Daily Archives: May 22, 2014

Africa: Boko Haram: The Growing Threat to Schoolgirls in Nigeria and Beyond

Boko Haram: The Growing Threat to Schoolgirls in Nigeria and Beyond


Sarah Sewall
Under Secretary for Civilian Security, Democracy, and Human Rights 

House Foreign Affairs Committee
Washington, DC
May 21, 2014

Chairman Royce, Ranking Member Engel, and Members of the Committee, thank you for inviting me to discuss Nigeria’s struggle against Boko Haram, one of the most lethal terrorist groups in Africa today.

Over a month ago, the world was shocked when Boko Haram kidnapped over 250 young women from a secondary school in Chibok. The United States swiftly joined the effort to help the Government of Nigeria safely recover the hostages.

President Obama pledged our full support, and President Goodluck Jonathan readily accepted Secretary Kerry’s offer of assistance. Today in Nigeria’s capital, Abuja, a robust multidisciplinary team from the United States government is working hand in hand with Nigerian counterparts and teams from a half dozen other countries such as the United Kingdom and France. Our military and civilian experts in intelligence, military planning, hostage negotiations, strategic communications, civilian protection, and victim support, have been given unprecedented access and cooperation to assist Nigeria’s effort to safely recover the kidnapped schoolgirls. This effort – one that is extremely difficult and, as we know from our own experience, may take far longer than we would like – will necessarily entail not just a military approach, but also law enforcement and diplomatic approaches. This kidnapping – and addressing the threat of Boko Haram more broadly – would be daunting for any government. That is why the United States is doing all it can to help Nigeria address these challenges – today and longer term.

During our trip last week, AFRICOM Commander General David Rodriguez and I met Nigeria’s top security officials to stress the importance of resolving this crisis and redoubling the effort to defeat Boko Haram, while respecting human rights and ensuring the protection of civilians. In Paris, Under Secretary for Political Affairs Wendy Sherman continued this conversation with Nigerian President Jonathan and heads of state from neighboring countries at a summit convened by French President Hollande in Paris. The summit brought together President Jonathan with presidents of his four neighbors (Benin, Cameroon, Chad, and Niger) as well as senior representatives of the United States, United Kingdom, and European Union. Coming one day after Boko Haram killed and kidnapped Chinese nationals in northern Cameroon, the summit made clear and urgent for all parties the growing regional dimension of this challenge.

The leaders discussed the safe return of the school girls held hostage, and shared concrete ideas on how to defeat Boko Haram such as improving cooperation on border security, countering violent extremism, and redoubling efforts to promote economic growth and create jobs in the affected region. This is consistent with the comprehensive approach Nigeria announced in March and we have repeatedly called for this broad effort to be implemented.

At the summit, the U.S., United Kingdom, and France established a coordination mechanism at various levels to ensure our development, diplomatic, and security assistance are synchronized, including with our African partners. We again called on our African partners to establish national CT strategies, to integrate them across the region, and to share them with P3 and other partners. The United States has worked with Nigeria to impose UN Security Council sanctions on Boko Haram, which we expect to be completed this week.

Peace and security in Nigeria is one of our highest foreign policy priorities in Africa. The tragedy of this kidnapping has rightfully focused our attention on the need to return these girls to their families, and on Boko Haram’s increasingly brazen assaults on youth seeking education. Ensuring that girls and boys alike have the opportunity to learn is essential to ensuring that all of Nigeria’s people contribute to and benefit from its economic prosperity. As the First Lady recently observed, stories like those of the kidnapped girls – and others who have risked their lives to pursue an education – should serve as a call to action to help the millions of girls worldwide who are not in school.

The kidnappings have also exposed the long-term security challenges that confront Nigeria, one of our most important partners in Africa. The fight against Boko Haram requires more than just military action, it requires a comprehensive approach to improving the lives of people in Northeast Nigeria. Just as my portfolio at the State Department includes counterterrorism, law enforcement, democracy promotion, human rights, conflict response, criminal justice, refugees, trafficking in persons, and religious freedom, Nigeria needs to address all of these important, inter-related issues in its fight against Boko Haram. Nigeria is not only a critical regional political and economic leader, but also a partner with which we work closely together in multilateral fora, including the UN Security Council.

While the kidnapping in Chibok has cast a spotlight on Boko Haram, I want to emphasize that we have long been working to help the people of Nigeria and the Nigerian government address this terrorist threat. Boko Haram is a Nigerian-based group that became considerably more violent in 2009 and has metastasized into a regional threat. It is responsible for the brutal killing of thousands of people in Nigeria, resulting in over 1000 deaths and injuries in 2013 alone. Boko Haram also operates in Cameroon’s Far North Region and the Lake Chad Basin and has kidnapped high-profile Westerners and, just recently, Chinese nationals in Cameroon. While we are rightfully focused on the almost 300 girls who were kidnapped, this tragedy is not an isolated incident. Going back just a few months, in February, over 59 teenage boys were killed in an attack, and, earlier this month, Boko Haram carried out an attack on two towns, killing an estimated 300 people.

