South African mining companies can manage water usage as part of a wider, integrated strategy for sustainable business, writes Stephen Austin, independent energy advisor to Ensight Energy Solutions.
The persistent drought in most of South Africa over the last couple of years and especially in the Western Cape province these last two years should serve as a wakeup call to South African industry and government. We live in a water-scarce country, yet many organisations are failing to manage water usage in a way that reflects just how precious this resource is and how important it is to conserve it.
South Africa is one of the 30 driest countries in the world, with an annual rainfall of less than 450 mm, well below the world average of around 860 mm a year. As we begin to feel more of the effects of climate change, we can expect to endure more extreme weather conditions, including the possibility of more frequent droughts that last longer.
Agriculture accounts for around 60% of South Africa’s water usage and 12% goes to domestic use, according to the Department of Water and Sanitation (DWA). Usage for afforestation makes up 3.7%, power generation accounts for 2.2%, and mining and bulk industrial use comprises around 5.7%. Little attention is paid to the industrial sector’s use of water, yet it is an area where we can score relatively quick and easy wins.
A growing operational risk
Nonetheless, we are not seeing mining companies pay much attention to water effi ciency, for the simple reason that it is not a major operational cost for most of them. Where energy costs may account for up to 30% of a major mining company’s operational expenditure, water might make up less than 2% of its operating costs.
The relatively low cost of water usage for most mining companies, however, belies its importance in production. From cooling production machinery to smelting material to moving minerals, water is crucial to mining. If the water supply to a plant stops, it will not be able to continue production, which will in turn damage its revenues and profits. This is a good reason to embrace water effi ciency as a business imperative – another is that the cost of water is likely to rise in the years to come.
The good news is that a strategy for water efficiency can work in lockstep with a mining company’s drive to reduce energy costs and carbon emissions. If you are wasting electrical power on a mine, there is a good chance you are wasting water too (and vice versa).
Imposing discipline on your energy usage will also help to reduce water usage in most cases. This is about looking at your environment in a holistic way and seeing how your various systems and equipment interact with each other.
Ways to use water more efficiently
For example, a mine that is using ineffi cient slurry systems to move material will possibly be pumping more water than it needs to into the system as well as using excessive power. A small increase in the density of the slurry mixture and a more efficient water pumping system could decrease water requirements by as much as 30%. Similarly, in a process plant running equipment that is 30 years old, it’s not unusual to be using water at a pressure four times higher than necessary to suppress dust – a potential waste of both power and water.
Another great example is how poorly optimised the cooling systems are in many mining processes – if you’re using old, inefficient technology, it will be generating more heat than necessary, demanding more water and power to cool it. Another innovation that South African mining companies could look at is desalination plants to produce fresh water. They can use energy efficient solar sources or recaptured heat from other systems for this purpose.
Ensight Energy Solutions, which helps companies in energy-intensive industries such as resources to implement efficient solutions that reduce their energy costs and their carbon emissions, has worked closely with a number of mining companies on energy efficiency strategies. When we measure how this impacts on water usage the results are encouraging.
We helped one customer save around 143 000 MWh in energy a year through a range of strategies – this also reduced carbon dioxide emissions by 142 000 t and saved nearly 5 700 Mℓ of water (that’s enough water for 76 600 hippos’ annual water requirements).
Given the fragile water situation in South Africa, mining companies should embrace water efficiency both as an essential component of their risk management strategy and as a contribution towards ensuring the sustainability of our country. Using water efficiently can help organisations meet their energy efficiency and carbon emission goals; it is an integral part of running a responsible and sustainable business.
AFRICA has been gradually turning into a net importer of food, as countries have continuously failed to produce enough to cover their consumption needs.
Although agriculture remains the mainstay of many economies in the region, a consistently growing population and a little diversifying agricultural sector has seen an increase in demand for food, which cannot be met locally.
The continent is abundantly endowed with approximately 50 percent of the world’s uncultivated land, abundant fertile soils and favourable climate.
Yet it still fails to feed itself, depending mostly on imports.
Grains top the list of foods that Africa imports, especially wheat, rice and maize.
However, due to the massive volumes that are traded on the global market every year, grains attract more traders and speculators resulting in volatile prices.
But this has not deterred African countries that continue to buy.
A Support to Agricultural Research for Development of Strategic Crops (SARD-CS) meeting held last year, revealed that Africa spends approximately US$15 billion every year on grain imports.
