The emerged middle class are trailblazers in their own nations and represent, on a massive scale, agents of global economic transformation. Their effect on the global economy is already starkly apparent in the seismic shift in global economic gravity over the past few decades.
Due to a myriad of factors, greater trade and investment flows, urbanization, expanding labor forces, rising wages, infrastructure spending, rising life expectancies, political stability, prudent macroeconomic management and, of course, the emerging middle classes of many developing nations, the world has been turned upside down. As recently as 1980, the world economy beat to the tune of the United States in particular and the developed economies in general. The West towered over the Rest.
But, currently the tables have turned. According to the International Monetary Fund, where the developing nations accounted for roughly one-third of world GDP in 1980, this cohort now accounts for over 55% of the global total, with China, the world’s second largest economy, leading the way. By pumping millions of new workers into the global labor force over the past three decades, China and other developing nations have dealt both a supply-side shock (more workers) and demand-side shock (more consumers) to the world economy.
Much of the economic narrative over the past few years has been focused on the former, notably in many developed nations, the United States included, where the common refrain is that the rising supply of workers in the developing nations has undermined the jobs and incomes of workers in the West. To a degree, this is true, although many empirical studies suggest that more United States jobs have been lost to automation and technological advances than to low-cost labor in Mexico or China. The more salient point is that the millions of workers in the emerging markets are also consumers, with more disposable income than their parents or grandparents ever had.
While the spending power of the West has been diminished by the United States-led financial crisis and ensuing austerity in Euro zone area of the European Union, the purchasing power among developing consumers is on a secular upswing. Where in the past factory workers in Asia would trudge off to work on Saturday morning, today they are more likely to head for the local shopping malls for a day of socialising and shopping.
Any first-time visitor to the emerging cities of Shanghai, Dubai, Mumbai, Ho Chi Minh City, Istanbul and Sao Paulo is struck by the vigor and vitality of the local consumer, out in force and shopping in an air-conditioned mall that might be mistaken for a mall in suburban America. The size and scale of these urban buyers and their pent-up demand for electronic goods, appliances, automobiles, skin-care products, clothing and other goods are increasingly setting global trends. Emerging market consumers are leading in global fashion and driving global sales in a number of industries.
Indeed, in a seminal shift, global consumption is tilting toward the developing nations and away from the United States and the West. According to both the recent UNDP and IMF documents, the gap in global personal consumption is narrowing in favor of the developing nations. Where the spread was roughly 80:20 in favor of the developed nations in 1980, the spread has now narrowed to roughly 60:40. And the will have little doubt that in the not-too-distant future, the lines will cross, with the newly emerging middle class poised to take the global baton of consumption from consumers in the West.
And as the emerging market middle classes consume more, world trade flows are being altered. According to the IMF, a shift in world imports is well under way, with the developing nations’ share of world imports reaching a record 56% last year, totalling a record $10.5 trillion. Again, in just a matter of years, the lines are set to cross and imports from the developing nations, led by rising purchases of goods and services from the middle class are set to easily supersede those of the developed nations.
The aftershocks from the rise of the middle class in the developing nations are evident in various guises. Their pent-up demand for electronic goods, appliances, automobiles, skincare products, clothing and other goods has reached the point where emerging market consumers are now dictating the global revenues and profitability of these industries and others.
In addition, as the new global consuming class adopts and acquires Western lifestyles, moves from the village to the city, works in air-conditioned offices, drives to work, consumes more protein, there will be greater demand and higher prices for energy, water, agricultural goods and other natural resources. Put in another way, the monopoly the West has long enjoyed in devouring the world’s natural resources is over.
For much of the post-Cold War era, the equation was rather simple. The developing nations produced commodities and the West consumed them. Those days however, are past. Millions of the new middle class consumers are pressuring the global commodity infrastructure. There is a dramatic shift in underlying demand for global energy, with the developing nations clearly now the global drivers of energy demand and prices.
According to the IMF, the same holds true for the global consumption of meat, fruits and vegetables, with the developing nations, driven by a more affluent emerging market consumer, already out-consuming the developed nations. Pick virtually any commodity and the story is basically the same. Copper, silver, iron ore, meat, corn, wheat, soybeans, the future price of these commodities and others will increasingly reflect the rising per capita incomes and attendant jump in consumption among consumers in the developing nations. In the end, the world has changed. In the years ahead, the global economy will increasingly beat to the tune of millions of other middle-class consumers.