As we pursue an integrated approach to helping Nigeria meet its challenges, we want Nigeria to prevail in its efforts, which we believe can only be accomplished through a comprehensive, whole-of-government approach to defeating Boko Haram. We know from experience the difficulty in confronting an enemy that knows no borders and kills civilians indiscriminately. The most urgent need we see today is for Nigerian forces to conduct intelligence-driven operations that avoid civilian casualties, in order to help enhance trust and cooperation with northern populations and expose the relatively small numbers of Boko Haram fighters. More broadly, Nigeria’s approach in the Northeast should emphasize and inspire respect for human rights, rule of law and accountability, and development and responsive governance. We are seeing small measures of slow progress, including the Nigerian government’s announcement two months ago of a multi-faceted “soft” approach to Boko Haram. We are eager to see and to help Nigeria now implement this plan and have offered assistance to that end, including sharing our own lessons learned in how to effectively carry out counterterrorism operations while ensuring the protection of civilians.

Today, I would like to highlight some of the kinds of security assistance that we have been providing to help Nigeria address Boko Haram. A fuller description of our counterterrorism assistance to Nigeria can be found in the Fact Sheet about Boko Haram and U.S. Counterterrorism Assistance to Nigeria released by the State Department on May 14. In Fiscal Years 2012 and 2013, the Department of State planned approximately $35.8 million in security assistance programs that benefit Nigeria, subject to Congressional notification and approval. Our security assistance reflects our efforts to ensure Nigeria takes a comprehensive approach to countering Boko Haram. We are working with vetted police and civilian security components to build Nigerian law enforcement capacities to investigate terrorism cases, effectively deal with explosive devices, and secure Nigeria’s borders. We do this because the most effective counterterrorism policies and practices are those that respect human rights and are underpinned by the rule of law. For example, our West African Regional Security Initiative provided nearly $3.7 million in assistance to the Nigerian Economic and Financial Crimes Commission in Fiscal Year 2013 to help Nigeria counter corruption, money laundering, and terrorist financing, and help reform the police and promote the rule of law. We are also focused on enabling various Nigerian security services, including the police, various intelligence agencies, and the ministry of defense, with fusing multiple information streams to develop a better understanding of Boko Haram. My DOD colleague will speak to this more fully, but our military assistance supports the professionalization of vetted military units and improves their ability to plan and implement appropriate steps to counter Boko Haram and ensure civilian security. We have a robust dialogue with our Nigerian counterparts on all of these efforts, including through the U.S.-Nigeria Binational Commission’s Regional Security Working Group.

While these efforts will make a difference, we continue to have concerns that human rights violations by government forces – particularly those forces that have operated in the Northeast – are undermining the government’s attempts to defeat Boko Haram. Given these concerns, we continue to press the Government of Nigeria to demonstrate that it is working to protect civilians where Boko Haram is not—this means ending impunity for human rights violations by security forces. For example, alongside the Nigerian people and their own human rights commission, as well as Amnesty International and others, we have asked the Government to investigate massacres allegedly committed by government security forces that occurred in the village of Baga in April 2013 and at the Giwa Barracks detention facility after Boko Haram staged a prison break there in March of this year. Only with facts uncovered and perpetrators brought to justice can the Nigerian government demonstrate that it is working to preserve life and fairly administer justice.

Let me be clear that there is no equivalence between the actions of the Nigerian military and those of Boko Haram, a terrorist group which has made clear that it is seeking to murder civilians in large numbers and terrorize the civilian population as a matter of policy. Yet, we also know the power of popular grievance narratives against governments, and it is incumbent on Nigeria’s government to demonstrate through specific steps the will to ensure its forces protect the human rights of all of its people and end impunity for those that use violence indiscriminately. Civilians in the Northeast must be assured that security services are there to protect them from Boko Haram’s violence. The confidence and cooperation of civilians is critical to deny Boko Haram a safe haven and gather the intelligence necessary to, among other pressing goals, safely recover the girls kidnapped at Chibok. Moreover, when military and security forces are found to commit human rights violations and the government does not act to hold the perpetrators of these incidents responsible for their actions, we are then limited as a matter of U.S law and policy to work with units involved in these incidents. We are eager to help the Nigerian government address these concerns, which impede our ability to help in preventing punishing, and rectifying Boko Haram’s atrocities.

