globalization and development strategies.

He said it was incredibly difficult to assess the damage.  

“It is buildings.  It is hospitals.  It is very difficult to make a proper assessment until the fighting stops but it has got to be in the billions of dollars … in the tens of billions of dollars,” said Kozul-Wright. “What I think the report emphasizes is the worrying trend in aid to the Palestinian economy, plus its inability to generate its own fiscal revenues in an independent way.”

The report says Israel’s decades-long blockade of Gaza has hollowed out its economy, leaving 80% of the population dependent on international aid. It also says nearly half of Gaza’s population is unemployed and that real GDP per capita is close to its lowest level since 1994.

Authors of the report note that since three-quarters of Palestinian trade is with Israel and the Israeli shekel is the main currency in circulation, Israel has a lot of control over the Palestinian Authorities’ fiscal policy.

“Israel collects Palestinian trade taxes because all Palestinian import and export goes through Israel or through Israeli controlled borders,” said Mutasim Elagraa, coordinator of UNCTAD assistance to the Palestinian people.

“Israel effectively controls two-thirds of Palestinian tax revenue and transfers it to the Palestinian government,” he said noting that Israel sometimes delays the transfer or even freezes the transfer, which “makes Palestinians fiscally vulnerable.”

On October 21, Israel partially lifted its siege of Gaza, allowing several convoys of food, water, and medical supplies to enter the territory.  However, the Israeli government has refused to allow fuel into the Gaza Strip, claiming that Hamas has fuel that it is hoarding for use in military operations.

“Lack of fuel will have a profound impact on the humanitarian support that the U.N. is currently providing and is an essential lifeline of many of the inhabitants of Gaza,” said Kozul-Wright.  “So, I think the impact will be immediate on the ground, but it will be difficult to know what its longer-term impact will be on the Gazan economy.”

In its concluding remarks, the UNCTAD report recommends that the “vicious circle of destruction and partial reconstruction [of Gaza] needs to be broken by negotiating a peaceful solution, based on international law, and relevant United Nations and Security Council resolutions, to end hostilities.”

While increasing donor support will be important for the recovery of Gaza’s economy, the report notes that this “should not be viewed as a substitute for ending restrictions and closures” and calls on Israel and all parties “to bear their responsibilities under international law.”
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Nigerians Praise Court Ruling in Multibillion-Dollar Gas Deal

Nigerian authorities are praising a London high court ruling Monday that overturned $11 billion in damages stemming from a collapsed gas project between Africa’s largest economy and a private company.

In a statement, Nigerian President Bola Tinubu lauded the London Business and Property Court’s ruling in the 2010 gas deal, calling it a victory for what officials termed the “long exploited” African continent.

“Nation states will no longer be held hostage by economic conspiracies between private firms and solitary corrupt officials,” Tinubu said.

Nigeria and Process and Industrial Developments, a firm based in the British Virgin Islands, signed the contract to construct a gas processing plant in Nigeria’s oil-rich region.

The deal, however, fell through, and P&ID took the Nigerian government to court in Britain.

In 2017, an arbitration tribunal ordered Nigeria to pay a $6.6 billion contract award and interest to P&ID.

The government appealed that decision.

The court on Monday said the company had in 2010 paid a bribe to a Nigerian oil ministry official in connection with the deal.

The court also said that P&ID did not disclose that information when the deal failed to materialize and that two British lawyers defending the company stood to benefit if the court ruled in favor of the firm.

Nigerian political analyst Rotimi Olawale said the decision is a relief for Africa’s biggest economy.

“Nigeria literally dodged a major bullet, knowing the foreign exchange issues the country is facing at the moment,” Olawale said. “Getting a judgment of $11 billion would’ve been a big blow to Nigeria’s financial situation.”

The company’s lawyers say they’re disappointed by the outcome and are considering next steps. The firm has denied the fraud allegations and accused Nigeria of incompetence.

Nigeria’s economy has been struggling with spiraling inflation and mounting debts for years. More recently, government reform policies have seen Nigeria’s foreign exchange reserve dwindle significantly, increasing the scramble for U.S. dollars and weakening the local tender.

The $11 billion would have been about one-third of Nigeria’s foreign exchange reserves.

Ebenezer Oyetakin, founder of the Anti-Corruption Network, said the ruling couldn’t have come at a better time.

“It is an example of how many African countries have been mortgaging their economy,” he said. “Definitely it would be of huge help to the dwindling Nigerian economy as we’re witnessing currently. But we should not rest on our oars. We should continue to absolutely stand against corruption.”

Olawale said Nigeria and all of Africa must address institutional corruption.

