Unstructured Finance

Hurry boy, it’s waiting there for you!

Sick of hearing about China and Brazil? Just a little bit worried about all the money flooding into emerging market funds this year? Sceptical that South Korea can even be classed as an emerging market anymore? Why not try Africa?

If there was one thing that speakers at this week’s CFA Institute European Investment Conference all agreed on it was that Africa could be the next big thing for the daring investor.

Both leading economist Nouriel Roubini and Lars Christensen, head of emerging markets research at Danske Bank, believe Africa offers a viable alternative to crowded emerging markets, with economic growth likely to be driven by industrialisation and political and market reforms.

Foreign direct investment has picked up since 2000 with the Chinese building roads, ports and railways so that they can extract sought-after commodities from the interior.

Christensen cited Kenya, Mozambique, Angola and Tanzania as some of the most interesting opportunities, as these are introducing market reforms and have enjoyed growth throughout the financial crisis. “Uganda is also a good story. We are seeing the development of a financial sector in some of these markets.”

Quicker to get Out of Africa

With liquid hedge fund strategies so much in demand, Insparo Asset Management is shortening the redemption terms on its $165 mln Africa & Middle East fund because it ended up buying assets that were more liquid than it had originally expected.

Investors will be able to withdraw up to 25 percent of their cash per quarter, meaning they can fully exit the fund in a year should they wish — surely a welcome move, given it previously took two years.

Nevertheless, as with any hedge fund, it remains to be seen how it would fare should another credit crisis-type scenario occur, when buyers suddenly disappear, even in markets that are normally fairly liquid.

Millions Fed: some solutions close at hand

More than a billion people go hungry each day — about the same number as did in the late 1950s. That’s both a “tragedy on a grand scale” and an “astounding success,” according to a new report called “Millions Fed,” produced by the International Food Policy Research Institute and the Bill and Melinda Gates Foundation.
While the absolute number of hungry people is the same as it was 40 years ago, the proportion is dramatically smaller — one in six today, compared to one in three then, the report said. It illustrates 20 successful case studies where progress has been made in the fight against hunger.

Some solutions come from science: new varieties of wheat, rice, beans, maize, cassava, millet and sorghum. Others deal with markets, government policies, or the environment.
Two farmers from the Sahel region of Africa, oft plagued by drought and famine, visited Washington last month to talk about solutions they found close to home — one of the success stories trumpeted in “Millions Fed.”
Almost 30 years ago, farmers in Burkina Faso experimented with a traditional technique called “zai,” digging pits in their plots and adding manure to improve soils before the rainy season, resulting in dramatically better yields.
Yacouba“There was a long period of drought in my village,” Yacouba Sawadogo told reporters. “Many people left because their life was very, very difficult. But I decided to stay,” he said, explaining how he taught others the technique.
In Niger, farmers manage trees on their land to prevent erosion, improve yields, and provide livestock fodder. Before, women had to walk 6 miles to get firewood, but now they have enough for themselves and to sell to others, said Sakina Mati, who coordinates tree projects in six villages.
The projects have improved 13 million acres of farmland and fed 3 million people, said Oxfam America, a development group that works with the farmers.
It’s food for thought as rich nations ramp up efforts to help small farmers grow more food in poor countries. “In our approach toward solutions and programs, we really need to listen as well as talk,” said Gawain Kripke of Oxfam.
“Solutions don’t always come from us.”


PHOTO CREDIT: Yacouba Sawadogo on his farm in Burkina Faso /Courtesy of Oxfam America

Less talk, more action needed on food security

World Food Day is Friday, and on opposite sides of the developed world, two large groups of experts have gathered to talk about the risks of food insecurity and what should be done to reduce hunger. In Rome, the UN’s Food and Agriculture Organization is mulling how to feed the world in 2050, and in Des Moines, Iowa, the World Food Prize forum will focus on the role of food in national security.