Let me say a few words about how the provisions of law concerning security assistance and human rights known as the “Leahy laws” affect our work to assist the Nigerian government combat Boko Haram. Let me be clear: We value and strongly support the tenets and purpose behind the Leahy laws, and we have worked within U.S. law and policy to assist the Nigerians in their fight against Boko Haram. There is no question that the behavior of certain Nigerian military actors have made it impossible for the United States to work directly with them. To better understand the possibilities of promoting change, I will ensure that we are working to the greatest extent possible to build Nigeria’s capacity as a rights-respecting security partner and to encourage the reform of its military to more effectively address the Boko Haram threat.

In addition, pervasive corruption undermines the government’s fight against Boko Haram. The Nigerian government has one of sub-Saharan Africa’s largest security budgets, with $5.8 billion dedicated to security in its proposed 2014 budget. Yet corruption prevents supplies as basic as bullets and transport vehicles from reaching the front lines of the struggle against Boko Haram. Morale is low and desertions are common among soldiers in Nigeria’s 7th Army Division. For example, on May 14, 7th Division soldiers reportedly fired at their commander’s car, complaining that he had failed to ensure they received the necessary equipment. As this incident shows, Nigeria will need to seriously tackle corruption if it is to succeed in stamping out Boko Haram.

These challenges are even more acute in the lead up to February 2015, when Nigeria will hold its fifth presidential election since its return to democracy in 1999. The last election, held in 2011, showed improvements in election administration, but was followed by riots that claimed over 800 lives, mostly in northern states. Insecurity and political tensions have fueled fears that 2015 may see even greater violence.

We are of course concerned about the northeast, where Boko Haram operates, and where it will be critical for the government to ensure security so that Nigerians in the Northeast are able to vote, including in three states of emergency. We are also working to help address instability in Nigeria’s Middle Belt, where complex conflicts over land have pitted communities against one another, and the Niger Delta, where tensions over the allocation of oil revenues remain high and a long-running insurgency is yet to be fully settled. As Nigerians prepare to vote against this backdrop of corruption, tension, and uncertainty, we must look at more than the kidnapping at Chibok to understand and help Nigeria address the full range of challenges to its future.

We are therefore working in other ways to help Nigeria keep civilians safe and strengthen democracy. For example, we are reviewing ways to establish a community-based early warning response to combat GBV in Nigeria, and particularly in the north. We are striving to promote interreligious tolerance in the Middle Belt, and we have an initiative championing narratives of non-violence in the Niger Delta led by local Nigerian community, business, cultural, and economic leaders, and aimed at giving local populations’ a voice to promote peace through media. As the 2015 elections approach, our diplomatic engagements are supporting USAID’s elections assistance package, which will help the Independent National Electoral Commission, or INEC, to register voters, conduct elections, and run a nationwide voter education campaign to ensure that all citizens understand their rights and know how to exercise them. During my trip to Nigeria, I met INEC Chairman Professor Attahiru Jega to discuss preparations for the elections, the status of northeastern states’ ability to participate in elections, and convey our interest in the credibility and peacefulness of the vote. We continue to call on all political parties and candidates to publicly renounce violence and commit to ensuring a free, fair, and peaceful election.

Before I close, I would like to address two aspects of the State Department’s approach toward Nigeria and Boko Haram. The first concerns the timing of the designation of Boko Haram as a Foreign Terrorist Organization. While I was not at the State Department at that time, the Department pursued the designation after careful deliberation and consultation with the Nigerian government and after a series of steps that included our June 2012 designation of Boko Haram’s top commanders as Specially Designated Global Terrorists and our June 2013 decision to add Abubakar Shekau, Boko Haram’s official leader to our Rewards for Justice Program. We made the FTO designation after implementing and assessing these earlier steps, and shortly after Nigeria and the United Kingdom made their own designations. In short, our approach to the FTO designation reflected our evolving assessment of Boko Haram’s threat potential, the utility of additional sanctions available pursuant to FTO designation, and our close coordination with our partners. Significantly, while Nigeria has been reluctant to seek international attention to the Boko Haram crisis, it has moved forward this month, in part at our urging, to request that the United Nations Security Council designate Boko Haram under its al Qa‘ida sanctions regime.

The second issue concerns whether Boko Haram, and particularly the kidnapping at Chibok, is part of a worldwide trend of persecutions against Christians. We are committed to protecting the rights of people of all religions, including Christians, to practice their beliefs freely and peacefully. Certainly Boko Haram has targeted Christians, and Nigerian officials believe that 85% of the girls kidnapped at Chibok are Christians and have been forced to convert to Islam after their kidnapping. We want to highlight, however, that Boko Haram is a problem that affects Nigerians of every religion. Indeed, the majority of Boko Haram’s estimated 4,000 total victims to date have been Muslim. Even as we work to help the Government of Nigeria protect Christians, we are also helping it protect its population as a whole. In the aftermath of the kidnappings, we have encouraged Muslim and Christian faith leaders alike to speak out, in Nigeria and around the world, to urge respect for religious diversity and interfaith cooperation. I can assure you that we treat issues of religious freedom, like other issues of universal human rights and fundamental freedoms, with utmost seriousness.