Market Consumers And Global Economic Transformation
BIOWEAPONRY IS EVIL
The world system doesn’t spare any effort when it comes to developing weapons of mass destruction. The rule of thump in this deadly business is, the newer ones must be more destructive than the existing ones. For the most part, these weapons of mass destruction are intended for use against humanity itself, or a component of it! To justify such horrendous proclivities, the ruling psychopathic elites of the powerful states have prepared ready-made ideologies that can support and facilitate their evil ambitions. One such obsession that always comes in handy is the strategy of separating humanity on the bases of race and ethnicity. Such division, based on the diverse nature of the species, has proved to be quite effective. To create immense hatred towards the ‘others’, a systemic inculcation of fear and insecurity (about all and sundry) became essential. As a result, the global masters have gotten away with mass murders!
Our current world system is one where the greed instinct is raised to the highest level of spirituality. It is now the unquestioned operating principle of the global order. From this organizing dogma to the ideology of worshipping outright evil is a mere footstep away, so to speak! Evil is where the techno-sphere is leveraged to the maximum to bring out the worst in humanity. Organized evil is when society endorses the complete moral degeneration of the human individual as well as the collective. Evil is when some members of society think the universe belongs to them and other life forms, including the whole ecosystem, are merely there to facilitate their parasitic and domineering existence, etc., etc. The ultimate outcome of such a sickening disposition cannot be all that good. In fact, unless collective humanity rebels against this prevailing malaise, our tenure on this delicate planet might be even shorter than anticipated.
All human values that took eons for their institutionalization are being destroyed by the shortsighted and callous manipulations of the prevailing global elites. Justice, honesty, truth, probity, harmony, peace, integrity, solidarity, etc. and their attendant institutions have been grossly undermined, and might well be on their way out! In late modernity, evil has ascended to a position where it can now dictate day-to-day affairs of collective humanity. Amongst the newer institutions that are empowered to implement pure evil, one can mention those agencies that are fully engaged in the production of ‘weapons of mass destruction’. The scary scenario of pending global pandemic due to pathogenic viruses/bacteria, from bioweapon labs, didn’t come with yesterday’s rain, so to speak. It has been around ever since the life sciences were opened up for continuous manipulation. The Japanese were probably the first to systemically experiment with bio weaponry. COVID-19, as the ongoing epidemic/pandemic is now called, might well have accidentally escaped from one of those Frankenstein labs or might have been spread intentionally by psychopathic operators of criminal states. Whatever the case, the fact remains that humanity is on its way to destroying itself in one form or another. Even those who would like to remain behind, after getting rid of the many ‘others’, might not be spared from the affliction of their inherent evil!
‘In Germany they first came for the Communists, and I didn’t speak up because I wasn’t a Communist. Then they came for the Jews, and I didn’t speak up because I wasn’t a Jew. Then they came for the trade unionist, and I didn’t speak up because I wasn’t a trade unionist. Then they came for the Catholics, and I didn’t speak up because I was a Protestant. Then they came for me-and by that time no one was left to speak up.” Pastor Maritn Neimoller (Nazi victim).
When evil commands all major operations in the world system, why cannot decent humanity try to temper it, even if getting rid of it is an impossibility?
This was first published in 2019
Central Bank, Capital Market Authority select software provider for securities settlement
The country’s financial regulatory body, National Bank of Ethiopia (NBE), and the recently formed secondary market regulatory body, Ethiopian Capital Market Authority (ECMA), select a company that will provide Central Securities Depository (CSD) software.
It can be recalled that with the support of FSD Africa, NBE and Ministry of Finance had introduced a CSD system project to streamline the financial sector with modern and technology based system.
Brook Taye, Director General of ECMA, stated that the two government bodies have now finalized terms to secure the CSD software.
“The contract has been awarded, which would allow us to transform all of the securities especially for the banks,” he said on Friday, March 24 at a roundtable event organized by Bloomberg and ECMA for Ethiopian financial firms.
“Some of you have thousands of shareholders and all those shareholders and certificates are on a paper format in order to change those into an electronic format and dematerialize them, we need to have a system and the government through NBE and the Capital Market Authority has finalized the procurement of CSD system, which would allow all of you to convert your shares into an electronic format,” the founding head of ECMA elaborated.
He added that the benefit of having all the shareholders in an electronic format, with a unique identification is vital to financial firms who have a share transaction, when there is a transfer or some sort of a sale of their securities. When that transpires, the companies will be able to monitor exactly where the transfer is happening in the ownership of a secured electronic format.
