As militant attacks get closer, Katarina Höije tells the story of a Malian town defiantly continuing its annual tradition of replastering a mosque. Here is :
An Ancient Mud Mosque Annually Restored
Rickety plastic chairs and tables line the winding streets around Djenné’s main square, where the mosque looms over the town’s low mud-brick houses. There are plates of riz au grastasty rice with meat and vegetables—and chilled soft drinks. Ivorian Coupé-Décalé music reverberates on soft mud walls. Djenné, a town of about 35,000 in the central region of Mali, is famous for its traditional mud-brick architecture and its UNESCO-protected mosque. Fifty-two feet (16 meters) high and built on a 300-foot-long (90-meter) platform to protect it from flooding, the mosque is the world’s largest mud-brick building.
Young men and boys run down the front steps of the mosque after dropping off baskets of mud. (Photo: Annie Risemberg, The New Traditional)
Touching up its walls each year—crépissage, the French word for ‘plastering’—is a proud and exuberant ritual that involves the whole town. “The crépissage is the most important event of the year, even bigger than Eid al-Fitr, Tabaski (the Malian equivalent of Christmas), and marking the end of Ramadan,” says Yaro, a 30-year-old lawyer and host of the celebration known as ‘la nuit de veille.’ Sitting under a tarpaulin strung between two neem trees, Yaro watches as the crowds sway through the street.
The partygoers won’t sleep until after the event. The revelry will strengthen them ahead of tomorrow’s big task, Yaro claims, sipping a soft drink. “Tonight we party, and tomorrow we will celebrate our mosque and Djenné’s cultural heritage.” The residents of Djenné come together to put a new layer of clay on their mosque every April, just before the rainy season. The crépissage is both a necessary maintenance task to prevent the mosque’s walls from crumbling and an elaborate festival that celebrates Djenné’s heritage, faith, and community. It’s also an act of defiance.
The increasing instability in Mali’s central region—fueled by inter-tribal conflicts and growing numbers of militant and jihadist groups exploiting the absence of state security forces—now threatens Djenné and its sacred annual ritual. Local militants—some linked to the Group for the Support of Islam and Muslims (JNIM), formed by the 2017 merger of several extremist groups operating in Mali—have invaded towns, destroyed markets, and spread their influence in central Mali.
A group of women carrying water needed for the mud mixture. Men and boys are responsible for bringing the mud to the mosque, while and women and girls are tasked with bringing water from the river. (Photo: Annie Risemberg, The New Traditional)
So far, Djenné and its mosque have been spared, but the security situation in the region continues to deteriorate, and more frequent attacks are being carried out in Djenné’s orbit. “We knew that the militants were getting closer to Djenné,” says town chief Sidi Yéya Maiga at his home the day before the crépissage. This year the town council even took the extraordinary step of debating whether or not to cancel their cherished tradition.
In an act of collective resistance, they decided the show must go on. On the day before the crépissage, Nouhoum Touré, the master among Djenné’s 250 masons, heads down to the riverbank to check on the mud that has been left to soak for 20 days.
The crépissage is the most important event in Mali. (Photo: Annie Risemberg, The New Traditional)
It’s the height of the dry season, and the river has shrunk to shallow puddles and inlets. The round pools that store clay until it’s time for the crépissage look like pockmarks on the riverbed. The mud comes from further down the river and is transported here by trucks and donkey carts. Younger masons then break the blocks into smaller chunks and mix them with water. In the final stages, rice husks are added to the mud, turning it into a soft and sticky paste. The rice works like a glue, holding the mud together and keeping it from cracking as it dries. The young masons then carry the mixture, in wicker baskets, to pits in front of the mosque in preparation for the event.
Early in the morning on the long-awaited day of the crépissage, Djenné’s residents gather by the mosque and wait for Touré to smear the first blob of mud on the wall. This is the starting gun.
There is a roar from the crowd as dozens of young men—some masons, some apprentices—run to the mosque. Smaller groups of boys raise wooden ladders against the mosque wall. Carrying wicker baskets full of dripping-wet clay from the pits next to the mosque, the young men begin scrambling up the façade, using ladders to reach the wooden poles protruding from the walls. Perching perilously on the wooden scaffolding, they pick up large blobs of clay and smear them on the walls.
The Djenné mosque the day before the crépissage. (Photo: Annie Risemberg, The New Traditional)
Nientao, the mosque’s guardian, weaves through the crowd, his pockets filled with sweets for the workers. Thousands of muddy feet trample the paths around the mosque. As the sun begins to rise over Djenné, turning shapeless shadows into dark silhouettes, a group of boys and masons tackle the minarets from the roof of the mosque.
Four hours later, the morning sun shines on the newly plastered mosque. Dark, wet clay patches on the dried mud give it a sickly look. Touré is covered in mud all the way from his plastic sandals, which have miraculously stayed on his feet, to the top of his turban. “I think we did very well,” he says, sitting in the shade of the mosque. “Normally, we re-mud the mosque over two days. This time we managed to get it done in only one day.”
Residents carrying mud, from pits to the mosque ahead of the crépissage. (Photo: Annie Risemberg, The New Traditional)
A little later, there is a crack as the loudspeakers come on, then the sound of Djenné’s mayor, Balfine Yaro, clearing his throat. Everyone looks on in silence as he makes his way to the front of the crowd. He declares Djenneka Raws the winning team. Djelika Kantao and Yoboucaïna have prevailed. For the winners, there is pride, honor, and a cash prize of 50,000 West African francs, or about $90 (€80). “With the money,” says Kantao, beaming with pride, “I will buy new solar panels for the neighborhood, so we no longer have to live in darkness.”
Delve into a world of traditions being kept alive unique individuals through The New Traditional. This story and images are featured in the book.
Arab News tells us How Middle East’s coronavirus crisis threatens the environment too. Let us see what all is this about. How different is it to North Africa, say to Libya?
The importance of hygiene has led to an exponential increase in use of disposable plastic products
COVID-19 may have set the world back on a slippery slope with regard to overuse of plastic products
DUBAI: The COVID-19 pandemic has set the world back on the slippery slope of plastic overuse, just when it seemed as if plastic reduction was becoming an achievable goal, experts fear.
The priority of hygiene to combat the spread of the virus has led to a sharp increase in the consumption of disposable plastic products — gloves, single-use water bottles, cutlery, packaging and medical supplies — across the world.
In some Gulf cities, many dine-in customers are being served up to three plastic plates, cups and sets of cutlery for a single three-course meal.
“It’s a disaster,” said Tatiana Antonelli Abella, founder and managing director of the UAE-based green social enterprise Goumbook. “The pandemic has undoubtedly impacted every aspect of our lives, from work to school and our daily tasks.
“It is unfortunate that sustainable practices that have taken a lot of work to implement have now been replaced, due to sanitization (requirements), by the use of single-use plastic bottles, cutlery and crockery in restaurants and delivery services.”
Last year, some communities across the UAE banned plastic use in restaurants, while supermarkets planned to charge customers for their plastic bags. Almost overnight, the initiative has taken a back seat.
“It is a contentious matter, as many would argue against any evidence that using reusables, if sanitized correctly, could in any way be dangerous,” Abella told Arab News.
“Dish-washing machines, high temperatures and dish soap have always been 100 percent efficient (as sanitizers) and always will be. And most of the plastic used is also not fully recyclable.
“Unfortunately, if plastic is not properly washed and cleaned, it is considered contaminated and will end up as general waste in landfills.”
Other sustainability experts concur. “If restaurants clean their tableware and cutlery with hot water and detergent after every use, there is no need for single-use items,” said Amruta Kshemkalyani, a UAE-based sustainability adviser and founder of Sustainability Tribe.
“Restaurants just need to pay extra attention to their tableware cleaning process. COVID-19 shouldn’t be used as an excuse to create unnecessary waste and harm the environment.”
Peter Avram, director of the Dubai-based Avani Middle East, which produces disposable packaging solutions and compostable plastic alternatives, said there had been a surge in the use of disposables during the current pandemic.
“Regrettably, due to the current economic situation, plastic is being preferred to the eco-friendly options simply because of costs,” he said. “Eco-friendly disposables are 20 to 30 percent more expensive.”
The UAE consumes an average of 450 plastic bottles of water per person per year – or more than four billion bottles annually.
“It hurts to see so many years of hard work from environmental organizations going ‘to waste’,” Abella said. “The relaxation on the [consumption of] single-use plastics, even if temporary, could quite likely have long-term consequences on consumer behavior.”
When Kshemkalyani started a zero-waste lifestyle in 2015, almost no restaurants and cafes in Dubai were aware of the concept of serving food and drinks in reusable containers.
The environmental cause is expected to return to the foreground when the crisis passes.
Peter Avram, Director of Avani Middle East
Since then, the #zerowasteUAE social initiative and Sustainability Tribe have made tireless efforts to bring awareness to the community on waste issues.
“Now, in the name of hygiene and convenience, if the disposable culture gets popular again, it will be a big hurdle in society’s progress towards sustainable habits,” she said, especially when there is no evidence that a switch to single-use items is imperative during COVID-19.
Kshemkalyani questioned whether restaurants are recycling their plastic waste or just dumping it. “We do not want more waste in landfills that will further contaminate and pollute our land, water and air,” she said.
“Restaurants can start using their reusable serving sets and intensify the right cleaning and hygiene procedures. Instead of spending on single-use items, they have an opportunity to keep their manpower and use it wisely for intensified cleaning – this would also help employment.”
Kshemkalyani also recommended that restaurants allow customers to bring their own plates, cutlery and glasses. “Restaurants can also use environmentally friendly disposables, like palm leaf and wood [cutlery], as a temporary measure,” she said.
According to Abella, “It is important to keep the conversation going to use your consumer power to campaign for these changes.”
Although some outlets are seeking to offer alternatives, consumers should also vote with their wallets and ask restaurants to use sustainable alternatives, she said.
She said: “We should try to cook more at home and, if need be, choose restaurants that make an effort to serve their food in eco-friendly packaging.”
She pointed to the trend of people ordering more items than usual during the lockdown, with many of the items delivered in plastic containers, “wrapped in plastic and bagged in more plastic.”