The State Department, like the American people, hope to see the girls reunited with their families soon. But we are also preparing for a long, tough fight to defeat Boko Haram and to help the Nigerian people – including Nigeria’s girls and boys alike – realize the full political and economic potential of their great country.

Compliance professionals to be recognised and rewarded at the inaugural Southern Africa Compliance Awards, in Johannesburg

Business in Africa is advancing rapidly, due in no small part to the efforts of the compliance industry

JOHANNESBURG, South-Africa, May 22, 2014 – The outstanding contributions that compliance professionals make every day to securing the future of business in Southern Africa will be celebrated and rewarded at the first-ever ‘Southern Africa Compliance Awards 2014′ (http://africancomplianceawards.com/south-africa) taking place in Johannesburg in November.

Logo: http://www.photos.apo-opa.com/plog-content/images/apo/logos/saca.png

The awards ceremony at La Toscana of Montecasino, on 19th November, is organised by C5 and will represent and reward professionals from across the compliance sector, recognising the very best individuals, teams and initiatives; highlighting the united efforts of this innovative and dynamic sector.

The key highlight of twelve months’ worth of diligence, vision and commitment in helping to keep compliance at the very top of its game, the ‘Southern Africa Compliance Awards 2014′ will be judged by prominent compliance and regulatory professionals from across the spectrum of the corporate, legal and professional services world in Southern Africa.

Awards Director, Brian Reffell, comments: “We are proud to launch the Southern Africa Compliance Awards, the latest edition in the unique global event series that allows us to dynamically support the compliance industry and its professionals in highlighting the vast range and diversity of work that is undertaken by the industry in Southern Africa.

It is especially germane in these challenging times with the increased regulatory and media spotlight on corporate ethics and compliance effectiveness; business in Africa is advancing rapidly, due in no small part to the efforts of the compliance industry. I would particularly like to thank our judges, their support and enthusiasm is demonstrative of the integrity and quality within the profession as it continues to innovate and deliver first-class compliance services.”

The shortlisted finalists that demonstrate the excellence and wealth of talent within the compliance industry will be announced and the winners revealed at the Gala Dinner and Awards Evening in Johannesburg.

The 12 award categories range from Junior Compliance Officer of the Year to Compliance Innovator of the Year and Law Firm of the Year to Inspirational Woman of the Year in Compliance.

Entries will be judged by a panel of prominent compliance specialists from across the corporate, legal and professional services world in Southern Africa, including:

Alexandra Wrage, President, TRACE International

Philippe Montigny, President, ETHIC Intelligence

Roy Waligora, Director and Partner, KPMG Services (Pty) Ltd

David Lewis, Executive Director, Corruption Watch (RF) NPC

Adela Fortune, Company Secretary, Old Mutual Emerging Markets Limited

Justin Warren, Head of Compliance, African Minerals

Ferdi Bayliss, Vice President: Group Compliance, Gold Fields

David Loxton, Co-head of Forensics, ENS Africa

Yvette Lingom, Division Manager- Legal, C5 Communications (UK) Ltd

Bapsy Dastur, General Counsel – Head Legal & Integrity IMA, ABB

Don Hughes, Vice President and General Counsel EMEA, Hitachi Data Systems

Hugh Bigwood, Global Head of Compliance, Rio Tinto Group

Andrew Legg, Partner, Eversheds LLP

Commenting on the launch of the Awards Alexandra Wrage, Founder and President of TRACE International said:

“Compliance professionals often find themselves in a thankless role. In the most extreme cases, they’re seen as an obstacle to business, looking where they shouldn’t to uncover things people don’t really want to see! Management rarely applauds the absence of problems, so the best many can hope for is the quiet confidence that they’re protecting the company’s reputation and shareholder value. These awards are enormously important because they provide the spotlight and accolade that talented compliance officers deserve, but so rarely receive. Compliance professionals have had far too few opportunities for recognition of this kind prior to this timely initiative and I am delighted to be a part of it.”

Ferdi Bayliss, Vice President, Group Compliance at Gold Fields shared Alexandra’s view:

“Congratulations on this excellent initiative and career advancing pathway for compliance officers. I am a firm believer and prophet of recognition, something that has been neglected in the SA’s compliance officer industry. I am honoured to be a judge at the Southern Africa Compliance Awards”

Distributed by APO (African Press Organization) on behalf of the Southern Africa Compliance Awards.

