Inflation hits South Africa and threatens the world – OZY


Africa

Sub-Saharan Africa will experience its worst inflation since 2008

Russia’s invasion of Ukraine led to a spike in global oil and food prices and the International Monetary Fund announced that sub-Saharan Africa’s inflation rate rose by nearly 4 percentage points to reach 12.2% because of the invasion. The rise in prices will “erode living standards a bit in many countries,” IMF Africa Director Abebe Aemro Selassie told the just-concluded IMF-World Bank Spring Meetings in Washington, D.C. DC.

Small businesses are already feeling the pain.

“When inflation hit, most of our customers – some who had been with us for a long time – started to cut their expenses, maybe from ZAR 10,000 ($632.39) to ZAR 1,000 ($63.24 $) as things like cooking oil and fuel went up,” Malesela Rachel Ouma Tema, owner of small South African clothing company Plus Fab, said in a comment provided to OZY. The company has been in business for ten years and receives orders from the British Caribbean, UK, USA, Nigeria, Ghana, Botswana, Zimbabwe and Swaziland.

“We’re a fashion company, so not a priority for most,” Tema said. “We had to lay off a lot of our workers and cut wages in half – so inflation really hit our business.” According to IMF, the two largest economies in sub-Saharan Africa, South Africa and Nigeria, will see slower growth this year. In Nigeria, inflation and global uncertainty around oil prices have combined with growing security risks and low immunization rates to dampen economic growth.

Zimbabwe’s president mimics Putin’s ruble bailout strategy

The Zimbabwean dollar (ZWL) is depreciating rapidly, signaling a lack of confidence in the currency.

According to official data from the Reserve Bank of Zimbabwe, the US Dollar is currently trading at ZWL166 but on the country’s parallel foreign exchange market, it’s ZWL 400 to the dollar, indicating that the government is trying to prop up its currency. And now Zimbabwean President Emmerson Mnangagwa has revealed his intention to adopt Russian President Vladimir Putin’s recent strategy to save the rouble, by requiring international purchases of Zimbabwean natural resources to be made in local currency. Thus, in Zimbabwe,any investor who comes here must buy using the Zimbabwean dollar,” Mnangagwa said. (Source: Bloomberg)


Americas

US markets warn of volatility in economy

As the United States experiences its worst inflation in decades, businesses are reporting a drop in consumer demand. Marlboro maker Altria Group Inc says cigarette smokers are turning to cheaper brands, while Sleep Number and Tempur Sealy International have reported falling demand for mattresses an expensive common item. Last week, the US Department of Commerce announced that gross domestic product fell 1.4% on an annualized basis in the first quarter of 2022. (Sources: Bloomberg, The Wall Street Journal, The Financial Times)

US Fed tackles inflation

The Fed’s action this week to raise interest rates by 0.5% – instead of the usual 0.25% – was an attempt to dry up liquidity and curb rising prices, but also triggered turbulence in the markets. President Biden is under pressure to reduce US inflation, which hit 8.5% in March: the highest rate since 1981. (Sources: Bloomberg, The Economist, The New York Times, The Wall Street Journal)

Has Brazil found a solution to rising global food prices?

With global food prices soaring due to Russia’s invasion of Ukraine, South America has struggled. In a continent heavily dependent on wheat, corn and fertilizer, Brazil may have found the answer. According to The Economist, agricultural techniques that combine crops and livestock with forestry practices can make a farm five times more productive than the current average for Brazilian agriculture. However, at present, these techniques are only used on about 5% of the country’s agricultural land. (Source: Bloomberg, The Economist, The Wall Street Journal)


Europe

EU responds to “Petro for Rubles”

Moscow demanded that European buyers are paying for its oil and gas in Russian rubles, as President Vladimir Putin seeks to stabilize a currency hit hard by economic sanctions. In response, EU energy ministers have proposed banning the purchase of Russian crude oil and gas while researching alternative energy sources. “We are also pushing within the EU to phase out oil together,” German Foreign Minister Annalena Baerbock told state broadcaster ARD. (Source: The Wall Street Journal, Bloomberg, The Financial Times, The Washington Post)

EU regulators accuse Apple of breaching antitrust laws

On Monday, the EU accused Apple of breaching antitrust laws, accusing the company of being not allowing other mobile app payment methods on its iOS platform, effectively forcing consumers to use its own Apple Pay. “Apple has built a closed ecosystem around its devices and operating system,” said EU Executive Vice President Margrethe Vestager, the bloc’s competition commissioner. Apple, however, denies blocking its competitors. (Source: The Wall Street Journal, Bloomberg, The New York Times, The Financial Times)


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Asia

China’s “zero tolerance” policy against Covid-19 threatens its economy

Some economists predict a recession for the world’s second largest economy. Due to a recent outbreak of COVID-19, the Chinese government has implemented more strict restrictions to curb infections. But these restrictions have an economic impact and impact global supply chains. Disruptions are occurring in the main financial center of Shanghai and the car manufacturing hub of Changchun. (Source: Bloomberg, The Wall Street Journal, The New York Times)

Singapore PM predicts global recession in two years

Singapore’s Prime Minister Lee Hsien Loong told the country to prepare for more economic challenges, pointing to high global inflation rates and tighter monetary policies. Loong predicts a global recession within the next two years. “Even before Ukraine, inflation was already a problem, but the war made it worse,” he said. (Source: Bloomberg)

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