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ideas have consequences

You are here:Home>>Emeka Chiakwelu>>Displaying items by tag: Rainforest
Displaying items by tag: Rainforest

The Governor of Central bank of South Africa, Gill Marcus has proven herself a pragmatic free market banker rather than ideological by the way she goes about with her responsibilities as the apex banker of the land. She has wisely asserted her independence by refusing to yield to pressure from politicians and labor union to further cut down the benchmark interest rate.

"On March 25, the central bank cut its benchmark interest rate to the lowest in at least 12 years, reducing it by half a percentage point to 6.5 percent, to shore up a recovery from the first recession in 17 years. Labor unions have been pushing for further rate cuts to create jobs." Governor Gill Marcus understood quite well that credit crunch must be ameliorated in order to stimulate the economy for wealth and job creations. For her gallant action she deserves every kudos.

Gill Marcus, Governor of South African Reserve Bank

Gill Marcus was the deputy governor of South African Reserve Bank before she was appointed the new governor of South African apex bank to replace the retired Tito Mboweni. Marcus appointment assured the global financial market that President Jacob Zuma who made the appointment was still committed to free market and financial discipline of his predecessor Thabo Mbeki.


The retired former governor of South African Reserve Bank, Tito Mboweni have the reputation of being fiscal conservative with a prudence in the application of well thought monetary policy to control inflation and maintaining the value of rand. Under the watchful eye of Mboweni the South African currency rand have continue to maintain its strong value but not too strong to dwindle export of home made goods.

South African economy is quite ebullient with its relentless dominance of the entire African economic and financial landscape - the largest economy in Africa and the only African country that made it to G20. A good thing coming from South Africa is the continued investments in the continent. South African investors are investing heavily in West Africa particularly in Nigeria and neighboring countries where they are dominating telecommunication industry. Many of construction contracts in buildings and road constructions in many African countries are dominated by South African firms.

Afripol praised the appointment of Gill Marcus by President Jacob Zuma and maintained that "the keeping of high interest rates do not augur well for growth of small and viable businesses in South Africa. High interests make it difficult for a flourishing economic growth in the country and for upcoming new capitalist it can be detrimental in obtaining and paying back loans from financial institutions." Therefore lower interest rate can be necessary for economic growth and job creation.

The further cutting of interest rate can stimulate economic activities and can help to regenerate economic growth in South Africa in era of global recession, ultimately setting the climate for job creation that is badly needed in the country. When business community and marketers have access to credit, it will surely bring about the needed liquidity that the market is craving for. But cutting the interest rate to appease political constituents will not be good for a coordinated and well thought monetary policy.

A way lower interest rate may certainly encourage more borrowing but more spending and easy money have its downside too. Excessive liquidity may trigger inflationary trends and higher inflation that may retard economic growth that comes with higher unemployment and even weaker rand. The rand is not doing badly even with local demand of dollar; it stood its ground and always rebounded. It was reported that "the rand has surged almost 27 percent since the start of last year, helping to ease price growth by reducing the cost of imports such as oil." An appreciating and strong rand is an indicator of prosperous economy but overtly stronger rand may discourage and dampen export.

The inflation rate since February in South Africa has been 5.7% and that is three-year low. And Reserve Bank Governor Gill Marcus deserves the credit on the handling of the apex bank and its monetary policy. Keeping the inflation lower may be the most important job she has been doing. Higher inflation will complicate her duties by slowing growth and that will not help to alleviate poverty among the youths and unemployed of South Africa. And the increasing stronger and appreciating rand will lose its luster and potency with rising inflation.

Governor Gill Marcus has done well by resisting the mounting pressure to further lower the benchmark interest rate. Yielding to such pressure without the consideration of the market forces will not be prudent. And with that comes the losing of independence and a weaken reserve bank.

 

Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.

 

 

 

 

 

 

 

 

 

 

 

Thursday, 24 June 2010 20:49

Prince Charles and Rainforest Fund

Protecting African ecosystem by swapping debt

Prince Charles of Wales a longtime advocate of rainforest protection has taken pragmatic steps by setting up an emergence rainforest fund with thirty five countries. The targeted goal is to put in $22 billion to up to $36 billion in the fund to save rainforest and reduce the raging deforestation rate especially in the poor countries.

This is a noble project and deserves the attention it received. The task of protecting rainforest cannot be left to poor countries in the southern hemisphere that lack the means and resources to stop the cutting down of tress. In the tropical rainforest the forest have become source of energy for domestic consumption. Tresses are cut down to be used as fire woods for cooking, medicine and nutrition. While governments cut down tresses for export in order to generate foreign currency.

This fund can play a vital role to save the Africa’s ecosystem but Prince Charles and the fund managers have to be creative in disbursing the money. African debt cancellation can become the tool to save the forest in the region. The Rainforest Fund can promise and implement debt reduction scheme: Outright debt cancellation when African countries are willing to implement the requisite criteria to save the forest. Simply swapping debt for forest protection can help to curtail rate of deforestation in Africa.

“In Africa today, tropical forests and rangelands are under threat from population pressures and systems of land use. Generally apparent effects of these threats include loss of biodiversity, rapid deterioration in land cover, and depletion of water availability through destruction of catchments and aquifers. Changes in climate will interact with these underlying changes in the environment, adding further stresses to a deteriorating situation. A sustained increase in mean ambient temperatures beyond 1EC would cause significant changes in forest and rangeland cover; species distribution, composition, and migration patterns; and biome distribution.”

In this trouble time of global warming and climate change, forest can aid in the reduction of carbon dioxide, the culpable greenhouse emission gas that contributes to global warming. During photosynthesis which is the process for plant to manufacture food, the carbon dioxide is taken in and oxygen is given out. Therefore the excessive carbon dioxide in the atmosphere can be reduced and global warming can be controlled. It is important to save the forest and have enough of it to make an impact on the reduction of carbon dioxide and global warming.

The 25% goal of reducing the destruction of tropical rainforest by 2015 is plausible when African forest is protected because “deforestation is responsible for almost 20% of global carbon emission.”

Task of contributing such a large amount of money for the Rainforest Fund can be difficult with the global economic recession but it is imperative that destructive effects of global warming must be slowed down before it becomes irreversible and irrecoverable.

 

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