SARD-CS co-ordinator, Dr Solomon Assefa, said it was unfortunate that Africa was spending billions of dollars to import food when it had the potential to be self-sufficient.
“Africa has huge arable land but cannot meet its potential. About 49 percent of the population in the region is living on less than US$1.20 per day. By addressing productivity, we will ensure people have decent lives. The US$15 billion being spent by Africa on importing food can be spent on other developmental programmes,” he said.
Market watchers have said Africa cannot reach its full economic potential without food security. They say the continent will remain poor as long as it continues to depend on other nations for food it can grow in its backyard.
And how can Africa address food self-sufficiency?
To be able to do this, there is need for greater private sector participation in the agricultural sector. If the private sector can join hands with government to come up with out-grower schemes that will benefit both the farmers and the company, economies will automatically benefit from a reduced import bill.
And contract farming is nothing new. It has existed since time immemorial.
In ancient Greece, the practice was widespread, with specified percentages of particular crops being a means of paying tithes, rents and debts. China and the United States also had such a practice at the turn of the century.
The concept has over the years been modified to benefit both the farmer and the contractor instead of favouring one partner.
According to the Food and Agriculture Organisation of the United Nations, the contract farming system should be seen as a partnership between agribusiness and farmers.
“To be successful, it requires long-term commitment from both parties. Exploitative arrangements by managers are likely to have only a limited duration and can jeopardise agribusiness investments. Similarly, farmers need to consider that honouring contractual arrangements is likely to be to their long-term benefit,” FAO said in a 2014 report.
One such arrangement has seen Dangote Group coming in to fund rice production in Nigeria.
Earlier this month, the group announced that its subsidiary Dangote Rice will launch a multi-million-naira rice out-grower scheme in Nigeria’s Sokoto state.
Dangote Rice projects when operational, are expected to generate a “significant number of jobs and increase income for smallholder farmers, all while diversifying Nigeria’s economy and reducing the nation’s food import bill”.
Official statistics in Nigeria show that rice demand stood at 6.3 million metric tons in 2015 but local production has been failing to satisfy that demand, only reaching 2.3 million tonnes.
The gap of about 4 million tonnes left by local production has been filled through rice imports.
Nigeria, along with South Africa, Senegal, Cote D’Ivoire, Ghana, Cameroon, Kenya, Tanzania and Angola are the continent’s top rice buyers, contributing to an import bill of more than US$3.5 billion every year.
But Africa has been growing rice for more than 3,500 years but due to the huge demand, local producers fail to meet demand.
So, if more companies can invest in rice production, the continent can significantly reduce that import bill.
Wheat has been part of the African every-day diet for decades. Wheat flour is used by bakeries and food processors across the continent to make bread, noodles, biscuits and several other pastries.
Up to 85 percent of wheat consumed in Africa is imported so Africa spends no less than US$6 billion on imports every year.
The leading importers are Nigeria, South Africa and Angola.
While Zimbabwe’s import bill is small compared to these big economies, it is still necessary to mention it.
Agro-processing firm, National Foods, has been investing into contract farming for wheat production, but this has not been enough to improve production to meet Zimbabwe’s requirement of between 350,000 and 450,000 tonnes of wheat per year.
This means that there is need for more firms to contribute towards wheat productions if that is to happen.
Contract farming schemes are also needed in maize production, which is a staple food for over 500 million Africans.
Africa produces roughly 50 million tonnes of maize every year, but still imports nearly 30 percent of its maize consumption. This is largely because most maize is rain-fed making it susceptible to droughts, as was the case last year when most parts of the continent, especially Southern Africa, were hit by the El Niño-induced drought.
More agribusinesses need to take up such schemes and correct the continent’s ineffective grain supply value chains.
This includes production, processing and marketing.
We have already seen such organisation in the brewing industry in Africa, which has been growing tremendously with several companies contracting farmers to grow their sorghum, barley, cassava and other grains used in beer production.
In Uganda, contract farming of sorghum for brewing purposes was first pioneered in 2008 by SABMiller. Sorghum-based beer now accounts for half of SABMiller’s 55 percent share of the Ugandan beer market.
In Zimbabwe, Delta Beverages last year injected more than US$4 million into its Beverages Sorghum Contract Farming Scheme (BSCFS) and received about 15,675 tonnes of the grain, which was more than enough to meet its annual requirement of 15,000 tonnes.