For further editorial information and/or images, please contact Jessica Horner Marketing &
PR Manager

C5 Communications

Tel: +44 (0)20 7878 6950

Or email j.horner@c5-online.com

To find out more about the inaugural ‘Southern Africa Compliance Awards 2014′, visit
http://africancomplianceawards.com/south-africa/ or follow the conversation on Twitter @AC_Awards #SACA2014 or get in touch with our team at awards@c5-online.com

Linkedin: https://www.linkedin.com/groups?mostRecent=&gid=6669332&trk=my_groups-tile-flipgrp

Facebook: https://www.facebook.com/africancomplianceawards

Notes to the editor:

The Southern Africa Compliance Awards (http://africancomplianceawards.com/south-africa) celebrate the achievements of compliance professionals in Southern Africa, recognising and rewarding the outstanding and essential contribution that compliance professionals make for business in the region. The awards embody the very best initiatives, individuals and teams, bringing into sharp focus the united efforts of this innovative and dynamic sector and business enabler.

Designed to empower, inspire and motivate the awards are exceptional in recognising the achievements of the compliance industry, they are a highpoint in twelve months’ worth of diligence, vision and commitment in helping to keep business at the very top of its game; winners being recognised on the 19th November 2014 at the Dinner & Awards Evening at Montecasino, Johannesburg, South Africa.

SOURCE: Southern Africa Compliance Awards

Statement of the Monetary Policy Committee by Gill Marcus, Governor of the South African Reserve Bank

Since the previous meeting of the Monetary Policy Committee, inflation has breached the upper end of the target band and is expected to remain outside the target for some time. This development was in line with the Bank’s inflation forecast, which is more or less unchanged since the previous meeting of the MPC.

The exchange rate has appreciated somewhat since its lows in January in response to a more benign global monetary policy environment, moderating some of the near-term upside risks to inflation. Nevertheless, risks to the inflation outlook remain skewed to the upside.

Despite a more favourable global growth environment, the domestic economic growth outlook has deteriorated markedly. There is still no end in sight to the protracted strike in the platinum sector, and the economic and social costs are escalating and are potentially devastating. Both the mining and manufacturing sectors appear to have contracted in the first quarter, with electricity supply constraints adding to the weak outlook. Against this backdrop, monetary policy faces an increasingly challenging scenario.

The year-on-year inflation rate as measured by the consumer price index (CPI) for all urban areas measured 6,0 per cent and 6,1 per cent in March and April 2014 respectively, up from 5,9 per cent in February. Food and non-alcoholic beverage price inflation accelerated significantly, measuring 7,0 per cent and 7,8 per cent in the past two months, compared with a recent low of 3,5 per cent in December.

The contribution of this category to headline inflation was 1,2 percentage points in April compared with 0,8 percentage points in February. The categories of food, housing utilities and transport together accounted for 3,7 percentage points of the inflation outcome in April.

Core inflation, which excludes food, petrol and electricity, measured 5,5 per cent in March and April after six consecutive months at 5,3 per cent. Administered price inflation excluding petrol continued its gradual decline, measuring 6,5 per cent in April, from 6,7 per cent in March.

The headline producer price inflation for final manufactured goods measured 8,2 per cent in March, compared with 7,7 per cent in February, driven mainly by food prices, and is indicative of further upside pressures on CPI inflation in the near term.

The Bank’s forecast of headline inflation changed marginally since the previous meeting. Inflation is expected to average 6,2 per cent in 2014, compared with 6,3 per cent previously, with the peak of 6,5 per cent (previously 6,6 per cent) expected in the fourth quarter. The forecast average inflation for 2015 remained unchanged at 5,8 per cent. The forecast horizon has been extended and inflation is expected to average 5,5 per cent in 2016, and 5,4 per cent in the final quarter of that year. Inflation is still expected to remain outside the target band from the second quarter of 2014 until the second quarter of 2015.

The outlook for core inflation is also largely unchanged. This measure is expected to average 5,6 per cent and 5,7 per cent in 2014 and 2015 respectively, compared with the previous forecast of 5,6 per cent for both years, moderating to 5,5 per cent in 2016.

The upward pressure is assessed to be a response to the lagged effects of the exchange rate depreciation rather than evidence of strong domestic demand pressures. The MPC still sees the risks to the inflation forecast to be skewed to the upside, and remains concerned that the current low level of pass-through may not persist.

The Reuters survey of inflation expectations of economic analysts conducted in May is more or less unchanged since the previous survey. Inflation is expected to average 6,3 per cent in the second quarter, and 6,2 per cent in the final two quarters of this year, before returning to within the target at an average of 5,8 per cent in the first quarter of 2015. Annual inflation is expected to average 6,2 per cent in 2014, and 5,6 per cent and 5,4 per cent in the subsequent two years respectively, somewhat lower than the Bank’s forecast.

The global economic outlook remains mixed. Growth in the US stalled in the first quarter as a consequence of the severe weather conditions, while retail sales in April were below expectations. Despite downside risk to growth from the housing market, the recovery is expected to remain on track, although at a lower rate than that forecast earlier in the year.