“The judgment should also give us an opportunity to tidy our home front,” Olawale said. “I feel that Nigeria, like many developing countries, goes into all kinds of dubious contracting. It is on us as a nation to ensure that we do our due diligence and that we harmonize the process in which we do contracting with other parties.”

Reports say the London court could decide to send the case back to arbitration or abandon it without delay.
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IMF Warns Africa of Economic Vulnerabilities as China’s Economy Slows

The International Monetary Fund is cautioning African nations about the possibility of a regional economic downturn and the ripple effects that China’s slowing economy could bring.

Africa and China have forged economic ties over the past 20 years, making the Asian giant the continent’s largest trading partner. Africa exports metals, minerals and fuel to China, while importing manufactured goods and machinery from that country.

The IMF says the partnership is threatened by China’s economic slowdown and aging population, trade tensions, geopolitics and the ongoing impacts of the COVID-19 pandemic.

Kenya-based businessman Adan Ibrahim, who imports vehicle parts from China, said it was difficult for a long time to access Chinese companies due to COVID-19 regulations, including visa restrictions that allowed relatively few people into the country per month.

“Up to now they have not reopened well,” Ibrahim said. “In terms of movement of people within the country, they even restricted when you travel to China. You [had to] undertake serious checks on health issues. There were … challenges, both economic and health wise.”

In December 2022, China lifted coronavirus restrictions that had prevented easy movement of goods and people.

Gerrishon Ikiara, an international economics lecturer, said the economic problems faced by China and African countries affect their trade relations.

“When African economies are affected either by drought or other problems that may affect various sectors, the negative effect is felt in China,” Iriara said. “If it’s … happening in China, the negative effect is felt in Africa.

“So, it’s important that both the Chinese and African economies are doing well to create a more healthy trading relationship,” he said.

Ibrahim said that as China shifts away from COVID-19 controls, the price of goods has increased and they go unsold.

“The goods that we used to buy with the relatively cheap prices before the COVID are now triple the price that we currently buy with,” he said.

China’s economic recovery from the pandemic slowed in recent months due to a sluggish property market and weak consumer spending. China’s trade data showed that exports and imports continued to decline as demand for Chinese goods waned.

Ikiara said Africa needs to find new trading partners to develop its economies.

“If the Chinese economy is slowing down, Africa needs to diversify its trading partners and to diversify either imports or exports to Asia, other parts of Africa, Latin America and the U.S.,” he said. “If there is a problem with our exports to China, we need to look for new markets.”

The IMF is urging African governments to diversify their economies, increase regional trade integration and create a favorable business environment so that local and international corporations can thrive.
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US Trade Act Helps South African Sisters’ Sustainable Business

South Africa is hosting a summit for participants in the U.S. government’s duty-free Africa Growth and Opportunity Act from November 2 to 4 as the act comes up for renewal. Kate Bartlett spoke to the owners of one South African company about how the trade initiative — which benefits more than 30 countries on the continent — helped them grow their business and enter the U.S. market. VOA footage by Zaheer Cassim.
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Mayor Says West Maui to Reopen to Tourism on Nov. 1

All of West Maui except for burned-out sections of historic Lahaina will reopen to tourism on Nov. 1 following the deadliest U.S. wildfire in more than century, the mayor of Maui County said Monday.

Mayor Richard Bissen said he made the move after talking about it with his Lahaina advisory team, the Red Cross and other partners.

West Maui has about 11,000 hotel rooms, or about half of Maui’s total. Travelers evacuated those hotels after the Aug. 8 fire raged through Lahaina town, killing at least 99 people and destroying more than 2,000 buildings.

Hawaii Gov. Josh Green last month declared West Maui would officially reopen to tourism on Oct. 8 to bring back badly needed jobs and help the economy recover. Bissen modified the governor’s declaration with a phased plan, allowing a small section on the northern edge of West Maui to open first with the rest to follow at an undetermined date.

The community has had an impassioned debate about when to welcome travelers back to the disaster-stricken region. Some residents drafted a petition opposing the return of tourists, saying the community wasn’t ready.

Bissen said Monday that workers are ready to return to their jobs while acknowledging “this isn’t for everyone.”

Those who aren’t prepared to go back to work on Nov. 1 should talk to their employers and “continue to seek the help and attention that they need,” Bissen said at a news conference in Lahaina that was livestreamed online.

The mayor said many residents are also concerned about not having child care. He said the county’s partners are working on that issue.

Residents who have been staying in West Maui hotels and other short-term accommodations after losing their homes in the fire won’t lose their lodging, the mayor said.

“We’re assured by the Red Cross that their housing will not be in jeopardy,” Bissen said.

The mayor said the reopening schedule was voluntary and said some properties have already reopened on their own. 
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