“So we are very much happy that this is finalized and we look forward to your companies also to jump on to this opportunity and to be the first one to completely transform your securities into an electronic format, which is dematerialize with a very efficient way of managing your shares,” Brook underlined.
Brook told Capital that the bidding and selection process which identified the appropriate partner company on the implementation of CSD system was accomplished mid this week and stated that the details will be disclosed soon.
However sources told Capital that the company selected on the bidding process to implement the system is not new to the Ethiopian financial industry scene as it is a dominant player in the sector globally.
CSD is crucial in the secondary market since the market is based on organized and technology based accurate information.
On the project description of CSD, the statement cited that it will ensure the safe custody of securities, ensure accurate record-keeping and reporting, reduce transaction costs, minimize risk, improve efficiency in the transfer of securities, facilitate the implementation of corporate actions, and improve the integrity of transactions.
The CSD will promote increased liquidity and turnover in securities markets, increase transparency, and enhance investor confidence. An efficient and effective capital market will attract diverse investors, including foreign investors, increasing the volume and diversity of trades in Ethiopia’s capital markets.
The CSD will support the development of a deeper and more sophisticated domestic capital market with new asset classes, a pipeline of bankable projects and issuers and improved investment opportunities.
Improved investment opportunities will lead to increased access to finance for the public and private sectors for infrastructure and other sector-specific priorities.
This Project will contribute to creating economic opportunities characterized by increased access to jobs, incomes and basic services, ultimately leading to a sustainable future for Ethiopia.
The system will allow NBE to utilize the CSD system for government securities, and the system also aligned for corporate debt securities, equities, and funds.
The proposed CSD system will increase the efficiency of securities settlement in Ethiopia, leading to enhanced safety, lower transaction costs, and financial sector stability.
At the roundtable that gathered financial sector leaders Bloomberg Country Manager East Africa, Stuart Wakeman, and team, explained that the services of the dominant and prominent financial and market information hub-company will provide the necessary support needed in the stock market.
At the event, experts from Bloomberg demonstrated a system and tools on the capital market operations with the required information and analysis provided by the firm’s platform.
Wakeman said that risk management in the capital markets is very important, “So it is important that you have the systems for market risk, collateral management, and value of risk numbers.”
“We are not going to attempt to sort of influence you to take our products. That is not why we are here. What we really want to do is stress how important some of these factors are,” he said.
In the financial industry, Bloomberg claims that it has about 45 percent market share in providing information, data and systems.
The Country Manager expressed that his company will connect Ethiopian brokers, banks and exchange actors with Ethiopian investment managers, insurance companies and beyond to be able to trade with its counterparts in other countries.
Sirak Solomon, Senior Legal Advisor at ECMA, who reminds that the capital market will be open for foreign actors, said that the roundtable is crucial for local players in the financial sector, “We are not trying to push Bloomberg or any other provider. It is crucial to be aware of the tools that competitors are using to be competitive with the banks and the capital market service providers coming into the market.”
Brook said that similar events will regularly continue with different potential local actors.
The securities market is expected to become operational in 2024 at least by launching the exchange on the fixed income side, according to Brook.
Currently the authority is developing directives that will breathe life to the securities market, and some of the draft directives have been tabled for consultation.
“The capital market service providers’ license directive is completed. So we look forward to the license which we think is very important for our domestic participants to be the first ones to be licensed,” Brook said, adding, “The sector is open for foreign participants as well but our major priority is to ensure that our domestic market makers are the ones that will be licensed.”
Treasury bonds peak past 7 billion birr
Government’s domestic burden still ‘a thorn in the flesh’
The newly rolled out Treasury bond purchased by commercial banks contributes to over seven billion birr in investment under a short window.
Despite the external debt showing reduction, government’s domestic burden continues to surge.
Following deterioration of budgetary support from external partners in the last two years, the central government has resorted to alternative policies like using domestic source to bridge its budget gap.
As part of the new policy, the government through the National Bank of Ethiopia (NBE) introduced 20 percent Treasury bond that became effective on November 1, 2022.
As per the new directive ‘MFAD/TRBO/001/2022’, all banks except Development Bank of Ethiopia (DBE), a state owned policy bank, are set to invest 20 percent of their loan portfolio treasury bond for their loans and advances.
The treasury bonds that shall be issued to each bank on a monthly basis have a maturity period of five years and each bond has two percentage points higher than the minimum saving deposit rate that is now seven percent.