While the Fed expects growth of between 2,8 and 3,0 per cent for 2014, the market consensus is closer to 2,5 per cent. The UK economic recovery also appears to be resilient, despite some slack in the economy. By contrast, the Eurozone continues to lag, following a lower-than-expected annualised growth rate of around 0,8 per cent in the first quarter.

The annualised growth rate of 5,9 per cent recorded by the Japanese economy in the first quarter of this year is not expected to be sustained as higher consumption taxes take effect, and consensus forecasts are for annual growth of around 1,5 per cent. The Chinese economy grew at an annualised rate of 5,8 per cent in the first quarter of 2014 amid weakening trends in industrial production and retail sales.

Although an annual growth rate of between 7,0 – 7,5 per cent is still generally expected, there are concerns that the loss of momentum in the property market and declining credit growth could pose downside risks to growth.

The shift in global growth dynamics toward the advanced economies has been reinforced with a number of emerging markets facing a more challenging outlook. Low growth is expected in a number of the larger economies, including Brazil, Russia, Argentina, Turkey and Thailand, but some analysts have revised upwards their growth forecasts for India. More positively, growth in sub-Saharan Africa is expected to average 5,4 per cent, but this is vulnerable to weaker commodity prices in the event of slower growth in China.

Global inflation remains benign amid relatively stable food and energy price trends. Financial markets appear to have priced in continued steady tapering of quantitative easing in the US, and recent guidance from the Fed appears to have reduced the degree of volatility and uncertainty in financial markets regarding the pace and timing of monetary policy normalisation.

Policy rates look set to increase at a moderate pace in the US and UK during 2015, while the possibility exists of further easing in Japan and the Eurozone, where the risk of deflation persists. Since the previous meeting of the MPC, monetary policy has been tightened in New Zealand, Brazil and Russia in response to inflation pressures or exchange rate concerns, but eased slightly in Hungary.

With global financial markets pricing in a slower pace of US policy normalisation, global risk appetite has improved. Apart from sizeable outflows from Russia in the wake of the crisis in the Ukraine, capital flows to emerging markets have resumed, or outflows slowed, resulting in generally appreciating EM currencies and declining long bond yields.

This improved sentiment has also impacted on the rand exchange rate, which appreciated by 3,3 per cent against the dollar and by 3,1 per cent on a trade-weighted basis since the previous meeting of the MPC. During this period the rand traded in a range of between around R10,70 and R10,29 against the US dollar.

Portfolio flows to South Africa have been in line with general global trends. Following cumulative net sales of South African government bonds and equities by non-residents of R71 bn from November 2013 to the end of January 2014, net purchases of bonds and equities since the beginning of February have totaled R8,3 bn and R29,9 bn respectively. Year-to-date net inflows into bonds and equities total R7,6 billion.

While recent exchange rate developments have afforded some near-term respite from further inflation risks from the exchange rate, the MPC is mindful of the sensitivity of the rand to both global and domestic factors.

The rand is expected to remain vulnerable to changing global perceptions of US monetary policy and associated capital flows. However, while the recent appreciation is more a reflection of changing global risk perceptions rather than a specific re-assessment of South African fundamentals, domestic factors have also impacted on the rand.

The exchange rate is likely to remain sensitive to domestic factors, including developments in the current account of the balance of payments and perceptions of its sustainability. In particular, the ongoing strike in the platinum sector is expected to begin to have a significant negative impact on exports, now that inventories are reaching low levels, and a further extension of the strike could impede the required current account adjustment process.

The domestic economic growth outlook has deteriorated markedly, with the reversal of a number of the tentative positive signs observed at the beginning of the year. The Bank’s forecast for economic growth for 2014 has been revised down from 2,6 per cent at the previous meeting to 2,1 per cent, implying a further widening of the negative output gap. The forecast for 2015 remains unchanged at 3,1 per cent, and growth in 2016 is expected to average 3,4 per cent.

However, the risks to these forecasts are increasingly to the downside against the renewed possibility of electricity load-shedding, among other factors. The Bank’s leading indicator of economic activity declined marginally in February, and the sustained sideways movement confirms the subdued outlook, amid weak business confidence.

The RMB/BER business confidence index declined by two index points to 41 index points in the first quarter of 2014.

The first quarter growth outcome was negatively affected by contractions in both the mining and manufacturing sectors. In the first quarter of 2014 the physical volume of mining production declined by 6,8 per cent (not annualised) when compared with the previous quarter. This decline was not confined to the platinum group metals, with production declining in seven of the twelve mining sub-components and expectations are for this negative trend to continue.

The physical volume of manufacturing production declined by 1,6 per cent (not annualised) in the first quarter of the year. The contraction was also broad based and the outlook for the sector remains subdued as reflected in the marked decline in the Kagiso PMI to 47,4 index points in April.

This follows two consecutive months when the index was above 50 points. The new sales orders component of the PMI remained well below 50 for the second consecutive month. There appears to be continued underutilisation of manufacturing production capacity, particularly with respect to durable goods production.