So if there is the same organisation in out-grower schemes for food crops, as there is in the brewing industry, we can begin to see a shift in Africa’s need to import.
6 September 2016 – A new United Nations report has indicated that global manufacturing growth is expected to remain low in 2016 due to weakened financial support for productive activities.
The quarterly World Manufacturing Production report, published by the UN Industrial Development Organization (UNIDO), has stated that with financial uncertainty still looming across Europe, foreign direct investment has not yet reached the 2007 pre-crisis level.
According to a UNIDO news release issued yesterday, world manufacturing output is expected to increase by only 2.8 per cent in 2016. However, in contrast to recent years, there will be no breakout from the low-growth trap in 2016.
The agency also warned that lower industrial growth rates pose a challenge for the implementation of Sustainable Development Goal (SDG) on promoting inclusive and sustainable industrialization and foster innovation, as encapsulated by Goal 9, which also aims to significantly raise the share of manufacturing in the economies of developing countries.
It further stated that that manufacturing production is likely to rise by only 1.3 per cent in industrialized countries and by 4.7 per cent in developing ones.
In terms of growth rates for countries, the growth rate performance of China, the world’s largest manufacturer, is likely to further decline from last year’s 7.1 per cent to 6.5 per cent this year. Russia and the United States recorded marginal rises of 1.0 per cent and 0.3 per cent, respectively.
Manufacturing output in Japan, however, fell by 1.8 per cent. India too suffered a sudden 0.7 per cent drop in growth figures. In contrast, other Asian countries largely maintained higher growth rates. Manufacturing output rose by 5.6 per cent in Indonesia, 3.9 per cent in Malaysia and 13.5 per cent in Viet Nam.
Additionally, in Europe, the uncertainty following the Brexit affected the growth rate performance in manufacturing in the second quarter of 2016, below 1.0 per cent for the first time since 2013.
Among Latin American economies, manufacturing output fell by 3.2 per cent in the second quarter, amid a continuing production decline in the region.
The report further noted that, based on estimates from the limited available, manufacturing output rose by 2.5 per cent in Africa. South Africa, the continent’s largest manufacturer, significantly improved its growth performance to 3.3 per cent in the second quarter. Higher growth rates of 8.3 per cent and 7.6 per cent were achieved in Cameron and Senegal.
In terms of growth estimates by manufacturing sectors, the report stated that the production of tobacco fell for the second consecutive quarter, declining by 2.6 per cent.
It also stated that developing economies maintained higher growth in the production of textiles, chemical products and fabricated metal products, while the growth performance of industrialized economies was higher in the pharmaceutical industry and in production of motor vehicles.
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London — Key emerging opportunities will be in the conversion of food waste to products such as plastics, fruit juices, food ingredients, and liquid fuels, finds Frost & Sullivan
The concept of food waste management (FMW) has gained traction with the declaration of food waste reduction as a target in the UN Sustainable Development Goals in 2015. Countries across the globe are showing greater interest in reducing as well as managing food wastage. The present gap between the amount of food waste generated globally and the number of storage and recycling facilities in operation translates to significant opportunities for the development of effective FWM technologies.
New analysis from Frost & Sullivan, Emerging Trends and Opportunities in Food Waste Management, finds that policies favouring food waste reduction in Europe and North America and the setting of global targets greatly aid the development of FWM technologies. The most popular methods for FWM at present are composting and anaerobic digestion. However, they do not help salvage unspoilt food from the food waste. These processes can also be energy intensive, substantially reducing the overall environmental benefits of FWM.
“Currently, there is a demand for technologies that can convert food unfit for human consumption to animal feed,” said TechVision Research Analyst Lekshmy Ravi. “Technology developers are simultaneously working on repackaging or repurposing food waste to food for human consumption using less energy-intensive solutions and employing novel management models.”
There are considerable research and industry initiatives for the conversion of food waste to products such as plastics, fruit juices and food ingredients. Additionally, innovative FWM companies are trying to convert food waste to valuable products such as liquid fuels.
While technology developers are looking to eliminate inefficiencies in FWM, it is also necessary to form strategic partnerships along the various links of the food supply chain. These synergies can help improve the efficiency of FWM and facilitate the exchange of technologies and techniques.
“Eventually, companies are likely to adopt models that enable the efficient and cost-effective extraction of valuable products from food waste,” noted Ravi. “Overall, key emerging opportunities are expected to be in the extraction of edible ingredients from food waste, conversion of misshapen fruits to saleable products, and conversion of byproducts from food production.”
