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Is Trump going to follow through?
The observed links between trade liberalisation, jobs and living standards risk leading us to a narrow focus on likely protectionist trade policies after Trump’s victory. But the topics which shaped the outcome of the US presidential election begs the question to what extent America is likely to disengage from the rest of the world – or not.
Take a moment to remember the impact of this superpower
The influence of the US is clear in economies around the globe. It has been instrumental in furthering the cause of free trade and markets. This has not found universal appeal and is increasingly open to question. But, it has nonetheless driven development in many economies, including sub-Saharan Africa.
The North Atlantic Treaty Organisation (NATO) was signed on US soil in 1949. For decades Western Europe has been comforted by the protection offered by the US nuclear shield.
And, under President Obama the US has increasingly come to recognise stresses on the environment are a real threat to the natural resources required to sustain the economy on which the “promise” of better living standards rests.
US disengagement: what will fill the void?
Scaling back US participation in trade liberalisation is one thing. Withdrawing from NATO, throwing up immigration barriers and/or scaling back support for global environmental initiatives are collectively much bigger. A Trump presidency may seek to do some or all of these. If the US disengages from the world it is not entirely clear what will take its place. It would ostensibly, for some time, leave a large gap, creating space for different ideologies to compete for supremacy and the right to define how economies operate.
Time will tell whether or not the US disengages. In the interim, financial market participants are likely to be more interested in the course of the US Budget, the Federal Funds rate and the US dollar, while keeping an eye on the implications of trade liberalisation losing its momentum.
Trump economics: what is feasible?
At face value, the man’s fiscal plans do not appear to be feasible. The proposed simplification of the tax code is a good thing, but the implied sustained deterioration in the federal budget and debt level is not. To stabilise the US federal debt ratio Trump’s plan requires sustained real GDP growth of more than 3%, markedly higher than the current view of potential growth in the US. The president elect would argue his tax cut plans (supported by infrastructure spending amid expenditure cuts elsewhere) will incentivise work, savings and investment, which would lift real GDP growth and hence tax revenue. This would limit the size of the deficit and contain the increase in the debt ratio.
However, this may be more hopeful than realistic. Supply-side constraints suggest the “required” growth spurt is bound to be met by capacity constraints and sharper increases in US interest rates than currently expected. After all, the US unemployment rate is not too far from historic lows. Indeed, this risk associated with Trump’s fiscal proposals has been clearly echoed in the rise in US Treasury yields since his election.
Regulatory reform could pay dividends – in the long run
It is possible regulatory reform, which Trump appears to favour, may remove some of the binding constraints to growth. But, deregulation is a lengthy process and not easy to sell. It is worth keeping an eye on this. Trump’s proposed term limits for members of congress, restrictions on lobbying activity and federal government employment freeze (with exceptions) complement his deregulation initiative.
Reducing and simplifying regulations could pay dividends in the long run, but one doubts it is a “magic wand” that can be waved to dramatic effect in the near term.
Moreover, Trump’s anti-immigration stance and protectionist foreign trade agenda, ironically, can be expected to constrain the supply side of the economy and run counter to his fiscal plans.
The benefits of trade liberalisation are well documented
Loss of momentum in trade liberalisation has coincided with weak import growth since the global financial crisis. This is the opposite of what the world needs. The impact of trade liberalisation on jobs and real incomes is well documented. Growth, however, is a function of efficiency improvements, which are often linked with renewal, the application of new technologies and updated production processes. Older processes and their associated skills become obsolete. Restricting this drive to do things better does not appear to be a useful approach. Rather, effective social safety nets and the development of flexible skill sets that can adapt to changing demands on labour would be more useful.
There are a number of potentially influential regional and sector-focused trade liberalisation deals on the table, which could form an important building block in the quest to re-invigorate global productivity growth. But Trump’s apparent hard-line protectionist trade stance threatens to further constrain global trade liberalisation momentum.
Indeed, Global Trade Alert observes the US, itself, has implemented far more trade “discriminatory” measures since 2009 than trade “liberalising” measures. And, the US appears set to dump the Trans-Pacific Partnership once Trump begins his term of office, while the Transatlantic Trade and Investment Partnership may also end up in the firing line. Also, a review of the North American Trade Agreement (NAFTA) has been mooted, in addition to threats of imposing high import duties on imports from China.
The big question: why start a trade war with your funders?
But, again, there are binding constraints to a US push towards greater trade protectionism. The US is expected to run a current account deficit of around 2,5% of its GDP in 2016. All else equal, fiscal expansion would increase the size of the deficit, which would need to be funded by foreign capital inflows. In August 2016 China, for example, held $1,185trn US Treasury securities. Hence, China is an important source of foreign savings the US needs to fund its domestic investment. Would the US really start a trade war with one of its largest funders?