Avram said that sustainability and recycling efforts must continue, pointing to the uptick in home composting procedures that many residents have begun to undertake to dispose of eco-friendly takeaway items.
“That has been very encouraging,” he said. “It is expected that the environmental cause will return to the foreground when the crisis has passed.”
Shams Hasan, air quality and corporate environmental responsibility expert at Envipro Consulting in the US, told Arab News: “The COVID-19 pandemic has created strange problems. Plastic items that were being phased out are at least temporarily back in use. The … fear is that during any crisis, society will start looking at an easy way out and apply ‘band-aid’ solutions instead of working on long-term strategies and solutions.”
Kristin Hughes, director of Global Plastic Action Partnership and a member of the executive committee, World Economic Forum, pointed to the challenge facing the world.
“We stand at the junction of two diverging paths,” she said. “One is a stop-gap solution that puts us solidly on track toward a not-so-distant future in which there is more plastic in the ocean than fish. The other is a sustainable model of living and working that will benefit us long into the future – one that will create a healthier, more equitable and more livable future for all.”
Authors Olivia Macharis is a researcher at the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut and Nadim Farajalla is Program Director of the Climate Change and Environment Program at the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut. They came up with this realistic picture of the Middle East’s Threat Multiplier. It is published on Project Syndicate of 12 June 2020.
The picture above is that of An Egyptian boy holding bread and flashing the victory sign shouts slogans at Cairo’s Tahrir Square on April 1, 2011 as he joins tens of thousands of Egyptians who gathered, issuing calls to “save the revolution” that ousted president Hosni Mubarak and to rid of the country of the old regime. AFP PHOTO/STR (Photo credit should read -/AFP/GettyImages)
Although many factors contributed to the mass protest movements in Iraq in recent years, and in Egypt a decade ago, climate change was the common denominator. By exacerbating endemic problems such as water scarcity and food insecurity, global warming threatens to plunge an already unstable region into the abyss.n Egyptian boy holding bread and flashing the victory sign shouts slogans at Cairo’s Tahrir Square on April 1, 2011 as he joins tens of thousands of Egyptians who gathered, issuing calls to “save the revolution” that ousted president Hosni Mubarak and to rid of the country of the old regime. AFP PHOTO/STR (Photo credit should read -/AFP/GettyImages) Survey the Middle East and North Africa (MENA), and you will find no shortage of crises, from escalating tensions between the United States and Iran to the cycles of violence in Libya, Syria, Yemen, and elsewhere. Countless young people across the region feel a sense of despair as they confront the daily realities of poor governance, economic immobility, and sectarian violence. Now, the COVID-19 crisis is putting increasing and unprecedented pressure on the global economy, state institutions, and livelihoods. It has also highlighted the dire consequences of health, social, and economic inequality. And as bad as these problems are on their own, all will be exacerbated and magnified by an even larger crisis: the devastating impacts of climate change. With its largely arid conditions, the MENA region is particularly vulnerable to the physical impacts of climate change. It is one of the world’s most water-scarce regions, with a high dependency on climate-sensitive agriculture. Along with rising temperatures, the region is already experiencing a wide range of deteriorating environmental conditions, including decreased rainfall in Iraq, longer droughts in Syria, more severe flash flooding in Jordan and Lebanon, increasingly intense cyclones in Yemen and Oman, and rising sea levels. There is also evidence of rapid desertification regionwide, as well as unprecedented heat waves and increasingly frequent and intense dust storms. Looking ahead, researchers warn that summer temperatures in the region will increase twice as fast as average global temperatures. This will lead to increased evaporation rates and accelerated loss of surface water, which will reduce the productive capacity of soils and agricultural output. Projections by the Intergovernmental Panel on Climate Change also warn of rising sea levels and an increase in the frequency and intensity of extreme weather events. In large parts of the region, the combination of worsening heat waves and increasing air pollution owing to sand and dust storms will likely compromise human habitability and force people to migrate. Climate change not only has serious implications for the environment and public health, but also for economic growth, livelihoods, and peace. Climate-induced impacts have the potential to reinforce factors that lead to or exacerbate conflict and instability. For one, resource scarcity may undermine the livelihoods of vulnerable households and communities, potentially leading to increasing competition, which may turn violent in the absence of conflict resolution institutions. Most vulnerable are fragile states and communities with a history of violence. In Iraq and Syria, the occurrence of devastating droughts between 2007 and 2012, combined with governments’ inability to provide relief to vulnerable populations, favored radicalization and recruitment efforts by jihadist militias, including the Islamic State. Other risks of conflict arise when growing resource scarcity is met with inadequate government action, which may cause grievances among the population and increase tensions along ethnic, sectarian, political, and socioeconomic lines. Water scarcity and contamination have already triggered recurrent protests in Iraq, and rising food prices have fueled protest movements in Egypt and other countries. The region desperately needs to start developing and implementing more robust adaptation strategies before it is too late. UNPREPARED FOR THE WORST Most countries in the region are woefully behind when it comes to preparing for the physical effects of climate change on the environment and for the socioeconomic effects on much of the population. Many governments are unable or unwilling to tackle issues related to poverty, slow and unequal economic growth, high unemployment, lack of basic services, and widespread corruption. Instead, the region’s governments have long relied on what political scientists call the “authoritarian bargain,” an implicit contract in which the state provides jobs, security, and services in exchange for political loyalty (or at least obeisance). This contract assumes that the population will remain politically inactive. But protest movements over the last decade, from the Arab Spring to more recent demonstrations in Algeria, Iraq, Lebanon, Jordan, and other countries, have shown that people across the region want to renegotiate. In many countries, the protests are the result of worsening economic and political conditions, many of which stem from strained government resources that have led to a decline in the provision of public services. With climate change projected to put additional pressure on water and food security, livelihoods, health, and overall living standards, public discontent is likely to keep growing in the coming years, resulting in a heightened risk of political instability and conflict. The linkages between climate change, resource scarcity, and social unrest are of course complex. Examining two cases – one dealing with water scarcity and contamination, the other with rising food prices – can help shed urgently needed light on these dangerous dynamics. WATER POLITICS IN IRAQ A good place to start is by considering Iraq’s water resources, which have been under increasing stress for more than three decades. As a result of both natural and anthropogenic causes, water quantities have decreased and water quality has deteriorated. The natural phenomena include increasing climate variability and lower annual precipitation, resulting in a lack of snowfall in the headwaters of the Tigris and Euphrates. The anthropogenic causes center around increasing water demand, inadequate government policies, and dam-building by upstream neighbors Syria, Turkey, and Iran. The Tigris and Euphrates are Iraq’s most important sources of freshwater. These twin rivers converge in al-Qurna, in the southern Basra governorate, to form the Shatt al-Arab River and drain toward the Gulf (see map). Both rivers originate in Turkey, with the Euphrates cutting through Syria before reaching Iraq. Several of the rivers’ tributaries originate in Iran, with the Greater Zab, the Lesser Zab, and the Diyala flowing into the Tigris. In total, more than 50% of the country’s renewable water resources originate outside of its borders.
Of particular concern to Iraq is Turkey’s controversial Southeastern Anatolia Project (GAP), which is located at the Euphrates-Tigris Basin in the upper-Mesopotamian plains. At an estimated cost of $32 billion, the GAP is one of the world’s largest river-basin development projects. Other serious concerns include Iranian dam-building activity and an expected increase in Syrian water usage. Regional cooperation to improve water management is limited, and political negotiations have so far fallen short of concluding a legally binding, comprehensive, and long-term agreement. On the domestic front, while rapid population growth, urbanization, and increasing industrial production have driven up water demand, decades of conflict and sanctions, along with inadequate government policies and the lack of a regulatory framework for sustainable water management, have undermined investment in supply. The main challenges include chronic deterioration of infrastructure, inefficient irrigation and drainage, lack of water treatment facilities, and weak regulation of agricultural runoff and discharges of sewage, industrial waste, and oil byproducts. In addition, the continuous decline in the water levels of the Shatt al-Arab has led to severe saltwater encroachment from the Gulf into the river. DISASTER AREA Basra, a port city with direct access to the Persian Gulf, was once glorified as the “Venice of the East” for its myriad of freshwater canals lined with palm trees. The surrounding governorate accounts for most of Iraq’s oil production, with nearby West Qurna considered to be one of the world’s most lucrative oilfields. But these strategic assets have not benefited the public, because government mismanagement and negligence have turned Basra into a decrepit and dysfunctional city, plagued by strained utilities and broken infrastructure. Its waterways have become open sewers that are poisoning the population. In the summer of 2018, Basra became the epicenter of an environmental and socioeconomic disaster that threatened the stability of the entire region. In July, Iraqis took to the streets to demand basic services such as clean drinking water, electricity, jobs, and an end to pervasive corruption. Then, in August, an outbreak of gastrointestinal illnesses, most likely caused by water contamination, sent tens of thousands of people seeking medical assistance in increasingly overwhelmed hospitals. Later that month, the UN-affiliated Independent High Commission for Human Rights called on the Iraqi government to declare Basra a “disaster area.” The water supply problems fueled further public outrage. Street protests resumed and gradually intensified. By September 2018, the protests had turned violent, with deadly clashes between protesters and security forces. Demonstrators burned government and political party offices and attacked the headquarters of the popular mobilization forces and the Iranian consulate, voicing anger over the growing influence of Iran-backed militias in the city. By early October, 18 civilians had been killed, and another 155 had been injured. While a wide range of long-neglected issues fueled the protests, water scarcity was cited as the most immediate cause or trigger. According to one civil servant quoted in The Independent, “The water shortages have made all the other problems gather and explode. It’s so extreme because it’s water, it’s essential for life.” Concerns remained that the health of the Iraqi people would continue to be affected unless the water situation improved drastically and quickly. Despite efforts to contain the outbreak of waterborne diseases and despite promises by the government to improve water infrastructure, it did not. In October 2019, the unrest spread to Baghdad, where protesters demanded economic reform, an end to corruption, and the provision of basic services, including clean water and electricity. A brutal crackdown by security forces resulted in more than 100 deaths in the first five days. Still, the demonstrations gained momentum, with protesters going so far as to call for an overhaul of the entire sectarian political system. According to the UN’s special envoy to Iraq, more than 400 people were killed, and another 19,000 were injured, just between October 1 and December 3 last year. EGYPT’S TROUBLED WATERS Likewise, climate change and politics have become inextricably intertwined in Egypt, where agricultural production and food security are threatened by acute water scarcity and other climate-related challenges. Egypt is also heavily reliant on food imports, which makes it all the more vulnerable to the impact of adverse weather events on global output and prices. Similar to the situation in Iraq, increasing water stress in Egypt reflects not only climate change, but also rapid population growth and resource mismanagement. The government bears a significant part of the responsibility, as a lack of treatment facilities, poor infrastructure maintenance, and weak regulations against dumping domestic, agricultural, and industrial effluent have all created water scarcities. Egypt’s water dependency ratio is one of the world’s highest, with the Nile River providing more than 95% of its total supply. Approximately 86% of the Nile’s total volume comes from the Ethiopian Highlands, flowing through Sudan before reaching Egypt (see map). As a result, water allocation has long been a source of political tension among Egypt, Ethiopia, and Sudan. The biggest challenge to Egypt’s water supply currently comes from the Grand Ethiopian Renaissance Dam project. At an estimated cost of $4.8 billion, the dam’s construction is a crucial step toward energy security for Ethiopia. For Egypt, however, the project poses a significant threat to its water supply, especially with Ethiopia becoming the dominant power in the Nile River Basin.