Emerging Trends and Opportunities in Food Waste Management, part of the TechVision subscription, offers a detailed account of FWM’s global trends. It discusses various solutions for FWM and studies the various pathways that could be adopted, as well as innovative technology and management solutions. Our expert analysts have identified emerging business models for FWM and employed Porter’s Five Forces to analyse the various FWM pathways.
Frost & Sullivan’s global TechVision practice is focused on innovation, disruption and convergence and provides a variety of technology based alerts, newsletters and research services as well as growth consulting services. Its premier offering, the TechVision program, identifies and evaluates the most valuable emerging and disruptive technologies enabling products with near-term potential. A unique feature of the TechVision program is an annual selection of 50 technologies that can generate convergence scenarios, possibly disrupt the innovation landscape, and drive transformational growth.
South Africa has a lot to offer to the global electronics industry, such as top design engineers and world-class electronics manufacturing companies.
It is often said that the electronics manufacturing industry can play a bigger part in South Africa’s industrial development and grow the country’s exports – thereby creating more real jobs.
We have the technological expertise and skills but it seems that the Department of Trade and Industry (DTI) is hardly walking the talk.
A key element of the electronics manufacturing is the component suppliers. South Africa does not manufacture electronic components except for some transformers and of course printed circuit boards.
I met with Hannes Taute, the MD of Avnet South Africa to talk about the future of our country’s component supply industry and its effect on the electronic contract manufacturing industry.
“I believe that we are holding our own in a very tough economy. The biggest disappointment is the lack of government support for local companies and projects,” he said.
“A good example of this is the whole digital terrestrial television (DTT) rollout. If managed correctly this could have given the local industry a massive boost with lots of jobs being created.”
“The initial specification was for a locally designed and manufactured set top box (STB) – this has unfortunately changed. If this project eventually goes ahead only a small portion of the electronics manufacturing industry will benefit by assembling imported knock-down kits.”
Taute said that growth in the electronics manufacturing business mainly comes from innovative entrepreneurs who are developing their own products in the areas of safety and security systems, renewable energy control equipment and the lighting industry.
“There is no doubt that the economy is taking strain. We see it on all fronts and yet there are still companies coming up with innovative products that provide moderate growth for the electronic components supply industry.”
“I know there are views within the DTI that each sector should have its own member organisation to interact with them. I disagree with that. Some years back a lot of effort was put into reviving the South African Electronics Industry Federation (SAEIF). Unfortunately it failed.”
“The Association of Distributors and Manufacturers of Electronic Components (ADEC) decided to unite the industry and was renamed AREI (Association of Representatives for the Electronics Industry).”
“The idea was to bring together all industry players related to electronics manufacturing in some way. Coming from a strong base of distributors and suppliers, AREI is making progress and has signed up some of the largest electronic product manufacturers.”
“South Africa is rich with technical expertise and we should be exporting more of our local electronic production. Yes the component costs have gone up as we pay higher prices because of the weaker rand, but if you think about it, the other input costs are pretty stable so local electronic manufacturers should benefit from the weaker rand by making their products more competitive on the world market.”
“We have world class manufacturing facilities that we can really be proud of, manufacturing high tech products that are being shipped all around the world.”
Taute makes an interesting point. Given that South Africa produces electronic products of a very high quality, it is the volumes that need to increase.
As many of the processes today are automated, higher volumes will not materially increase labour cost. I asked him what he believes the local component industry can do to help contract manufacturers grow their business.
“Our offering enables companies to grow. The component supply industry needs to keep customers up to date with the latest technology to enable them to develop and introduce interesting products all the time.”
“Electronics is so fast-moving that if you look at a supplier base there are new products launched almost daily. From a semiconductor point of view there is a lot of consolidation and repositioning going on and it is important for us as a supply industry to keep our customers informed of these developments as it ultimately can affect their future production.”
At one time most component distributors had exclusive product lines. That has changed over the years as virtually all component distributors today have access to most manufacturers.
Taute says that the focus has changed from taking an order and supplying to quite complicated logistics.
“When a new product enters from the development and testing phase into production, the component supplier has to ensure that components are delivered just in time.”
“Today nobody wants to keep massive stock. It is a fine line to manage between the component manufacturers, the shipping agents, customs clearance and delivering what your customers require to keep production lines running efficiently without stoppages because a component is late.”