Inflation is bound to come back and this has implications for SA
The bottom line of Trump’s fiscal and trade policy proposals, even if scaled back, is that the groundwork is being laid for higher inflation – a risk that would escalate should US fiscal policy loosening become excessive.
Accordingly, central banks around the world, especially those in emerging market economies running macroeconomic imbalances, including South Africa, will pay careful attention. Should the US Federal Reserve become more aggressive than previously expected this could weigh on their currencies, while placing upward pressure on their interest rates.
Source: bizcommunity.com
Autochek Financial Services CEO, Johan van der Merwe
New insights from a sample of 55,000 car-related transactions on the Autochek platform has revealed that millennials are more likely to apply for car loans than any other age group, with 75 percent of applications, compared to 13 percent for Generation X, 11 percent for Generation Z and 1 percent for Baby Boomers.
The data, which covered transactions from Kenya, Ghana, Nigeria, Cote d’Ivoire and Uganda, and represents a subset of Autochek’s overall transaction volume, also suggests that millennials were the top purchasers of cars across the continent. In multiple markets, millennials were responsible for the most sales, with more than half of vehicles sold in some markets. Gen X was typically in second place in most markets, with Baby boomers and Gen Z following behind.
With increasing access to education, technology, and employment opportunities, many millennials in Africa are earning higher income, becoming increasingly financially stable and are seeking ways to improve their standard of living, including buying cars as a symbol of status and mobility.
When it came to the choice of cars, Toyota was the top choice and led sales across the markets surveyed, except for Côte d’Ivoire where Suzuki was the top choice. Despite Toyota being the preferred car, with 56 percent sales in Nigeria, 37 percent in Ghana, 46 percent in Kenya, 49 percent in Uganda, the data also shows that millennials were also purchasing luxury brands, such as Lexus and Mercedes Benz among others.
According to Johan van der Merwe, Chief Executive Officer of Autochek Financial Services, ‘The trend of millennials driving car sales and finance across Africa is expected to continue as this generation becomes more financially independent and the continent’s economy continues to grow. Our main focus at AFS is to improve institutional credit access for automotive transactions from the current average of 2% to 50% across Africa, and catalyse the benefits that come with improved mobility’.
Despite being a $45bn industry, Africa’s automotive market only has a 2% financing penetration rate, compared with the average of around 60-75 percent in emerging markets. At the same time, vehicle penetration is low, with 44 vehicles per 1,000 people in Africa, compared to the global average of 180.
Autochek is building the financial infrastructure to drive the penetration of auto financing across Africa, powered by a data analytics engine that makes it easier for financial institutions to offer credit to consumers. It has a partner-led retail footprint of more than 2,000 dealers and workshop locations across Africa, which enables unparalleled access to insights into vehicle-related transactions. The company recently launched Autochek Financial Services, new arm of the business that provides best in class technology and advisory solutions to car dealers, financial institutions and other stakeholders in Africa’s automotive ecosystem, supporting them to improve credit decisioning, collections, pricing, portfolio management and product development, as well as deliver an enhanced customer experience.
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iCE3X becomes first cryptocurrency exchange in South Africa to launch native token with Artificial Intelligence Coin (AIC)
Gareth Grobler, Founder iCE3X
iCE3X has become the first cryptocurrency exchange in South Africa to launch native token in the form of Artificial Intelligence Coin (AIC) – a token developed by iCE3X, one of the oldest cryptocurrency exchanges in South Africa and Nigeria. The token aims at reducing the cost of transactions on the platform provided the AIC token is used. AIC is an ERC-20 token created on the Ethereum blockchain.
Following in the footsteps of exchanges such as Binance with its BNB token, the AIC token by iCE3 is a cryptocurrency that allows users to pay for trading fees at a discounted rate on the exchange. Other exchanges worldwide who have native tokens include Huobi with its HT token, KuCoin with its KCS token , Bibox with its BIX token and OkEX with its OKB token. Although discounted trading fees is the first use case for AIC, there’s nothing stopping the token from expanding its utility to use cases such as earning in-game rewards for example, considering iCE3X developer team’s experience in creating software for the gaming industry.
Exchange token utility varies between platforms. Binance for example gives crypto projects discounts for paying their listing fees in BNB. iCE3X on the other hand has a different approach in that it does not charge token listing fees but rather has other governance mechanisms for determining which tokens to list on the exchange for example taking the more customer-centric approach of analysing which tokens are being requested by most users and other due diligence processes.
Exchange tokens are not the same as security tokens or even some other forms of utility tokens. There are potential benefits of owning exchange tokens but it is important for people to not view exchange tokens as an investment since they typically do not represent equity in the company. For example, simply owning AIC does not represent equity ownership of the iCE3X exchange. However, token holders can be included in exchange governance processes through being afforded rights to vote e.g. voting for which tokens are listed next on the exchange. Holding exchange tokens may allow users to pay for services offered within and outside of the iCE3X ecosystem.