Egypt’s economy is highly dependent on agriculture, which itself is almost entirely dependent on irrigation, accounting for over 85% of the country’s total water usage. Egypt’s food production is thus severely restricted by rising temperatures and more frequent droughts, which translate into higher water demand and lower agricultural yields. Worse, climate models show that Egypt’s national food production could decline by anywhere from 11% to 50% by 2050, depending on the level of warming. Moreover, the Nile Delta, Egypt’s breadbasket, is subsiding and extremely vulnerable to sea-level rise. Higher sea levels are expected to affect around 30% of fertile land in the Nile Delta within this century. With tightening resource constraints and a growing population, Egypt’s dependence on imported food is growing, as is its vulnerability to supply and price risks on the global market. The Egyptian population was hit particularly hard by the global food crisis of 2006-08, which came at a time when the country’s domestic production was weakened by severe water scarcity and debilitating agricultural reforms. BREAD, FREEDOM, AND SOCIAL JUSTICE As world commodity prices rose in 2007, Egypt’s government was unable to contain domestic food price inflation, owing to increasing resource scarcity, a corrupt and unsustainable food-subsidy system, and other structural problems. The annual rate of growth in food prices soared from 6.9% in December 2007 to a peak of 31% in August 2008, compared to an average of only 4% in the early 2000s. Rising food prices eroded the purchasing power of the population, causing poverty and food insecurity to rise. Between 2005 and 2008, the incidence of extreme poverty – defined as the inability to meet basic food needs – increased by about 20%, and a growing share of the population became dependent on government-subsidized bread. When the government struggled to meet demand, bread shortages became the focus of a wave of anger at perceived official incompetence, indifference, and corruption. On April 6, 2008, in response to low wages and rising food prices, Egyptian textile workers in the northern town of Mahalla al-Kubra organized a strike. Residents took to the streets, participating in the biggest demonstration that Egypt had seen in years. Police responded with live ammunition to disperse the crowds and arrested more than 300 people. The strike spread to other cities, including Cairo, albeit not with the same intensity. According to news reports, the demonstrators’ complaints were mainly economic: higher food prices, stagnant wages, and “unprecedented” inequality. Many view the Mahalla protests as a precursor to the Arab Spring less than three years later. Then, in 2010, fires in Russia and floods in Pakistan disrupted global wheat and rice markets, and the prices of basic foods in Egypt rose again (see graph). By the end of the year, Egyptians had been pushed to the brink by the sharp increases in food prices, escalating unemployment, chronic government corruption, rigged parliamentary elections, lack of political freedoms, growing concern about police brutality, and crackdowns on the media and universities. Resentment toward Egyptian President Hosni Mubarak’s 30-year-old regime was growing. Social media had raised awareness of state repression and the fall of Tunisian President Zine El Abidine Ben Ali on January 14, 2011, gave Egyptians hope that political change was possible.
Two weeks later, thousands of protesters poured into Cairo’s Tahrir Square, demanding dignity, democracy, and better livelihoods for all. One of the popular chants called for “bread, freedom, and social justice” (“aīsh, huriyya, adala igtima‘iyya”). As the call for “aīsh” indicates, the accessibility and affordability of food was part of the population’s key grievances against the government. And although rising food prices were not the main factor behind the uprising, they likely played an important role in the sequence of events that led to nation-wide demonstrations and deadly unrest. Protest movements were met with extreme police violence and the excessive use of force by the military. Reported deaths in January and February amounted to 846 persons, in addition to mass arbitrary arrests and many cases of abuse and torture. THREATS, MULTIPLIED Resource scarcity and the lack of basic services are feeding public frustration, social unrest, and broader instability throughout the MENA region. In Iraq, water scarcity and contamination have given rise to recurrent demonstrations in Basra, and also contributed to the protest movement that started in Baghdad in October 2019. In Egypt, steep increases in domestic food prices led to riots and sporadic protests in 2008 and contributed to the uprising in 2011. Basic services such as running water, sanitation, stormwater drainage, solid-waste management, electricity, and access to staple foods, but also – as highlighted by the COVID-19 pandemic – basic health care, social protection, and emergency response mechanisms, are the pillars on which governments build relationships with their citizens. The collapse of one or more severely erodes public trust and can lead to social upheavals, as demonstrated again by the recent uprisings in Lebanon, Jordan, Sudan, and other countries. At the heart of the water and food scarcities in Egypt, Iraq, and other countries lie poor governance, weak regulation, and a lack of cross-border cooperation. But looming large in the background is a changing climate, which has exacerbated these problems. As the ultimate threat multiplier in a region that is extremely vulnerable to its effects, it must not be overlooked. Given the risks, it is crucial that governments in the MENA region make adaptation efforts a top priority. If anything, the COVID-19 pandemic has underscored this need. Countries with preset plans have contained the spread of the coronavirus and managed its consequences much better than those with no plans. Likewise, confronting climate change requires developing comprehensive national and regional strategies that take into account the projected effects on water resources, agriculture, and human health. It is up to MENA governments to start building more resilience. The climate will not wait for them.
Mirna Abdulaal in Egyptian Streets suggests that only some ‘Radical’: Empowering Creative Youth and Local Designers in the Arab Region could awaken the currently dormant creation movement, particularly that in the art and design.
There’s one thing that unites generally all creative youth in the MENA region: their lack of representation and trouble in finding a platform that documents their story for others to see, hear and share.
Most media platforms and magazines in the region often fail to represent creatives, and particularly creative youth, through visual and imaginative presentations that help to truly capture their story. The concept of creative journalism and using art, aesthetics, powerful images and podcasts to brand a particular designer or artist is very much absent, with most resorting to mere commercial and celebrity-focused features rather than stories and dialogues to push the creative scene forward.
Nour Hassan, writer and founder of the platform ‘Radical Contemporary’, is the first to recognize this gap and introduce new understandings of how we can represent creatives in media and journalism. “When I started radical, I didn’t have any reference or any online magazine that gathers all creatives together, and it takes a lot of research. So I wanted to help people avoid what I faced in the beginning through this platform,” she says.
“If you want to know who is the best designer in Saudi Arabia, where would you look or who would you ask?”
Initially founded in 2017 as an online magazine that speaks about fashion, art and culture, Hassan began to branch out and do further projects, such as photoshoots, production, and podcasts. Eventually, she expanded into PR and creative consulting, growing from a magazine to a platform that also helps build and market brands.
For her, it is more than just representation, it is also creation – a ‘radical’ and creative process that aims to fundamentally change something in society or culture. In one of her projects, ‘Runaway Love’, she combines storytelling and visual journalism in an attempt to touch upon certain issues, such as the pressure of marriage for young girls. “It was shot on a Felucca boat and it talked about how young girls are pressured to get married, and how she is trying to escape that pressure by riding the Felucca. The photoshoot is a story that is also relevant to the culture,” she notes.
“I am making sure we have conversations, and this is important because there isn’t really any dialogue on creatives in the region.”
Coming from Egypt and growing up in Saudi Arabia, she noticed that there also aren’t any important dialogues and conversations being done on the work of young creatives across the region, which led her to launch ‘The Radical Contemporary Podcast’, allowing several creatives to speak about their creative process and provide a space for others to learn and grow. “I am making sure we have conversations, and this is important because there isn’t really any dialogue on creatives in the region and their work,” she tells Egyptian Streets, “If you want to know who is the best designer in Saudi Arabia, where would you look or who would you ask? And so, this is where I come in and bring them to let them talk in the podcast.”
In times of fast-paced communication and the growth of digital media, consuming content for longer periods of time has become even more difficult, which is why it has become ever more imperative for platforms to push creative journalism ahead and utilize podcasting effectively. “Podcasting is the future of content, it is the new radio,” Hassan says, “Right now, we cannot consume content for more than 15 seconds, so a podcast is like an alternative that helps you listen to the conversations even while you’re busy doing other things. It’s a different way of learning.”
“Podcasting is the future of content, it is the new radio”
It is also a way to introduce more critical conversations in the creative industry, particularly as the fashion industry continues to grow exponentially and young designers are entering the scene. “Our biggest problem is that we don’t have critics. We don’t have someone who critiques the work that is being produced, which is really important in helping young creatives grow and reach their potential. We need to work on being more critical and having critical conversations so we can develop,” she adds.
While it is easy to compare this to other magazines such as Vogue Arabia, Radical Contemporary goes even beyond that, as it is focused on building the creative soul in the region. It is expressive, visual, critical, and communicative – providing creatives an opportunity to learn and document their work. “I think we are the first generation telling our story. From the times of Umm Kalthoum up till now, there is this huge gap, and I don’t think there was a generation before us that really documented their work for others to find and look at.”
“I think we are the first generation telling our story.”
On top of that, it is also supporting local and regional brands, concerning that there is a lack of access to platforms that represent them. “At a time right now where it can be very hard for brands to survive, it is important to support our platform and in turn support these regional brands,” Hassan says.