“Avnet has the necessary systems and logistic support to offer customers this type of service. It is also important to ensure that high quality products are supplied coming from legitimate component manufacturers.”
“Should something go wrong customers want to have the peace of mind that they have recourse to the manufacturer. Unfortunately our industry is still plagued by a lot of grey imports.”
The South African industry still suffers unfair competition fuelled by import duties on many items such as switches and other electro-mechanical components.
Taute said that it is ironic that a local manufacturer of a remote control unit has to pay duty on the switches used in the remote while the completed product from China can enter South Africa duty free.
“It is this kind of issue that needs to be addressed to grow our electronics industry by making local manufacturers more competitive. I know that AREI is continually working on this problem; government needs to understand the urgency for this to be resolved.”
Taute is positive about the future of the industry.
“I believe that South Africa has a lot to offer to the global electronics industry – top design engineers, and world class electronics manufacturing companies supported by leading electronic component suppliers.”
“By working together, support from the export council and AREI and with a more proactive DTI, I believe we can become an export industry of note. In this way we can create more real jobs. From the industry side they should support industry associations, take part in electronics shows and really showcase our local ability to the global market.”
“Together we can grow and develop our industry.”
Durban – A week of searing heat in KwaZulu-Natal did little to alleviate the province’s water woes, with service provider Umgeni Water saying dam levels continued to dip.
Spokesperson Shami Harichunder said that water resource availability remained “of grave concern”.
“Water shortages within the Umgeni Water operational area are as a result of a protracted drought, which has affected many parts of KwaZulu-Natal. Exacerbating the current situation are high temperatures, which cause evaporation of dam surface water,” he said.
Harichunder added that below average rainfall was predicted for the next four months.
“Information released by the CSIR suggests that the below-average rainfall pattern will continue to be experienced until the end of August 2016.
“This means that the amount of water currently available in dams that are owned or operated by Umgeni Water will have to be carefully managed in order to ensure that available water lasts until the next good rains arrive.”
He said that water cuts by municipalities would be key in managing the scarce resource.
“Management of water resources at times of absence of rainfall and simultaneous reduction of dam levels involves the application of a cut in potable water production at water treatment plants and introduction of restrictions by water services authorities,” he said.
Some of the world’s biggest iron ore miners are slashing ambitious production targets, a move likely to restore balance to the commodity’s skewed fundamentals and fuel price gains ahead.
On Wednesday, BHP Billiton, the world’s third-largest producer,lowered its 2016 output guidance by 10 million tonnes. The news comes a day after number two producer Rio Tinto cut its 2017 forecast by 20 million tonnes and left its 2016 global shipments estimate unchanged at 350 million tonnes.
Weather-related issues were broadly at fault after a cyclone hit Western Australia’s iron ore mining belt, called the Pilbara, earlier this year. Stalled production at Samarco, a company joint-owned by BHP and Brazilian miner Vale, following a deadly dam collapse last year also weighed on BHP’s results while Rio’s performance was hampered by a delay in the deployment of its driverless train technology.
“This is quite positive for the spot price. As more major miners cut production, concerns about oversupply could finally be cooling down,” Angus Nicholson, market strategist at IG, said.
The price of iron ore, a key steel-making ingredient, dropped nearly 40 percent in 2015 on the back of an enormous supply glut, but the mineral substance has since recovered most of those losses. Year-to-date, iron ore is more than 40 percent higher, having recently breached the psychologically important $60 level, on the back of improved demand from China, reflected by a 6.5 percent rise of iron ore imports in the first three months of the year.
Beijing is channeling its massive monetary and fiscal resources to stimulate a nation experiencing its slowest pace of economic growth in over two decades—stimulus that has yielded a noticeable recovery in property investment, industrial production and fixed asset investment. Data last week showed all three indicators logging robust gains in the first quarter of the year.
Because these sectors consume massive amounts of industrial metals such steel, the commodity market benefits.
With the added support of lower production from major miners, iron ore should be able to stay above $60 a tonne in the near-term, Nicholson said. Prices jumped to a six-week peak of $62.85 a tonne on Tuesday, according to the Metal Bulletin’s benchmark index.
“The price rise is sustainable. We probably will not see the lows of $30-$35 for a while and if we do see a correction, it would be a correction that I’d buy into,” said Jonathan Barratt, chief investment officer of Ayers Alliance Securities.