Last year’s spike in food prices raised the political profile of food security. G8 nations and the United States have pledged money and action. I spoke with Per Pinstrup-Andersen, an agricultural economist at Cornell University and a Food Prize laureate, to get his take on what that means. Here are some excerpts. 
pinstrup_andersenQ. What do you think is different now in terms of the political will to address this problem? 
A. I think there is an increase in the political will. However, past initatives or past rhetoric of that kind didn’t really result in much action. I’m very concerned that we’re going to see a lot of additional rhetoric and a lot of plans being designed and discussed during the next year or so, but probably not very much action. Insofar as developing country governments are concerned, I doubt if the political will has changed at all. There is a lot of talk. But unless the developing country governments decide to prioritize the eradication or at least the amelioration of poverty, hunger and malnutrition, not much is going to happen.

The best way of doing that in the long run is to invest in rural areas, in infrastructure, in agricultural research, in primary health care. Look, we know what needs to be done, it’s not a big secret, it’s just that the governments have other priorities. The World Bank can put in a lot of money, and so can the bilaterals, but for this to have a sustainable impact, the governments of these countries have to step up to the plate. 
Q. What can be done to encourage that to happen? 
A. I wish I knew. The governments of most developing countries — and it’s not all of them — are ignoring the Millenium Development Goals, they’re ignoring the World Food Summit goals. Their main concern is to maintain legitimacy so they can hold on to power, and the rural poor are not threatening them. 
Q. In the face of that, what can donor countries do to make the best of their investment? 
A. I think all we can really do from the outside is to try to make up for the deficiencies of the national governments by bringing some money and some technical assistance to bear on these problems and to try to convince governments to work with us on this so that over a period of time the government will gradually take over these things. 
cQ. How do you think the new U.S. food security initiative will play into global efforts to address hunger? 
A. One of my concerns is that we once again are going to spend a lot of time and effort and money on developing plans. We’ve got so many plans developed for almost every country in the world. We now need to pick them up and put them into action.

Starbucks to sell exclusive Rwanda coffee in UK

howardbeans1Starbucks will start selling a high-grade variety of fair trade-certified Rwandan coffee in Britain and Ireland next year as part of its effort to source more fair trade beans across East Africa. 

The world’s biggest coffee chain has pledged to have all coffee sold in its 700 British and Irish outlets fair trade-certified, which would make it the largest purchaser of such coffee in the world. 

Coffee represents Rwanda’s biggest foreign-exchange export earner in an economy which has been rebuilt following the 1994 genocide of 800,000 people.

A food czar could bring sexy back to agriculture

It seems if you got a problem in Washington today, you need a Czar to take care of it. And now some powerful U.S. senators believe the agriculture sector should get one to sharpen efforts to feed the world’s poor.
foodaid3Former Agriculture Secretary Dan Glickman told lawmakers on Tuesday that too often agriculture takes a back seat to other “sexier” issues in policymaking, but it must be a priority if the country hopes to address global hunger and malnutrition.
“It is not a secondary factor,” Glickman said before the Senate Foreign Relations Committee.
Senator Dick Lugar, the Republican leader of the committee, supported appointing a White House food coordinator to take on raising agriculture and food aid’s prominence.
This “food czar” would be tasked with coordinating efforts between the U.S. Agency for International Development, the U.S. Department of Agriculture and other agencies involved in food aid and agriculture production.
The need for a food czar doesn’t seem as far stretched when considering recent events that have nudged agriculture over into the realm of a national security issue.
Soaring food prices last year sparked food riots and led to political instability in some parts of the world. The threat of violence and coups continues as the recession makes it increasingly difficult for even more people to buy food.
A food czar could possibly mitigate future riots by improving the United States’ role in making other nations self-sufficient in agricultural production, an area some say the country has failed in. 
In fact, U.S. efforts to address the long-term challenge of persistant malnutrition earn an ‘F,’ according to political science professor and author Robert Paarlberg.
He said U.S. agriculture assistance to Africa has plummeted 85 percent since the 1980s. “So as things have been getting steadily worse in Africa, the United States goverment has curiously been doing steadily less,” Paarlberg said.
A food czar, Lugar said, would have the difficult job of addressing this conundrum.

Photo Credit: Reuters/Luc Gnago (Farmers in Cote d’Ivoire work on a rice field); Reuters/Alberto Lowe (Riot police clash with Panamanians over food prices in Panama City); Reuters/Margaret Aguirre (A child in Ethiopia is severely malnourished due to widespread starvation brought on by drought and soaring food prices)