For future writers, designers, artists, photographers and just about every creative in the region, Radical Contemporary represents the heart of their growth and expression in the rapidly changing region of the Middle East. It represents the face of a new generation, and a new region.
This report was compiled before the Covid-19 pandemic and therefore refers to patterns and trends based on data that was current at the time of writing in February 2020. The full impact of Covid-19 on trade is unknown, but the World Trade Organization estimates that trade will fall by anything between 13% and 32% globally during 2020. Alongside this, and ahead of any impact on trade, the Mena region was already being affected by the collapse in global oil prices, which happened in March and, again, was not factored into this report. However, the points in the report remain valid: that the region’s dependency on oil will have an impact on its trade and economic performance, greater in net oil exporting countries than in net oil importers.
There are other general concerns amongst trade finance professionals around the role of the trade credit insurance sector, which is now heavily exposed to the sharp downturn in global trade. Inventories are collapsing as just-in-time distribution models struggle to cope with restrictions on the physical movement of goods. This is affecting invoice payments and, while it is too early to say exactly how this will affect the recovery from the current crisis, it is undoubtedly the case that many businesses in supply chains worldwide will not survive. As a result, the role of government agencies at present is vital in supporting exporters. In addition to fiscal support, countries will also need clear and robust strategies to rebuild economically once lockdowns are lifted.
GTR: 2019 was a sluggish year for trade. How was MENA affected by this general climate of uncertainty?
Harding: Mena has had a tough few years and last year was not really any different. The combined effects of the trade war between the US and China, the UK’s exit from the EU and enduring intra-regional tensions, particularly between the US and Iran, made 2019 a poor year for trade.
This follows five years of sluggish growth. A weak or volatile oil price over the period since 2013 to the end of 2018, which is where the data is actual rather than forecast, has meant that export revenues have dropped at an annualised rate of 6% in Mena – the highest decline of any global region (Figure 1). This has had a spill-over effect on the region’s economies as well, with imports falling back by nearly 3% annually over the period, suggesting weaker demand both within Mena and globally for the goods that are re-exported from the region.
The Mena region is particularly vulnerable to underlying uncertainties globally. It is highly dependent on two things: oil prices and global demand for the goods that are shipped through the Gulf via its largest ports. As a result, the overall picture for the region in 2020 is likely to be mixed and show no particularly clear pattern of recovery from the uncertainty that has dominated the last few years in terms of oil prices, and 2019 in terms of broader geo-economic and geopolitical issues (Figure 2). The collapse of oil prices, following an OPEC meeting in early March, was a product of Saudi Arabia’s decision to launch a price war; this will have major repercussions for the region.
What stands out from Figure 2 is that, in spite of the difficult environment around sanctions and its fraught relationship with the US, Iran is projected to fare well in trade terms during 2020, especially in terms of its exports. That said, care should be taken when interpreting Iran’s data as a lot of its trade is hidden or executed with poor reporting partners.
Even if the figure of a 55% increase in the projected value of Iran’s exports seems extreme, it arguably reflects a slowdown in trade in 2018 as a result of US sanctions, and a pick up into 2020 as the country finds a way to work around the restrictions it now faces. Its largest export partner is China and the projections suggest an increase in export trade during 2020 of around 8%, alongside imports from China of around 17%. But it is not just China where Iran is seeing trade growth. Exports to the UAE are set to grow by nearly 39%, to the Republic of Korea by over 52% and, perhaps most intriguingly of all, to parts of Asia not indicated elsewhere (Asia NIE) of more than 2,000% year on year.
Asia NIE is Iran’s second largest export partner. It is an amalgamation of trading partners that are too small or too unreliable in their reporting to be classified individually as countries in trade statistics. The fact that it is both a large partner and that its growth is volatile but substantial during the course of the coming year suggests some of this growth is a reaction to the political and economic uncertainties that exist in the region.
Morocco is another country in the region which is predicted to see export growth in 2020. This reflects its position as a non-oil-dependent trading nation with an increasingly strong manufacturing base. Its top five trading partners are European, which points to its role as a gateway for trade between Mena, Europe and Africa. Its imports from Spain, for example, are increasing rapidly, with growth predicted at 8% during the course of the coming year. While oil and gas are important imports to Morocco from Spain, machinery and components, automotives and electrical products and equipment imports are also large and growing sectors. Spain has also taken over from France as Morocco’s largest export partner.
Nonetheless, the region remains vulnerable to global trade’s broader fragilities. These are likely to continue into 2020, not least because there is no sense that trade tensions have gone away, even if in an election year for the US there may be a slightly toned-down rhetoric. Trade growth remains negative or flat for most of the region’s countries and this will affect the extent to which GDP picks up.
GTR: Is there any sign that Mena has increased its resilience into 2020 and beyond?
Harding: The real measure of resilience in the region is the extent to which it is managing to reduce its dependency on oil. This is most evident in its imports (Figure 3). The region’s GDP expansion has failed to pick up since the collapse of oil revenues and, according to the IMF, is likely to be around 1.6% in 2020, down from 2.2% in 2017.
The fact that economic growth looks to have slowed somewhat has had an impact on the region’s imports. For example, imports of machinery and components (which includes computer machinery as well as tools for infrastructure development projects), will decline by 0.6% in 2020. The longer-term outlook to 2023 also points to an annual drop in imports of 0.3%. Iron and steel products, aircraft and automotives all exhibit a similar pattern.
This could arguably be a function of two things. First, the region’s infrastructure has gone through a growth phase as ports and airports have been constructed to support its increased role as a trade hub. The slowdown now may well be because this construction process has slowed as more projects have been completed.
The second cause may be a slowing of regional or global demand, as might be suggested by the drop in automotive imports. This could suggest that there is a bigger picture to the sluggishness of trade in the region.
However, the data does not support this interpretation. The Mena region imports over US$75bn in automotives each year and exports just US$13bn. Exports are forecast to increase both in 2020 and for the next few years (Figure 4). This suggests that the region is potentially becoming more important as a hub, and that it will be re-exporting more in the coming years. The slowdown in imports therefore looks as if it can be attributed to the region’s economic fortunes. Indeed, the fact that iron and steel product imports are also declining indicates that there is less construction work going on.
Even so, the projected growth in exports is encouraging. The region has a trade deficit in all of its largest sectors except mineral fuels and some of the import sectors where growth is slower, such as infrastructure products like iron and steel, may simply be a function of the fact that a lot of resource has been put into catching up over the past couple of decades and that this development is now slowing. Growth in exports of other infrastructure sectors such as machinery and components, aluminium and electrical products, alongside growth in automotives, suggests that the region’s role is changing – and this will mean that its long-term resilience is somewhat more assured.
GTR: How is intra-regional trade developing in Mena?
Harding: Mena will see an increase in intra-regional trade from 2019 to 2023, and this is noticeable in comparison to the pick-up in intra-regional trade in other net oil exporting regions such as South America and Sub-Saharan Africa (Figure 5). The only other region with faster intra-regional trade growth is Asia Pacific (APAC).
While oil remains the dominant traded sector in Mena, this greater intra-regional trade indicates either that the region’s oil dependency is declining or simply that there is a greater amount of cross-border trade within the region.
Could this therefore mean that more export diversity across the region is behind the growth in regional trade? A first glance suggests not. The top five countries for intra-regional exports are the UAE, Saudi Arabia, Iran, Iraq and Oman. In terms of export growth, the UAE, Iran and Saudi Arabia are growing quickly, but Iraq and Oman are falling back. Similarly, the top five countries for intra-regional imports are the UAE, Saudi Arabia, Egypt, Iran and Oman. All of these countries are likely to see growth in intra-regional import values between 2019 and 2020 (Figure 6).
A couple of points stand out from this chart: first, the impact on Qatar’s trade because of the blockade, which began in June 2017, is evident. Intra-regional trade values fell back between 2013 and 2018 at an annualised rate of over 20%. While this initially aligned with the collapse in oil prices, an annualised decline of 16.1% in imports between 2016 and 2019 covered the pick-up in oil prices and the onset of the blockade, while intra-regional exports over the same three-year period fell annually at over 22%. The data suggests that this will continue into 2020.
Furthermore, Morocco’s trade with the region looks set to decline at the same time it increases with the EU27 and Spain and France in particular. The country’s trade with Mena spiked during the financial crisis, largely because of an uptick in gold prices, with a three-year growth in imports of over 300%, albeit from a low base. Other imports, such as automotives, clothing and accessories, and milk and dairy products have remained on a consistent downward trend since 2014.
Morocco exports hard commodities and plastics to the rest of Mena, and these have also been on a downward trend since 2014 because of weak commodity prices. In other words, the structure of Morocco’s trade with the rest of the region is very different to its trade outside of the region, which is focused on intermediate manufactured goods.
This leads to the conclusion that, in fact, growth in intra-regional trade has been driven by a rise in oil prices, rather than any diversification efforts. Indeed, between 2017 and 2020, intra-regional trade in oil and gas grew by nearly 6% annually. The UAE, Egypt, Jordan and Bahrain have been major beneficiaries of this pattern, which looks set to continue.
GTR: Geopolitical tensions between the US and Iran have added a layer of uncertainty into the 2020 outlook. How will this play out during the course of the year?
Harding: On January 3, US forces carried out a drone strike near Baghdad International Airport killing Qasem Soleimani, commander of Iran’s Quds Force and right-hand man to Ayatollah Ali Khamenei, Iran’s supreme leader. Khamenei vowed “severe revenge”. Five days later, on January 8, 16 short and medium-range ballistic missiles were launched at two US airbases in Iraq (Ain al-Asad and Erbil). No fatalities were reported, which US officials attributed to an effective satellite early warning system known as the Space Based Infrared System. It is likely that Iran’s response was an example of ‘escalation for de-escalation’; by providing the US with a degree of early warning, casualties could be minimised and direct conflict with the US avoided, while still demonstrating to Iran’s domestic base that action had been taken. From the US perspective, President Trump was equally unlikely to be willing to become embroiled in a costly war during an election year.