The latest debt analysis that Ministry of Finance (MoF) published indicated that in the first two months since the Treasury bond directive became effective, banks have purchased about 7.1 billion birr worth of bonds from the government. However experts said that it is not clear if it is inclusive of the November and December purchase amount, while MoF’s document stated that the new instrument was introduced in December, 2022.
According to the MoF bulletin that covered the first half of the budget year, which ended on December 31, 2022 banks purchased USD 133 million under the new scheme.
Experts recalled that the directive became effective in the fifth month of the budget year so the investment covers the last two months of the half year. However they said that the amount mentioned was small.
“The amount is not big. The period accounted came at a time when banks new loan disbursement was very minimal due to that the investment on the new bond was less,” they explained signaling their expectation that the amount shall mushroom when banks’ liquidity capacity stands on better grounds leading to loan disbursement increment.
“When the new disbursement increases, investment on bonds will skyrocket,” they elaborated.
A bank president said that so far the banks had purchased four round bonds since the directive was issued in November last year.
“I don’t know whether the MoF document included the bond purchase for December 2022 or not. We purchased the first bond that is for November in December and for December in January 2023. So it may not be clear what they include on their report for the purchase done in January,” he said.
The treasury bond, which is also called a medium term government bond is the second by its nature according to experts who compared the latest government move with the ‘MFA/ NBEBILLS/001/2011’ directive introduced in April 2011 which forced private banks to buy 27 percent of NBE bills of their individual loans and advance disbursements at a maturity of two percent lesser saving deposit interest rate. The NBE bills directive was effective for eight years and seven months up until its scuffing in November 2019.
For the 2022/23 budget year that started on July 7, 2022, parliament approved 786.6 billion birr and of that 308.8 billion birr or 39.3 percent was a deficit.
On the budget document, the government stated that from the total 308.8 billion birr budget deficit 266.1 billion birr or 86 percent is projected to be covered by domestic debt.
The budget deficit is now 3.4 percent of the GDP, which is higher from the recommended about three percent of the GDP.
In the reported period, the direct advance (DA), a government overdraft from the central bank, has also shot up.
The MoF bulletin stated that as at October 7, 2022 the total outstanding of DA which was 236.5 billion birr was converted into long term bond, “And after the conversion, a new DA was issued which amounted to 40 billion birr.”
However in the first quarter of the 2022/23 budget year, the government has taken 60 billion birr as DA from NBE.
Following the decision to convert the DA to long term bond interest bearing government bond has climbed by 123 percent to stand at 428.8 billion birr from 192.2 billion birr in June 2022.
Due to that the interest bearing government bond took 25.5 percent share of the total domestic debt that was 12.6 percent six months ago.
The overall external debt of the public sector was USD 27.8 billion as of December 31, 2022, down from USD 27.9 billion as of June 30, 2022.
The fluctuation in the value of the US dollar relative to other currencies is one of the main causes of the decline; a stronger dollar reduces the stock of external debt in terms of USD, and a relatively higher principal payment during the period compared to disbursement is another reason for the decline.
A total of 69.3% of the country’s external debt is owed by the central government, while 21.2 and 9.5 percent, respectively, are owed by state owned public enterprises (SOEs) that have received government guarantees and non-guarantees.
According to the MoF document external public sector debt disbursements totaled USD 543.02 million from July 1, 2022, to December 31, 2022. This financing benefited mainly central government projects. The total amount of external finance disbursed over the last year and a half was lower than the previous three years same period.
“One of the factors contributing to the decrease in total external debt disbursement is the fact that SOEs, with the expiation of EAL, have not obtained out a new loan in the last four years, and they are disbursing for their older projects less and less as they near completion while the amount of money disbursed to them declines,” it added.
Between July 1 and December 31, 2022, USD 974.05 million in principal, interest, and fees related to servicing the external public sector debt were paid.
The net external debt resource flows from July 1, 2022 to December 31, 2022 (Disbursement-Principal payments) are negative (USD -198.35 million), indicating that the total amount of disbursement from creditors of external sources is less than the total amount of principal payments made to creditors of external sources.
However, the external debt burden is reducing with several challenges including hard currency shortage and low inflow as the domestic debt is contributing to spike the government debt to surge.
The total domestic debt as of December 31, 2022 was 1.68 trillion birr, a 10 percent increase from 1.53 trillion birr as of June 30, 2022. In terms of birr, it increased by close to 150 billion birr from the end of last budget year.
In the reported period, SOEs hold 41 percent of total public domestic debt, with the Central government holding the remaining 59 percent.
Currently, the central government share is increasing against SOEs.