The favourable trend in the real value of building plans passed during the past two years has been maintained in keeping with rising levels of building confidence. The real value of building plans passed increased by 13,6 per cent on the 3-month-to-3-month basis in March 2014, and by 5,9 per cent on a year-on-year basis.

The unemployment rate remained elevated at 25,2 per cent in the first quarter of 2014 in a declining growth environment. This follows a decline in employment in the first quarter of 2014 of 122,000 jobs, although on a seasonally adjusted basis the decrease was 32,000.

Consumption expenditure by households is expected to remain constrained in the face of continued weakness in credit extension, rising inflation, high consumer indebtedness, as well as the knock-on effects of the mining strike, where the cumulative loss of wages is estimated to have exceeded R8 billion. Real retail sales grew by 0,6 per cent on a quarter-to-quarter basis in the first quarter of this year, having declined in March by 1,4 per cent on a month-to-month basis.

New vehicle sales declined by 0,7 per cent on a 3-month-to-3-month basis in April, and by over 10 per cent on a year-on-year basis while NAAMSA expects new vehicle sales to contract over the year. Although the FNB/BER consumer confidence index improved marginally in the first quarter of 2014, it remained at a low level of -6.

Growth in bank credit extension to households continued to moderate, while that to companies has remained relatively robust. The twelve month growth in total loans and advances to the private sector measured 8,2 per cent in March 2014, driven by a 12,7 per cent increase in credit extension to companies, related in part to the awarding of a new round of renewable energy contracts.

By contrast, growth in credit extension to households moderated further to 4,8 per cent, as unsecured lending continued its downward trend. Growth over twelve months in general loans to households, mainly made up of unsecured lending, measured 3,5 per cent in March, the lowest rate of growth since 2005.

Growth in mortgage advances to households remained below 3 per cent, in line with the relatively subdued volume growth in the housing market. While growth in instalment sale and leasing finance recorded annual growth of 10,1 per cent in March, it is on a declining trend, particularly with respect to households. These trends in credit extension are expected to remain a constraint on consumption expenditure growth.

The trend in wage settlements is more or less unchanged. According to Andrew Levy Employment Publications, the overall average wage settlement rate in collective bargaining agreements was unchanged from the previous year, at 7,9 per cent in the first quarter of 2014. However the main wage negotiations are yet to be completed, in particular the re-negotiation of a new multi-year agreement in the Steel and Engineering Bargaining Council. The outcome of this, as well as the impasse in the platinum sector, could have an important bearing on the general trend of wage settlements.

Food prices remain a risk to the inflation outlook, although the risk may have moderated somewhat following the sharp reversal in domestic maize prices in recent weeks. Having reached a peak of almost R3,800 per ton in March, maize prices declined in May to around R2,000 per ton, and an 8 per cent decline over the year.

This was in response to an upward revision of the domestic maize crop forecast, now expected to be 11 per cent higher than last year, which has resulted in a move from import to export parity prices. This development, if sustained, could help ameliorate the considerable pipeline pressures that have been evident in the producer price index since the beginning of the year.

Final manufactured producer food price inflation accelerated to 9,1 per cent in March and further pressures are evident in the agricultural producer price inflation for cereals which measured 26,5 per cent in March, although this is expected to moderate in response to lower spot prices.

The international oil price has remained within the range of US$105-US$111 for some time. The domestic price of petrol has benefited from the stronger trend in the exchange rate over the past weeks. In May the price of 95 octane petrol declined by 15 cents per litre, following a 7 cent per litre increase in April, and, should current trends continue, a further reduction can be expected in June.

The MPC continues to face the difficult dilemma of dealing with upside risks to inflation and a deteriorating domestic economic growth outlook. Although the breach of the upper end of the inflation target band was in line with the Bank’s forecast, the risks to the forecast remain on the upside.

The policy dilemma is increased by the fact that inflation is seen to be driven primarily by supply side factors, while demand conditions in the economy remain subdued.

Although the immediate pressures from the exchange rate are lower than was the case earlier in the year, the exchange rate remains a significant source of upside risk to the forecast.

The respite from the stronger exchange rate could be temporary and respond quickly to changes in both domestic and external conditions. Although the pass-through from the exchange rate to inflation is still relatively low, there are indications of some acceleration.

In addition, food prices are expected to add further upside impetus to inflation in the near term, but this risk may have moderated to some extent given the sharp decline in the maize prices and low global food inflation.

As indicated earlier, the Bank’s economic growth forecast for 2014 has been revised down significantly to 2,1 per cent, and the first quarter growth outcome is anticipated to be the lowest quarterly growth rate since the recession in 2009. Although growth in the second quarter is expected to improve somewhat, the risks to the 2014 growth forecast are strongly on the downside, with developments in the mining sector an ongoing cause for concern. The demand side of the economy is also weakening: household consumption expenditure growth continues to moderate amid slower credit extension to households, high levels of consumer debt levels and moderate job growth.