Revenues made by exchanges come mostly from trading fees. The bigger the volume traded, the more fees generated and the bigger the profit. Some people see the growing interest in cryptocurrencies as a sign that trusted and secure exchange platforms such as iCE3X will grow as more people get involved in the digital asset ecosystem. There is potential upward growth trajectory when crypto goes mainstream for exchanges with a proven track record such as iCE3X which has a history dating back to the advent of crypto exchange service platforms such and is still the only Kaspersky security audited exchange in the world.
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Google trends shows Nigeria and South Africa as the top countries in the world with the highest searches for terms such as Bitcoin and these are markets iCE3X has already been operating in for years. It’s not unreasonable to expect the cryptocurrency ecosystem to continue to grow and attract more people and with that more traders and larger volumes of digital asset trades taking place on platforms such as iCE3X. If this turns out to be the case, early adopters of exchange tokens such as AIC could potentially see the demand for such tokens rise as more and more people seek to get reduced fees on their trades.
Hypothetically, from a speculator’s perspective one could surmise that would create some direct correlation to the token price valuation in the future should that happen.
More people are starting to realise the potential opportunity of possessing a cryptocurrency exchange platform’s internal assets. Most exchange tokens can be seen as essential to crypto-infrastructure projects and the potential price rise in such tokens could be linked to several factors such as platform feature development which most exchanges are able to fund through these types of mechanisms. This promotes and enables continued internal development of the ecosystems of the native platforms which ultimately benefits the users.
As exchange tokens are made available on other exchanges some of the common use cases we typically see include transfer of value from exchange to exchange at almost no cost compared to sending other cryptos between exchanges since native token values have historically been less volatile than other cryptos. Essentially, one could argue exchange tokens have characteristics akin to stable coins in some cases.
Technically advanced exchanges such as iCE3X should have the capabilities of even integrating tokens like AIC in future payment mechanisms. It all comes down to the vision and roadmap of any one exchange but with founder Gareth Grobler consulting with the South African financial regulator since 2012 and the team at iCE3X working on making iCE3X one of the first licensed crypto-asset service provider (CASP) in Africa, the potential for further use cases to be tied to a native token like AIC is not unimaginable.
The team at iCE3X also includes COO, Eugene Etsebeth who was the inaugural Chairperson for the Intergovernmental Fintech Working Group back in 2016 during his tenure at the South African Reserve Bank. It’d be interesting to see which product and service offerings from the various exchanges will be rolled out as the local ecosystem continues to grow. At the moment iCE3X seems to be leading the pack in terms of advanced platform features and security.
As we all look forward to seeing how the market shapes up as momentum in the cryptocurrency space continues, it is not far-fetched to imagine that some exchanges may soon follow in the footsteps of global market dominators such as Binance in terms of rolling out things like ‘Exchange-as-a-Service’ features for developing decentralised finance applications or decentralised exchange (DEX) protocols.
If interested in earning regular dividends as passive income and holding crypto coins with real utility you can purchase some AIC tokens on the AIC-BTC pair on iCE3X. iCE3X exchange will mint a hard cap of 210 million Artificial Intelligence Coins. Currently the pre-sale offer on AIC tokens is live with up to 20% discount off the public sale price. Be one of the first 100 people to stake 10,000 AIC tokens and get zero % trading discount on all trades for the lifetime of your stake.
About the author: Heath Muchena is the founder of Proudly Associated which advises international blockchain companies developing technologies that have use cases focused on emerging economy development, particularly in Africa. He is the author of Blockchain Applied. He is also the brains behind Block Patrol – a technology adoption and business development startup that pushes the value of 4IR innovations upstream including Blockchain, AI, IoT, and Machine Learning to leverage new opportunities and foster growth.
The Executive Council of the African Union has supported Dr. Akinwumi Adesina’s candidacy for a second term as President of the African Development Bank.
The decision was taken during the thirty-sixth Ordinary Session of the AU Executive Council, held during the AU Summit in Addis Ababa, Ethiopia, 6-7 February 2020.
Adesina was elected to his first term as President by the Bank’s Board of Governors at its Annual Meetings in Abidjan on 28 May 2015. He is the eighth President of the African Development Bank Group and the first Nigerian in the post.
During his first term, the Bank’s shareholders approved a landmark $115 billion capital increase in late October. The increase in the capital base, from $93 billion to $208 billion, signaled strong support from the Board of Governors in the continent’s foremost financial institution.
Adesina is a renowned development economist who has held a number of high-profile international positions, including with the Rockefeller Foundation, and as Nigeria’s Minister of Agriculture and Rural Development from 2011 to 2015.
The African Union Executive Council comprises 55 ministers of foreign affairs representing the member states of the African Union.
In December 2019, the Economic Community of West African States (ECOWAS) also endorsed Adesina for a second term as Bank chief. The election will again take place at the Bank’s Annual Meetings in May in Abidjan.
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