From a global supply-and-demand perspective, lower output targets were positive for the market because it created a sense of better balance, explained Shaw and Partners’ metals and mining analyst Peter O’Connor.
BHP and Rio’s combined lowered output will prevent 30 million tons of new supply from hitting the market. While that number may seem like a tiny drop in iron ore’s estimated 1.5 billion-tonne seaborne market, it could lead to a tighter market in 2017, O’Connor explained.
Another factor supporting the commodity’s price recovery was delayed spending on new projects, Nicholson noted. Rio has yet to make a investment in its Silvergrass mine in the Pilbara, which further limits the amount of new supply.
An important paradigm shift is underway. Over the course of last century, global trade was growing faster than global GDP (read: income). However, post-2008, this trend is reversing. Presently, world trade is growing more slowly than world GDP. Recent estimates by OECD in 2015 indicate trade figures for the G-7 group of countries fell by 7.1 per cent while trade figures for major emerging economies including Brazil, China, India, Indonesia, Russia, and South Africa slumped by 9.5 per cent.
This trend is worrisome. The beneficial effect of trade in increasing productivity and income growth is well known. Economies such as South Korea, Taiwan, and much of the South East Asian nations catapulted to a higher growth trajectory through trade. In fact, as evidence from China suggests trade has been instrumental in lifting millions out of poverty.
Economists argue four important reasons as to why growth in global trade is slowing down. First, the financial crisis in the US, and more recently in Europe has slowed down world trade. These two regions account for more than half of world trade volumes, and a slowdown in these regions will naturally have an impact on global trade. Second, with an economic slowdown there will be a concomitant fall in investment across national boundaries, which means lower trade.
Third, a slower intra-industry trade, particularly, those associated with the international fragmentation of production. A fall in investment flow negatively affects trade in similar in commodities such as cars, computers, air conditioners, and refrigerators. Finally, in event of slower trade growth, individual countries turns protectionist. Protectionism is becoming evident in terms of an increase in applied tariffs (although, keeping them below the rates countries bound at WTO) and non-tariff barriers (NTBs), mainly in the form of anti-dumping measures, sanitary and phytosanitary sanctions, and even through the provisions granting subsidies to domestic producers.
In the event of this global scenario, India has a lot to worry about. Recent trade data for India (April-February 2015-16) suggests, in dollar terms, cumulative value of exports were at $238.4 billion as against $286.3 billion during corresponding period a year earlier, registering a negative growth of 16.7 per cent.
Apparently, Prime Minister Narendra Modi’s aim to almost double goods and services exports to $900 billion in the next four years, and grabbing a 5 per cent share of global trade by 2020 (up from 1.7 per cent global exports share at present) seems overly ambitious. India’s largest export item, namely, refined petroleum products has fallen by 15 per cent, lowest in nine years. Interestingly, this fall is not only due to a fall in international crude price (as some experts would argue) but also because of declining export volumes. Growth of other important export items such as metal, electronics and machinery are also falling.
Interestingly, despite the Chinese economy slowing down, the export figures for China in 2014 was recorded at $2,342.3 billion in comparison to India’s $317.5 billion. If one takes into consideration items such as iron and steel, chemicals, machines and telecommunication equipment, textiles and clothing, where China and India compete with each other in international market, the former’s share in the world market is much higher.
Indian businesses are losing competitiveness due to high borrowing costs and because of country’s long-standing weaknesses such as bad infrastructure, red tape and corruption.
In this regard there are important lessons to be learnt from China. The relative success of China lies in its ability to provide better physical infrastructure and easy availability of cheap credit. Within infrastructure funding, the contribution of India’s private sector is only 36 per cent in comparison to China’s 48 per cent. This is notwithstanding the fact that China’s GDP is almost four times the size of India’s GDP.
In many instances, Indian exporters of edible items like rice, tea etc., find it difficult to ship their product from the nearest port of exit. For example, exporters in eastern India are forced to transport edible items by road to Kakinada – a port in Andhra Pradesh which offers mid water loading facilities – to avoid contamination. The congested Kolkata port handles export of iron ore and other metals scraps, items which cause pollution (read dust particles) and thereby expose edible items to the risk of contamination.