Although tensions between Iran and the US are unlikely to lead to direct conflict, there are two real risks to the region. The first is that of miscalculation – in other words, the danger that either Iran or the US misinterprets the actions of the other and acts accordingly. For example, had the US had any fatalities from the Iranian response, there may have been a more severe, escalatory response. This risk is always there but the fact that neither side appears to have much appetite for conflict means that it is unlikely to be the major issue affecting trade during the course of the year.
Of more consequence is the second risk that is apparent in the region at present, which is that it is increasingly caught in the power struggle between Russia, China and the US. As Coriolis Technologies has been observing for some time now, Russia is increasing its influence in the region. Our data suggests that the average annualised growth in imports from Russia for the period 2016-2020 will be around 14%. While much of this is oil and gas, the period 2015-2018 saw a worrying exponential growth in so-called commodities not elsewhere specified – trade in which closely correlates with conflict around the world. This reflects Russia’s role in Yemen and Syria in particular.
The consequence for trade of this type of uncertainty is obvious. It holds back investment as businesses outside of the region tread cautiously to avoid conflict. However, while Russia’s engagement in the region provides a backdrop to traditional “hard” power, the US is now using its financial power rather than military means to support its regional objectives.
The tightening of sanctions on Iran since the US withdrew its support for the Iranian nuclear treaty (JCPOA) has affected the way in which banks can operate in the region. The risk of secondary sanctions, for example inadvertently using the US dollar for a transaction, as well as the direct risk of trading with a sanctioned entity or person is the core way in which trade with the region will be affected.
Mena continues to be dominated by trade with areas not elsewhere specified (Areas NES), which is an agglomeration of countries which are either too small or report too irregularly, potentially indicating hidden trade. Exports to this partner were worth US$519bn in 2018; US$97.1bn of these exports were in commodities not elsewhere specified. The region’s exports to Asia NIE were worth US$19bn in 2018.
What this says is that trade in the region remains opaque. While this continues to be the case, it is very difficult for dollar-denominated trade finance to work with banks in the region. Swift has shut down its messaging services to Iran; and although European government officials announced in April that Instex, a trade vehicle set up to bypass US sanctions on Iran, has successfully completed its first transaction, there remain doubts over the viability of the mechanism. China, Russia, Iran and Turkey have been building an alternative to the Swift network, but as this would be subject to the same sanctions constraints as other regions, unless and until US strategy changes, the opacity and political nature of trade will be a core challenge for the region as a whole.
GTR: The largest ports like Dubai are increasingly focusing on their role as trading hubs for re-exports. How will this expand in the coming year?
Harding: The best way of approaching this question is to look at trade with free trade zones (FTZs). These are the economic areas around ports or airports which are specific to a sector and which enable re-export activity by providing tax and customs duty incentives to overseas investors and trading businesses. Dubai alone has more than 30 of these zones; the UAE has the greatest number of FTZs of any country in the region.
Because countries report exports to FTZs, but FTZs do not report imports as a country in their own right, the data depends on the reliability of the partner country and, as a tax and duty payment mechanism rather than as a trading partner, the numbers tend to be small. The Mena countries are amongst the least reliable reporters globally, so the data is somewhat erratic but nevertheless tells an interesting story:
Mena as a region exported some US$981mn to freeports in 2018. The dominant products that the region exported were electrical products and equipment, precious metals and stones (gold and diamonds), commodities not elsewhere specified, machinery and components and mineral fuels (oil and gas).
Mena imported some US$220mn of goods from freeports in 2018. The dominant sectors were commodities not elsewhere specified, mineral fuels, electrical products, machinery and components and coffee and tea.
Exports to FTZs declined between 2013 and 2018. However, Coriolis Technologies is expecting growth in exports to be nearly 150% between 2018 and 2019, and to fall back to around 2% between 2019 and 2020.
The trade with FTZs is not necessarily attributable to hidden trade as such. By way of comparison, the region trades over US$519bn with areas not elsewhere specified and US$27.5bn with Asia not elsewhere specified. Since these have been shown to be highly correlated with sanctions avoidance and conflict as discussed, the distinction is an important one to be made.
These patterns tell an interesting story about how FTZs may be utilised at present. Oil and gas, precious metals and stones and commodities not elsewhere specified are sectors which hide other patterns in trade. However, trade in electrical products, automotives, machinery and components and coffee and tea suggest that something else is happening given the expected overall growth in trade with FTZs.
Because trade looks to have grown so quickly between 2018 and 2019, FTZs clearly play an important role in the region’s trade. The data is naturally opaque, so any conclusion is to some extent speculative. However, tighter sanctions and the risk of secondary sanctions against Iran from the US means that trade with one of its main trading partners became very difficult for Mena during that year. Alternative mechanisms, such as FTZs, mean that trade technically does not touch either Iran or its financial institutions. As a result, FTZs may become a route to continued legal trade with sanctioned countries.
GTR: China is playing an increasingly active role in Mena. What are the key developments and are there any particular sectors of interest?
Harding: One cannot overstate the importance of China to the Mena region. Imports from China were worth US$146bn and exports worth US$169bn in 2018.
Mena’s exports to China are dominated by oil and gas, which makes up nearly 76% of the total at US$128bn.
Imports from China are far less concentrated. The top five imports from China are electrical products and equipment (US$38.1bn), machinery and components (US$22bn), knitted clothing and accessories (US$4.6bn), iron and steel (US$6.2bn) and automotives (US$6.2bn).
China is strategically focused on its electronics exports and, in 2019, Mena is estimated to have imported US$9.2bn of specialised electronic equipment from China. This represents an annualised growth of 27% since 2016, when President Trump came to power in the US and China became more explicit about its global aspirations. While China’s imports from Mena may well be focused on energy security, it is extending its reach into the region through technology.
Yet trade growth overall has been sluggish. Over the period between 2013 and 2018, imports from China grew at an annualised rate of 1%, while exports increased by just 0.6%. This is largely because of oil price related economic weakness in Mena, which has affected both domestic demand as well as the value of exports to China.
Even so, Mena’s trade with China is twice the size of trade with its second largest country-level export partner, the US. China overtook the US as the region’s largest country partner (excluding blocs like the EU27) in 2009. The growth in the trading relationship was particularly evident between 2002 and 2014, likely driven by Chinese investment into the energy sector, given that post-2014 growth has trailed off amid lower oil prices (Figure 7).
Despite China’s expansionary policy through the Belt and Road Initiative (BRI) to develop infrastructure more generally, it is energy security that seems to underpin its trade with the region. Investment has supported that with the majority going into the energy sector. This highlights the fact that China invests for its strategic purposes, although real estate (construction) and transport have featured strongly. In effect, then, the BRI has just given a name to an investment trend that has been growing gradually since before the financial crisis (Figure 8).
Up to 2013, all investments by China into Mena were classified as non-BRI, but since 2014, all investments have been classified as BRI – this is again a reflection of how China is now categorising its investments. The pattern is clear, though: the general trend is for more investment in the region, both in terms of consistency and in terms of value. The fact that investments appeared to drop in 2019 may reflect two things: first, the general uncertainties during the course of the year that arose from the US-China trade war which held back investments globally. Second, and as a result of the dispute, China was relatively quiet about the BRI during the course of the year having been very public about its intentions the previous year – perhaps as a signal to the US that it was growing its economic power.
Whatever may be the case, what is important is that the investments appear to support China’s trade aspirations in the region.
GTR: What are the key upside and downside risks to growth in the region in 2020 and what are the consequences for trade finance?
Harding: Trade within the region is substantial and the value of bank-intermediated trade finance from intra-regional trade alone is as much as US$122bn per year. Electronics trade between countries in the region has grown by 36.7% since 2016, machinery and components by nearly 19% and, against the odds perhaps, Iran’s intra-regional trade is growing by an annualised figure of 47%.
Much of the growth in trade finance will depend on the risk appetite of the region’s financial institutions. There is plenty to invest in, as is clear from this report, but the region itself has a number of challenges which banks will need to overcome: Coriolis Technologies risk indicators for the region, particularly around the risk of terrorism, the risk of repression and threats from regimes, are among the highest in the world. While businesses on the ground are trying to reduce the region’s dependency on oil, particularly in technology and digitalisation, this reputational risk cannot be ignored.
The region is particularly prone to commodity price fluctuations. The collapse of oil prices since the beginning of 2020 presents a serious threat to Mena’s economic wellbeing. Saudi Arabia is unlikely to be able to thrive economically at an oil price below US$70 a barrel. With 82% of its export revenues coming from oil and gas (approximately US$455bn in 2019) and its next largest export products like plastics also being heavily oil dependent, its overall trade is 96% correlated with the price of oil.
Russian influence in the region is growing as a result of the US strategy to withdraw militarily and, in reality, economically as well. Since the global financial crisis, imports from Russia have grown from US$11.8bn in 2009 to US$27.8bn in 2018. Similarly, exports have grown over the same period from US$1.9bn to US$4.2bn. Increased trade with Russia and China is likely, not least because of the sanctions that are now associated with any trade in US dollars that might touch Iran. This will have the effect of limiting trade and investment – and the role of global banks – in the region if there is any compliance risk from supporting intra-regional trade in particular. Meanwhile, greater Russian involvement in Mena will add to the complexity of already fraught relations between countries in the region, with the potential of an escalation into broader conflict.
The Covid-19 pandemic has caused widespread economic disruption around the world. This is a key risk which could impact events in the region, travel and tourism and, of course, oil trade. These are risks that are the same for everywhere in the world at present, but the potential for a global recession is obvious. The extent to which the region’s reforms over the past few years have created economic resilience are likely to be tested during the course of this yea
‘The immediate issue for all businesses, in whichever industry they’re in, is survival’ – Shehab Gargash by Bernd Debusmann Jr who on 30 May 2020 reports that Gargash Group managing director and CEO Shehab Gargash has a grim short-term forecast for the coronavirus-era economy. But out of the ashes, opportunity will arise. 10 Scenarios for the MENA region in the year 2050 elaborated by @Eubulletin amongst many others predicted similar outcome, even though the world was not going through the same exceptional circumstances.
Like most globetrotting travellers and businessmen, Shehab Gargash’s office has souvenirs of his trips. But these souvenirs aren’t postcards, fridge magnets or cheap trinkets. Gargash collects boarding passes – hundreds of which are kept in a massive glass display case in his office, atop of which sits a silver and red aircraft wing.