However, the weak state of the economy cannot be resolved through monetary policy actions alone.

The committee continues to hold the view that we are in a rising interest rate cycle, and interest rates will have to be normalised in due course. We embarked on this process with our first move in January 2014. At this stage the pace and timing of normalisation in the advanced economies appears to have been pushed out further and may be more moderate than previously believed. We are also aware that this can change very quickly.

Accordingly, the committee decided to keep the repurchase rate unchanged at 5,5 per cent per annum at this stage.

Future actions will be data dependent and determined by developments in the inflation outlook and inflation expectations. Inflation is currently at uncomfortable levels and a marked deterioration in the outlook may require action that we will not hesitate to take. The MPC reiterates that a rising interest rate cycle does not mean that rates will be raised at each meeting or by the same amount each time.


Govt: Inauguration plans at an advanced stage

Pretoria: Preparations for the inauguration of Jacob Zuma as President of the Republic of South Africa, are at an advanced stage, Acting Government spokesperson Phumla Williams said.

Saturday’s inauguration is expected to attract thousands, 4 500 of whom will be accommodated in the Amphitheatre.

The remaining attendees will be accommodated on the Southern Lawns of the Union Buildings.

Cabinet will brief the media on its preparations on Friday.

“All South Africans are assured that the work of government will continue as usual prior to the inauguration of the President.

“The current Ministers and Deputy Ministers, Premiers and MECs remain in their posts and will continue to discharge their duties,” William said on Wednesday, after Zuma was elected as President of the country by the National Assembly.

Baleka Mbete was elected Speaker while, Lechesa Tsenoli as Deputy Speaker of the National Assembly.

The President-elect is expected to name the Ministers and Deputy Ministers who will serve the nation at a date still to be announced.

President-elect Zuma is South Africa’s fourth President since 1994. He is preceded by Nelson Mandela, Thabo Mbeki and Kgalema Motlanthe.


Western Cape Government dominates inaugural Management Performance Assessment awards

Last week the Department of Performance Monitoring and Evaluation in the Presidency held its inaugural Management Performance Assessment tool (MPAT) awards which recognise exceptional achievement in government departments across South Africa, both provincially and nationally.

I am pleased to announce that the Western Cape Government won eight of the fifteen first place awards presented to provincial and national departments, including the best overall performing department.

The MPAT assesses all 156 national and provincial government departments on their management practices by focusing on four key performance areas:

Governance and accountability;

Strategic management;

Human resource management; and

Financial management.

The Department of Performance Monitoring and Evaluation has completed three cycles of MPAT assessments thus far and handed out awards, based on the outcomes of these evaluations, to the best performing departments as well as the most improved departments in these four key performance areas.

The Western Cape Government came first in the following categories:

Best Performing Department in Governance and Accountability with a staff complement of less than 2000 – Western Cape Department of the Premier;

Best Performing Department in Governance and Accountability with a staff complement of more than 2000 – Western Cape Department of Transport and Public Works;

Best Performing Department in Human Resource Management (including employment equity practices) with staff complement of less than 2000 – Western Cape Department of Economic Development and Tourism;

Best Performing Department in Human Resource Management (including employment equity practices) with a staff complement of more than 2000 – Western Cape Department of Transport and Public Works;

Most Improved Department in Human Resource Management – Western Cape Department of Local Government;

Best Performing Department in all four Key Performance Areas with a staff complement of less than 2000 – Western Cape Department of Community Safety;

Best Performing Department with a staff complement of more than 2000 – Western Cape Department of Transport and Public Works; and

A floating trophy for the overall best performing department for MPAT 2013: Western Cape Department of Transport and Public Works.

I would like to convey my sincere congratulations to the Director-General Adv. Brent Gerber and the dedicated professionals, both political and administrative, working in the provincial government for these exceptional outcomes.

The Department of Transport and Public Works was particularly outstanding and for this credit must go to outgoing Minister Robin Carlisle, his former Head of Department (HOD) Johan Fourie, his current HOD Jacqui Gooch and their colleagues. Thanks must also go to Zeenat Ishmail in the Department of the Premier and her staff for managing the MPAT process.

Three Western Cape provincial departments were also runners up in the strategic management, governance and accountability and best performing department award categories.

We recognise that an efficient, effective, transparent, accountable and corruption free government is critical to generating the enabling environment needed to create jobs and grow the economy. That is why we have focused on building a capable and professional public administration over the last five years.

The results of the Presidency’s inaugural MPAT awards demonstrates the progress we have made in this regard and our commitment to having the best management practices in the country so that we can deliver opportunities and services to citizens.

While there is always room for improvement it is clear that we are moving closer towards achieving our goal of becoming the best-run regional government in the world.