The Chinese government offers other goodies as well. On top of cheaper credit, Chinese manufacturing units also avail cheaper power, water and land. Besides providing these indirect subsidies, the government also gave differential subsidy. For example, production of staple fibres, meant for domestic consumption, attract lesser subsidy as compared to when it is used as an input for making exportables, like, polyester yarn. The special economic zones (attracting zero tariffs) were built with the idea of making China the assembly hub of the world – where inputs were imported from neighbouring Asia, assembled in China and thereafter exported to the rest of the world. Coupled with these, a much larger scale of operation by lowering per unit cost of production, explains China’s much higher share of world exports.
Lower transaction costs have also given Chinese exports a much-needed competitive edge. For example, it takes around 40 days to book a container for exports in India as compared to just one day in China. On the contrary, logistics costs in India are among the highest in the world at 13 percent of GDP. For instance, trucks in India have to pass through multiple checkpoints and stop at state borders to pay toll taxes and octroi, for inspections, etc. An estimate of the time taken at checkpoints shows that for a journey of 2,150 kilometres between Kolkata and Mumbai a truck had to stop at 26 checkpoints for as much as 32 hours. This torturous journey is likely to continue unless the government implements GST. With respect to ‘Trading Across Borders’, in 2013, India ranked 132 out of 189 countries, while Bangladesh, Nepal, Pakistan and Sri Lanka ranked 130, 177, 91, and 51, respectively.
Inadequate infrastructure is responsible for holding back GDP growth by roughly 2 per cent, or an annual hit of approximately $20 billion to economic progress. The government, on its part, has set a huge target of doubling investment in infrastructure from Rs. 20.5 trillion ($0.33 trillion) to Rs. 40.9 trillion ($0.65 trillion) during the twelfth five year plan period (2012-2017). To achieve this target, the government will require investment from the private sector.
Ease of doing business
Although reforms in India are taking place, they are far from complete. Companies face a maze of government orders, regulations, rules and procedures, which raise the cost of doing business in India. In its Doing Business Report-2015, the World Bank placed India in the 142nd position out of a sample of 189 countries, with a ranking that is worse than China, Sri Lanka, Bangladesh, and Pakistan when it comes to the convenience of doing business. The Doing Business Report-2016, saw India’s performance improved, moving up by 12 places to 130th position, mainly because Central government specifically stepped in to improve the ease of doing business in Delhi and Mumbai (as opposed to the rest of India) – the two cities where World Bank observers undertake surveys to examine the ease of doing business.
Even in terms of productivity and efficiency, India needs to improve. According to the APO Productivity Database 2014, average Total Factor Productivity (TFP) growth in India rose from 2.0 per cent in 2000-05 to 4.7 per cent during 2005-10, but fell to 0.9 per cent in the following two years. However, for China average TFP growth was 3.9 per cent during 2000-05, rising to 4.2 per cent during 2005-10, and falling to 2.1 per cent over the next two years. During 2010-12, while TFP contributed 11 per cent to GDP growth in India, its share in China’s GDP growth was 26 per cent. Average TFP growth over the last four decades in India has been 1.4 per cent as compared to 3.1 per cent in China.
Equally important is to undertake a more effective stance at regional trading forums. The South Asian Free Trade Area (SAFTA) has met with limited success. Negotiators from ASEAN regions accuse Indian policymakers of not willing to give them market access to items originating from ASEAN countries. Most of the tradable items are under negative lists (outside the purview of basic zero custom tariffs). India-Japan CEPA has resulted in limited gain for services involving movement of professionals such as nurse and yoga teachers, and trade in Indian generic pharmaceutical products. India policymakers need to indulge in more effective negotiation to sell our Mode 1 and Mode 4 services, areas where we have a comparative advantage.
Despite the lower-for-much-longer oil price outlook, integrated chemicals and energy company Sasol is remaining focused on executing growth projects in Southern Africa and North America as part of a dual regional strategy. In presenting 63%-lower earnings attributable to shareholders in the six months to December 31, outgoing Sasol CEO David Constable gave details of Sasol’s expansion in neighbouring Mozambique, where it had obtained Council of Ministers’ approval for a field development plan that would monetise more hydrocarbon resources in support of Southern Africa’s growth objectives. (Also watch attached Creamer Media video). “The Mozambican gas industry is playing an increasingly important role in the regional energy landscape,” Constable said at the company’s latest presentation of financial results, attended by Creamer Media’s Engineering News Online. The production agreement’s $1.4-billion first phase involved an integrated oil, liquefied petroleum gas and gas project next to the company’s existing production agreement area.