“Oh! I have slipped the surly bonds of earth,” reads a sonnet on the case, written by American poet and pilot John Gillespie Magee Jr, killed flying a Spitfire over England during the Second World War. “And danced the skies on laughter-silvered wings.”
This, I think to myself when I see it, is a man who really loves his travel. His Instagram account proves it.
From India and China to Barcelona, Monaco and the Maldives, Gargash gets around – and that’s just in the last year alone.
But like the rest of us, Covid-19 has put a damper on Gargash’s travel plans.
“When will I travel again? That’s a good question,” he tells me, chuckling through the grainy screen of our video teleconference meeting.
“If I’m going on holiday, I want to enjoy it. So I’m not itching to get back on a plane. I don’t think we’ll be there anytime soon.”
In the current climate, an Instagram-worthy trip is the least of Gargash’s concerns. At the moment, he’s preoccupied with facing the impact of the coronavirus pandemic, both on Gargash Group – of which he is managing director and CEO – and on the wider economies of the UAE and GCC.
Some estimates – such as that of the International Monetary Fund (IMF) – forecast that the GCC economies will collectively record negative real GDP growth in 2020, with the UAE slipping to -3.5 percent from 1.3 percent growth last year.
When it comes to the crisis, Gargash’s warm smile and friendly banter come to a stop. This isn’t a situation he minces words about.
“The immediate issue for all businesses, in whichever industry they’re in, is survival,” he tells me. “I think we are facing worldwide, industry-wide, existential issues that a lot of us have never even dreamed of. It’s all-encompassing and covers all sorts of areas of the economy.”
Hard times ahead
When it comes to the pandemic-related issues that the UAE’s economy faces, few are in a better position to comment than Gargash. A scion of one of the country’s most prominent Emirati families, Gargash leads the Gargash Group, which has diverse interests including automotive, real estate, hospitality and financial services. He’s also the founding chairman of Daman Investments – not to mention a long-time banking industry and prolific socio-economic commentator.
Gargash Enterprises is the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates
In the short-term, he says with startling matter-of-factness, the forecast is grim. He predicts that many businesses will not last.
“People aren’t looking at their strategies, or their plans. They’re looking at the daily details of expenses, revenue, cash in the bag. The immediate oxygen for the business to live through this,” he says. “Many businesses will not appreciate the impact of what they thought were very small elements, like levels of leverage and borrowing that seemed manageable a few weeks ago. These will deal a fatal blow to a lot of businesses.”
Perhaps more alarmingly, Gargash believes that most businesses are “nowhere near” a stage in which they can even think of what the future holds. What businesses will look like, and how they can adapt to new realities, are still unknowns.
“We haven’t even considered that future yet. A lot of businesses, through no fault of their own in many cases, will not survive simply because they have underappreciated the need to have that safety cushion,” he adds.
According to Gargash, the businesses that do survive the immediate impact of the pandemic over the coming weeks and months will soon have to start thinking of their next moves.
“You can’t afford to be firefighting too long. Over the weeks and months, [companies will] regain their balance. Subsequent to that, strategy kicks back in,” he explains. “Where am I going as a business? What are my priorities? What are new opportunities, and what’s a dying, sunset industry?
“It’s time we ask ourselves these questions as businesses, as they’ll define how we act, post the shock-therapy. Once we do that, our priorities are better defined, and actions put together accordingly,” Gargash adds. “That’s the kind of soul searching that will occupy our minds this year, and possibly into next year.”
The company has diverse operations in financial investment and real estate
Gargash Group is far larger than most businesses that operate in the country. For the average resident, the company is most readily associated with the automotive sector, being the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates. It is, however, much more than that, offering a wide range of financial, investment and real estate services in various sectors.
But the company’s size and status did not spare it from the impact of the coronavirus. “We went through shock and panic, and saw revenues tumble to extremely low levels, and like everyone had to grapple with a 24-hour lockdown,” Gargash recalls. “Those were the issues that we dealt with as a group in the early days of the pandemic. Nobody knew how to deal with Covid-19.”
And although Gargash says it is “far too early” for decisions to be made on the company’s future, it has already begun a soul-searching process he advises for companies across the wider economy.
“That’s where we are at right now. Let’s say I have 10 lines of business. Which ones are still valid propositions? The ones that aren’t, do I adjust them? Do I integrate them into something else? Or do I just cut the rope and let them sink?,” he says. “Those kinds of questions are still being tackled.”
While it may be too early to determine what the group’s focus will be going forward and what it may need to be cut loose, Gargash says he isn’t particularly worried. The group’s core businesses – automotive, real estate, and financial services – will form a key part of the post-Covid economy in some form.
In fact, he adds, the shock of the pandemic may end up being a blessing in disguise that forced the company to become “more daring in its implementation.”
Businesses that will survive the impact of the pandemic over the coming months will soon have to start thinking of their next moves, Gargash believes
“We’ll try new ideas, new thoughts, concepts and industries that in the past I dismissed,” he explains. “Let’s imagine, for a second, potato farming. Potato farming has been proven to be a strategic source of nourishment. That’s a silly example, but understand, I’m obliged to become a more entrepreneurial business, and regardless of how ‘classic’ I’ve been in the past. I must investigate new avenues. I have the same eagerness to survive as a brand new start-up.”
A new GCC?
Gargash is undoubtedly an optimist. Even while speaking about the challenges of the economy, he peppers his comments with reminders that, sooner or later, things will return to something resembling normality. As he puts it, the masks will fall off, and the glove won’t be a necessity – even if the “trauma” of the event stays with us.
Even widespread job losses, he says, will eventually lead to something better. “In the longer term, jobs will be replaced, rather than lost. We still [in the UAE] have an economy serving 10 million people, and a broader GCC economy with 50 million or so. Jobs will be created, possibly in new industries and in new roles.”
These new roles – which Gargash admits he isn’t sure what will be, exactly – will require many employees, from blue-collar workers to managers, re-skill themselves, or learn entire new professions. Although challenging, he is confident the region’s youth in particular will manage.
“This [trend] will disproportionally [benefit] young people,” he says. “They’re more adept and more able to align themselves with industry trends.”
These ‘new roles’ don’t just apply to employees. The pandemic, he believes, may ultimately change the UAE’s economy as a whole by encouraging more home-grown entrepreneurs to step up with fresh new ideas.
“Most of the businesses that are set up in the UAE are in the ‘last-mile’ economy: the delivery of a product or service that has evolved somewhere else, or was manufactured somewhere else. Your control over what your supplier gives you is fairly limited. I can’t invent a better wheel, so to say. I’m just distributing the wheel that was manufactured somewhere else.”
Young people could align themselves with industry trends, says Gargash
What we’ll see instead, Gargash hopes, is an opportunity for motivated entrepreneurs to try and forecast where the future is headed and where they can step in with an idea.
“In a post Covid-reality, we’ll be asking what is going to drive businesses, and what those businesses will look like,” he says. “There needs to be a proper reading of what demands will need to be fulfilled. Businesses will need to alter their offerings to suit the new realities.”
He adds, “It’s by no means an easy task. There’s still a lot of projection and reading into the future that is required.”
Once that’s done, he says, the UAE’s economy will be able to take off – as will he, on his next trip abroad. For Gargash, that day will be welcome news.
“I have a fear of losing my frequent flyer miles,” he laughs. “But that’s another story.”
Advice for investors
When asked what advice he’s given to would-be UAE investors in the pandemic, Gargash responds without hesitation: “hold on to it and watch what happens.”
“Do not rush into investments today. I do not think there will be an imminent, overnight bounce back of growth and activity,” he says. “It’s going to come back, but it will be more deliberate.
“It’ll take more time. If I was an investor with AED1m, I’d hold back and watch and observe. I’d make a convinced decision before I take that plunge and go into one asset class.”
Architecture can be a tool for social change, and the belief in this statement is what motivates the work of many architectural NGOs who strive to address the lack of adequate shelter, generate social and economic change, and build resilience in communities. These NGOs operate in two major areas, disaster relief, and community development, with many organisations pursuing both types of actions. This article rounds-up several architecture-related foundations that act in emergencies, covering their expertise, past involvement in humanitarian crises, as well as the means to join them in their efforts.
Natural disasters affect more than 250 million people each year, and according to UNHCR statistics, 70.8 million people have been displaced worldwide due to conflict and violence. One billion people live in slums, and the number is expected to grow to two billion by 2030. Add the lack of clean water and sanitation, and you have a comprehensive picture of a silent humanitarian crisis, with the need for adequate shelter at its core. Nonetheless, NGOs aside, the profession has recently started to reclaim its social responsibility, as more and more architects engage with humanitarian architecture. For those looking for ways to use their professional skills for the betterment of society, these NGOs are an excellent place to start.
Habitat for Humanity
The well-established non-profit housing organisation works to help vulnerable communities overcome the lack of adequate shelter. Created in 1976, the foundation works in over 70 countries and since its inception has helped more than 29 million people attain a suitable home. The organisation pursues its vision of affordable, decent housing for everyone in several different ways. In a participatory process, volunteers and future dwellers work together, creating suitable housing solutions, in the form of new construction or repairs and improvements to existing homes. Habitat for Humanity also participates in disaster response, through its dedicated program and addresses the need for sanitation and clean water by creating the necessary infrastructure. From local, long-term or as part of an event, there are several types of volunteering with Habitat for Humanity, which are covered in detail here.
Architectes de l’Urgence
Founded in 2001, the NGO Architectes de l’Urgence (AU) focuses on re-establishing essential infrastructure (hospitals, schools, water supply, roads) in post-disaster situations. With branches in France, Canada and Switzerland, the organisation benefits from 19 years of experience with more than 30 reconstruction programs in 33 countries. Since its inception, over 1600 architects, engineers and additional support staff have participated in AU’s diverse aid initiatives. Most of their projects are not limited to immediate post-disaster response but incorporate rebuilding strategies stretching over several years. To catch a glimpse of their sustained endeavour, over the course of eight years, AU has rebuilt 12 healthcare facilities, 12 schools, one orphanage and over 1500 houses in Haiti, following the devastating tsunami. The organisation also helped in the Philippines, Sri Lanka, or Afghanistan. The foundation recruits architects and civil engineers on a regular basis for international solidarity missions. The type of involvement varies, from student internships, long-term volunteer work, short missions for experienced professionals. All information regarding requirements, recruitment process and forms of participation is available here.