Against that background, R2.7-billion was being invested in the Loop Line 2 natural gas pipeline project to increase the capacity of the Mozambique-to-South Africa gas pipeline to 191-billion cubic feet a year from the second half of this year. In South Africa, beneficial operation was expected at the Shondoni coal project in Mpumalanga in the first half of this year and at the R13.6-billion second-phase Sasolburg wax expansion in the first half of 2017. In the United States, $3.7-billion had been invested to date in the ethane cracker and downstream derivatives complex at Lake Charles, where detailed engineering was advanced and underground civil work was nearing completion. To support the company’s response plan to the lower oil price, the decision had been taken to pace the execution of the cracker project, with the proposed schedule extension expected to optimise field efficiency still further and limit the spend rate. A phased commissioning of the cracker was expected in 2018 and full beneficial operation of the smaller derivatives units in 2019. “By optimising cash flows, we’re managing our gearing and credit rating, ensuring continued balance sheet strength, protecting our dividend policy and driving resilient earnings,” said Constable – who will be succeeded by joint CEOs Bongani Nqwababa and Stephen Cornell on July 1. The dual strategy was designed to augment Sasol’s other business activities in Eurasia, Middle East and the rest of Africa. Overall, the company was going all out to ensure that its balance sheet and earnings remained resilient at an oil price of $30/bl.
3 March 2016, Rome – The FAO Food Price Index was stable in February, as falling sugar and dairy prices offset a substantial jump in vegetable oil prices from the previous month.
Averaging 150.2 points for the month, the FAO Food Price Index was virtually unchanged from a revised 150.0 points in January and down 14.5 percent from a year ago.
FAO also issued its first forecast for the world’s 2016 wheat harvest, projecting 723 million tonnes of total production, about 10 million tonnes below last year’s record output.
The FAO Food Price Index is a trade-weighted index tracking international market prices for five key commodity groups: major cereals, vegetable oils, dairy, meat and sugar.
Diverging from February’s generally stable trend was a sharp increase in the FAO Vegetable Oil Price Index, which rose 8.0 percent from the previous month. That was led by a 13 percent surge in palm oil, which gained on reports of falling inventories and a poor production outlook in the near future. Soy oil prices also firmed as a result.
But other staple commodities more than absorbed that rise. The FAO Sugar Price Index declined 6.2 percent from January, buoyed by strong global inventories and improved crop conditions in Brazil, the world’s largest producer and exporter.
The FAO Dairy Price Index fell 2.1 percent on the month amid sluggish imports, especially by China.
Prices of the world’s staple grains were broadly stable. The FAO Cereal Price Index inched down only around half a percentage point from the previous month but was 13.7 percent lower than a year earlier. Wheat prices fell 1.5 percent, maize prices slipped only slightly, while rice prices rose modestly.
Meanwhile, the FAO Meat Price Index rose slightly, buoyed by supply constraints for beef from Australia and the U.S. as well as support for private storage of pig meat in the European Union. Poultry prices fell, reflecting lower feed costs.
Strong 2016 wheat harvests seen in China and South Asia
FAO’s latest Cereal Supply and Demand Brief forecasts a 1.4 percent drop in worldwide wheat output in 2016, due mainly to dry weather leading to reduced winter plantings in the Russian Federation and Ukraine. However, China and Pakistan are expected to sustain near-record wheat harvests, and India’s output is anticipated to recover.
FAO also trimmed its estimate of last year’s total cereal production to 2 525 million tonnes, reflecting updated wheat production estimates from India and revised output figure from the Islamic Republic of Iran.
Estimates were also lowered for last year’s world output of coarse grains and rice due to developments in Asia. Combined world cereal production in 2015 is now seen at around 1.4 percent below the record level reached in 2014.
Global cereal stocks are likely to amount to 636 million tonnes by the close of seasons ending in 2016, nearly unchanged from their already high opening levels, but down 6.2 million tonnes from the previous month’s forecast. The revision mostly reflects reduced wheat inventory forecasts for the Islamic Republic of Iran and Uzbekistan, largely resulting from adjustments to historical stock numbers of both countries.
The world cereal stock-to-use ratio, a leading indicator of global world food security, still stands at a relatively high level of 24.7 percent.
FAO now expects world trade in cereals to decline by 2.0 percent in volume terms in 2015/16 from the previous season. That mostly reflects shrinking demand for wheat and barley, more than offsetting firmer demand for rice.