Open Architecture Collaborative
Open Architecture Collaborative is, to some extent, a successor to Architecture for Humanity. The latter filed for bankruptcy in 2015, stirring some controversy, but several of its international chapters picked up the pieces of the organisation, drew knowledge from the 16 years of experience with humanitarian architecture and created a new organism. The NGO’s philosophy is rooted in participatory design and its mission is achieving community engagement for marginalised people through architectural means. The new organisation is still in its infancy, but it derives its know-how from AfH’s successful past initiatives, like the Haiti rebuilding program. The NGO now focuses on local, small-scale projects like the Kids Skating Series in Nigeria. For information on how to get involved with the organisation, whether as a design firm or an individual volunteer visit their dedicated page.
Emergency Architecture & Human Rights
The NGO focusses on aiding socially vulnerable communities around the globe who are dealing with crises or face inequality of any kind. Regarding architecture as the embodiment of a universal human right, their mission centres around resilience, be it social, economic, or environmental. Founded in 2015 in Denmark and with sister organisations in Santiago de Chile and Rome, Emergency Architecture & Human Rights has completed various humanitarian projects in Europe, Africa, the Middle East and South America. Within the NGO’s initiatives, the EAHR team, volunteers and the local communities work side by side to design and construct projects such as the school in the Za’atari Refugee Camp in Jordan. The organisation focuses on working with the communities, using locally sourced materials, while advancing local construction methods. In addition, the foundation held workshops on architecture for humanitarian emergencies at several universities around the world. For upcoming internships and volunteer opportunities, get in touch with the organisation using the information provided on their website.
Architecture Sans Frontières International
This collaborative network of NGOs brings together more than 20 independent organisations in an effort to consolidate their individual endeavours. The history of the network began in 1979, with the creation of Architectes Sans Frontières in France, followed 13 years later by the namesake organisation in Spain. Now spread across 30 countries on all five continents, ASF International creates a framework for cooperation among the different entities and assists in the formation of new local organisations. With the stated mission of improving the built environment for people in need, all member foundations work for community development and engage in post-disaster and relief interventions. Each organisation has its own recruitment process and provides various types of volunteering and involvement for individuals who are interested in helping disadvantaged communities. See the complete list of member organisations and get in touch with any of them here.
Global trade values fell 3% in the first quarter of 2020
An estimated quarter-on-quarter decline of 27% is expected in the second quarter
Commodity prices fell by a record 20% in March, driven by steep drops in oil prices
The coronavirus pandemic cut global trade values by 3 per cent in the first quarter of this year, according to the latest UNCTAD data published in a joint report by 36 international organizations.
The downturn is expected to accelerate in the second quarter, with global trade projected to record a quarter-on-quarter decline of 27 per cent, according to the report by the Committee for the Coordination of Statistical Activities (CCSA).
The report is a product of cooperation between the international statistics community and national statistical offices and systems around the world, coordinated by UNCTAD.
“Everywhere governments are pressed to make post-Covid-19 recovery decisions with long-lasting consequences,” UNCTAD Secretary-General Mukhisa Kituyi said.
“Those decisions should be informed by the best available information and data. I’m proud that UNCTAD has played a central role in bringing so many international organizations together to compile valuable facts and figures to support the response to the pandemic.”
Commodity prices falling too
According to the report, the drop in global trade is accompanied by marked decreases in commodity prices, which have fallen precipitously since December last year.
UNCTAD’s free market commodity price index (FMCPI), which measures the price movements of primary commodities exported by developing economies, lost 1.2 per cent of its value in January, 8.5 per cent in February and a whopping 20.4 per cent in March.
Plummeting fuel prices were the main driver of the steep decline, plunging 33.2 per cent in March, while prices of minerals, ores, metals, food and agricultural raw materials tumbled by less than 4 per cent.
The more than 20 per cent fall in commodity prices in March was a record in the history of the FMCPI. By comparison, during the global financial crisis of 2008, the maximum month-on-month decrease was 18.6 per cent.
At that time, the descent lasted six months. Worryingly, the duration and overall strength of the current downward trend in commodity prices and global trade remain uncertain.
Before the Covid-19 pandemic sent international commerce into a tailspin, global merchandise trade volumes and values were showing modest signs of recovery since late 2019.
Situation changing rapidly
The UNCTAD now casts featured in the report incorporate a wide variety of data sources, capturing diverse determinants and indicators of trade, but the situation is changing rapidly.
“In this time of crisis, we are putting out the facts as we know them today. We’ll continue monitoring the global trade landscape as it evolves,” said UNCTAD’s chief statistician Steve MacFeely.
“I’m delighted the international statistical community could step up, mobilize quickly and publish such a useful and fascinating report. It was a great honour for UNCTAD to lead this endeavour.” – TradeArabia News Service
If we put together the words “MENA region” and “women-led startups” into the same sentence most of us probably would not expect the following statement: one in three start-ups in the Middle East and North Africa region is founded or led by a woman, which is a much higher percentage than in Silicon Valley. Women in Arab countries make up for 34-57 per cent of STEM graduates, a figure which is also much higher than in universities across Europe and the US. This led us to ask ourselves: how come, given these numbers, the proportion of female workforce in 13 out of 15 Arab countries remains among the lowest in the world?
This is how Wamda‘s Thought Leadershipon 11 May, 2020 introduced the hot subject of gender equality in the MENA region.
How can we encourage more women to pursue entrepreneurship?
Prior to the Covid-19 outbreak, Sana Afouaiz, founder of Womenpreneur, an organisation established to support women entrepreneurs, toured three countries in the Middle East and North Africa (Mena) to gain an insight into the challenges faced by women founders in the region. In this article, Afouaiz outlines the steps needed to overcome these challenges.
The answer to this is neither short nor simple. It is safe to say, however, that the figures above unveil the amazing potential to be unlocked in the region. For this reason Womenpreneur Initiative and SANAD’s Entrepreneurship Academy joined forces to promote female tech entrepreneurship in the Mena region. The goal of this unprecedented empowerment campaign was to give visibility to women in tech, innovation and entrepreneurship as well as to provide platforms to assess the current state of the tech ecosystem in three countries: Morocco, Tunisia and Jordan.
During the Womenpreneur Tour we interviewed female tech entrepreneurs from diverse backgrounds. They shared with us what motivated them to launch their businesses, as well as every obstacle they encountered on their journey. Did you know that 71 per cent of Tunisian women started their enterprises with absolutely zero resources and zero support? Or that only 10 per cent of Moroccan women are entrepreneurs despite them representing half of the population of the country? Or that only 6 per cent of women entrepreneurs in Jordan are generating revenues exceeding $100,000?
Mindset as major drawback for women entrepreneurs in the region
Most of them point out mindset as the main barrier preventing women from having equal access to the job market or promotion opportunities. Traditional values in Arab countries are still deeply-rooted and this is reflected in recruitment processes for example, where women are still inquired about their marital status and left as second choice in the presence of a male competitor. High demands in the family setting are another major drawback for women to advance their career. This traditional mindset extends to the investment-seeking process too. Due to lack of precedent in the region, investors are more likely to distrust the profitability of women-led businesses.
What can be done to eliminate these constraints?
Many argued that a change of mindset is slowly emerging. For example, Jordan recently passed a new labour law providing equal day care obligations to both female and male parents in the workplace. This is a great achievement but real changes are taking too long to materialise. During our tour across these countries we also interviewed multiple experts from various fields who shared their recommendations to make the tech ecosystem more accessible and fairer to women. Most of them agreed on the need for gender quotas in the public administration to ensure the involvement of women in strategic decision-making at the political level as well as in board of directors in the private sector to promote that they reach top management positions. Recruitment processes should be revised from a legal perspective as well in order to prevent gender-based discrimination due to marital and family status. On the other hand, many pushed for the need to break the glass ceiling as well as gender roles and stereotypes which traditionally portray women as more suitable in social and human sciences and men as more capable for physics, mathematics and technology.
Further recommendations related to the financial sphere, where some of our experts suggest a democratisation of processes and requirements for opening a business bank account is needed. This would facilitate that women receive funds quickly to start their activities and demonstrate recorded payments and credit history. As a result, female tech entrepreneurs acquire financial credibility and are in a better position to fundraise further. Additionally, the creation of female-oriented or women-only funds for all stages of start-ups, in forms of government grants or equity investments, would facilitate women access to funding and present the investment-seeking process as one based on merit and business skills rather than a risk journey into gender discrimination.
After the great success of our tour we are embarking ourselves into a second edition that will explore three new countries: Algeria, Egypt and Lebanon. This time, however, in the context of the current Covid-19 crisis our aim is to find out how this pandemic is affecting female entrepreneurs’ lives across the Mena region and how the female talent is tackling this challenging situation and bringing about solutions.
If you want to know more about all the inspiring female tech entrepreneurs we met, then watch our documentary
ZAWYA’s ECONOMY on 7 May 2020, elaborated on IMF reveals how COVID-19 could disrupt Arab economies. Here is how the COVID-19 pandemic by bringing unprecedented challenges, and strict lockdowns in some parts of the MENA region, could make it even worse for those petro-economies of the Gulf, the obvious object of this article.
Governments responded quickly to the pandemic and Arab youth will play a major role in economic recovery.
The Arab economies are facing a multi-level shock from COVID-19 despite the prompt responses by many governments in the region, the regional head of the International Monetary Fund has stated.
Low oil prices will not only further distress producers but will also impact non-oil Arab economies, said Dr Jihad Azour, Director of the Middle East and Central Asia Department at the IMF.
“Starting with long-term structural problems, Arab countries will have difficulties addressing the direct impact of the ongoing slowdown,” said Dr. Azour, adding that one thing that helps in the recovery in Arab countries is that they have young populations.
Two-thirds of the Arab population in the region is less than 30 years old, and this human capital advantage would play a key role in speeding up the regional economic recovery in the post-COVID19 market, he said.
Dr Azour expects Arab countries to continue their technology adoption programs as the economic recovery would depend on the efficiency of such initiatives.
What is needed, he noted, are dedicated efforts to implement what Arab governments and international organizations know are essential reforms to the structure and emphasis of Arab economies.
Oil producers in the Arab world should continue their economic diversification drive, he said, adding that ongoing COVID-19 pandemic should prompt countries in the Middle East and North Africa to focus on public health and social security. “The countries must work towards reducing trade barriers, decreasing financial vulnerability and avoiding high costs of armed conflicts.”
Dr Azour was answering questions in a webinar last night hosted by Khalil E. Jahshan, who is the executive director of Arab Center Washington DC.
In Tuesday’s IMF podcast on Arab economies, Dr. Azour said all countries in the region were affected by the COVID19-led economic crisis and most of them have introduced a certain number of measures to protect life and livelihoods and also to protect certain sectors in the economy.
“Most challenging moments”
“If we compare to the last hundred years, this is one of the most challenging moments in economic history for both Central Asia Caucuses as well as also for the Middle East and North African countries,” he said.
The IMF’s Middle East head believes the oil exporting countries in the Arab world will face the impact of the shock on their revenues and fiscal situation.
Countries with ample buffers could use them to mitigate some of the repercussions of the shock, but the economic management is going to be more complicated for the nations with less buffers. Oil importing countries will be impacted due the fluctuations in the levels of remittances, capital flows and investment coming from the oil producers, he said.
During the Arab Center webinar, Dr. Azour also provided some global perspective on the impact of COVID19 pandemic.
The current economic crisis caused by COVID19 is not like that of 2008-2009 since it has precipitated a deeper and wider shock to the economies of individual countries as well as to the international economy at large, he said.
What also specifically differentiates the current economic crisis is the degree and level of uncertainty associated with it. He said the international community and organizations knew what instigated the 2008 financial crisis; however, the severity and impact of the current one remains unknown, thus addressing its effects is still indeterminable.
He stressed that the IMF’s current policy, which includes loans and advisory services, is to give breathing space so that “emerging economies and low-income countries are not left behind” in this period.
He predicted that there will be a new globalization effort that may try to address the deficiencies of the former international economy. The international economy, he argued, will have to determine how to address challenges to growth and to make sure that this growth is equitable between low income and developed countries.
(Reporting by Atique Naqvi; editing by Seban Scaria)
Oil, telecom and retail conglomerate Reliance Industries now expects to reach zero net debt ahead of the March 2021 target as reported by Arabian Business of 1 May 2020. Here is the story of how and why Indian billionaire Ambani accelerates debt plan as stake sale to Saudi drags.
Ambani’s focus on paying down debt and attracting investors comes as Reliance on Thursday reported its biggest profit slump since 2008
Mukesh Ambani, Asia’s richest man, accelerated the timeframe for wiping out $21 billion in net debt at his Reliance Industries Ltd., seeking to quash skepticism that emerged as talks to sell a stake in some assets to Saudi Arabian Oil Co. have dragged on.
The oil, telecom and retail conglomerate now expects to reach zero net debt ahead of the March 2021 target Ambani had set in August, the Mumbai-based company said in a statement Thursday. A $7 billion share sale to existing investors was approved by the board on Thursday, a week after Facebook Inc. agreed to invest $5.7 billion in Reliance Industries’ Jio Platforms business.
The rights issue — the latest in a series of fund-raising efforts — may help Ambani, 63, pay down borrowings that piled up as the company spent almost $50 billion to roll out a wireless network. Building investor confidence has become all-the-more crucial after the pandemic caused a crashin oil prices, undermining prospects for Reliance’s proposal to sell an estimated $15 billion stake in its oil and chemicals business to Saudi Arabian Oil.
Talks on the investment by the world’s biggest oil producer are on course, Reliance said Thursday in the statement. The company also said it has sought regulatory approvals to carve out the oil and chemicals division. Investors have sought clues to the progress of negotiations with Aramco, as the Saudi company is known, helping drag the stock to a two-year low in March. The shares have rebounded, gaining about 66% since the March 23 close, on renewed confidence in Ambani’s ability to attract investors.
“Reliance Industries has demonstrated excellent timing for fund raising,” said Chakri Lokapriya, chief investment officer at TCG Asset Management. “The Jio Platforms-Facebook deal provides Reliance a huge, scalable business venture with first-mover advantage. The rights issue is a smart way of raising capital.”
Ambani’s focus on paying down debt and attracting investors also comes as Reliance on Thursday reported its biggest profit slump since 2008, missing analyst estimates, on a plunge in oil prices and slumping demand.
Profit plunged by nearly 40% in the March quarter as the coronavirus outbreak slammed fuel demand. To cut costs, Ambani is foregoing his pay and has cut salaries at the oil unit, the company said Thursday.
The billionaire has vowed to shift Reliance away from dependence on profit from its energy-related businesses to faster-growing consumer segments including its digital platform and retail.
Reliance said Thursday that it has received interest from new potential global partners in taking a stake of similar size to Facebook’s agreement to buy a 10% stake in the company’s platform business.
Reliance “has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months,” it said in a statement. The company “is set to achieve net zero debt status ahead of its own aggressive timeline.”
The Facebook-Jio Platforms transaction is to be closed by end of this quarter, the company said in a presentation to investors on its website.
Under the planned rights offering, Reliance will issue shares worth 531.3 billion rupees, it said Thursday. The deal includes one rights share for every 15 held, at 1,257 rupees each, or 14% lower than the closing price on Thursday. Ambani and other members of the founding family who own stakes will subscribe to their entire entitled portion and will buy any stock left over, under the plan.
The offering comes at a tumultuous time for many companies in India.
Even before the pandemic triggered one of the world’s most extensive lockdowns and slammed economic growth, companies were struggling to raise money as banks cut back lending. The atmosphere may make it hard for Ambani to come through on his plans, said Arun Kejriwal, director at KRIS, an investment advisory firm in Mumbai.
“The rights issuance is not attractive,” said Kejriwal. “Hence, the math is not adding up for Reliance in cutting its net debt to zero ahead of the promised deadline. The road map needs to be clearer as the earnings were below expectations.”
In April, Reliance said it would raise as much as 250 billion rupees through non-convertible debentures.
Adjusted debt peaked at 2.7 trillion rupees in fiscal 2020, according to S&P Global Ratings. The ratings company expects that to decline to about 2.2 trillion rupees in the following year and 1.7 trillion rupees by fiscal 2023.
Earnings growth at the company’s digital and retail segments will be about 50% in fiscal 2020, S&P estimates. The businesses will account for about 40% of the company’s earnings before interest, taxes, depreciation and amortization, from just 3% in 2017, S&P said.
“The company’s strategy of transforming its upstream energy focus to domestic consumption-driven businesses has been successful,” S&P said in an April 28 report affirming Reliance’s BBB+ credit rating. “We expect digital and retail growth to continue in fiscals 2021 and 2022.”
The continued sharp decline in working conditions due to the Covid-19 outbreak means that nearly half of the global workforce stand for having their livelihoods changed to the worse, warns the International Labour Organization. In effect, workers of all countries’ informal economy are the most vulnerable of the global workforce, without welfare protection or access to good healthcare. All MENA region countries especially the heavily populated ones tend to have large informal economies. North Africa and countries of the Levant literally owe it to these workers for their citizens’ daily life. These workers, accounting for more than half of all manpower handle more than 40% of the economies of their respective countries. But let us hear the ILO addressing the issue as reported by the WEF, i.e. nearly half the global workforce at risk of losing their livelihood.
The International Labour Organization has warned that nearly half the global workforce are at immediate risk of losing their livelihood because of coronavirus.
Informal workers are at particular risk as they lack welfare protection, access to healthcare, or means to work from home.
Some 1.6 billion workers in the informal economy, representing nearly half of the global labour force, are in immediate danger of losing their livelihoods due to the coronavirus pandemic, the International Labour Organization (ILO) said on Wednesday.
The U.N. agency’s latest report sharply raised its forecast for the devastating impact on jobs and incomes of the COVID-19 disease, which has infected more than 3.1 million people globally, killed nearly 220,000 and shut down economies.
“It shows I think in the starkest possible terms that the jobs employment crisis and all of its consequences is deepening by comparison with our estimates of 3 weeks ago,” ILO Director-General Guy Ryder told a briefing, foreseeing a “massive” poverty impact.
Already, wages of the world’s 2 billion informal workers plunged by an estimated global average of 60% in the first month that the crisis unfolded in each region, the ILO said.
Informal workers are the most vulnerable of the 3.3 billion global workforce, lacking welfare protection, access to good healthcare, or the means to work from home, it stressed.
“For millions of workers, no income means no food, no security and no future. Millions of businesses around the world are barely breathing,” said Ryder. “They have no savings or access to credit. These are the real faces of the world of work. If we don’t help them now, they will simply perish.”https://open.spotify.com/embed-podcast/episode/6jNDKwt8zdtcQn8sWLBeVi
‘Protect the vulnerable’
The ILO said prolonged lockdowns and office and plant closures are now expected to lead to an “even” worse fall in total working hours worldwide in the second quarter than what was forecast just three weeks ago.
Worst-hit sectors are manufacturing, accommodation and food services, wholesale and retail trade, and real estate and business activities.
Total working hours in the second quarter are expected to be 10.5 per cent lower, equivalent to 305 million full-time jobs, than the last pre-crisis quarter, the ILO said, with biggest declines forecast for the Americas, Europe and Central Asia.
The previous ILO estimate on April 7 was that disruptions would wipe out labour equivalent to the effort of 195 million workers, or 6.7% of hours clocked worldwide.
About 436 million enterprises – businesses or self-employed – face “high risks” of disruption, the agency added.
The long-term panorama was unclear.
“The eventual increase in global unemployment over 2020 will depend substantially on how the world economy fares in the second half of the year and how effectively policy measures will preserve existing jobs and boost labour demand once the recovery phase begins,” it said.
As governments splurge unprecedented cash to counteract the crisis, the ILO urged them to speed procedures for unemployment benefits, extend support to independent workers, and fast-track small and informal businesses’ access to credit and loans.
“As the pandemic and the jobs crisis evolve, the need to protect the most vulnerable becomes even more urgent,” Ryder added.Share
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