FINTAK Weekly Newsletter.
Digital euro: A game-changer for the global financial system?
The European Central Bank (ECB) is taking the lead in the race to launch a central bank digital currency (CBDC), with plans for a pilot project that could lead to a digital euro within a few years. This is a significant move, as the ECB is the first major Western central bank to announce plans for a CBDC formally.
CBDCs are digital versions of fiat currencies issued and regulated by central banks. They can potentially revolutionize the global financial system by making payments faster, cheaper, and more accessible.
However, there are also some concerns about CBDCs, such as the potential for privacy concerns and the impact they could have on commercial banks.
Why are CBDCs needed?
Proponents of CBDCs argue that they can offer some advantages over traditional payment systems, including:
What are the concerns about CBDCs?
One of the main concerns about CBDCs is the potential for privacy concerns. Central banks would have access to all CBDC transactions, which could raise concerns about government surveillance.
Another concern is the impact that CBDCs could have on commercial banks. If people start to move their money from commercial bank accounts into central bank accounts, it could reduce the ability of commercial banks to lend money and invest in the economy.
What are the next steps for CBDCs?
The ECB's pilot project is a significant step forward for CBDCs, but it is still too early to say when or whether a digital euro will be launched. Other central banks worldwide are also exploring CBDCs, but most are still in the early stages of research.
The success of CBDCs will depend on a number of factors, including the ability to address privacy concerns and the impact on commercial banks. However, if CBDCs are successful, they can potentially transform the global financial system.
The launch of a digital euro could be a game-changer for the global financial system. CBDCs can potentially make payments faster, cheaper, and more accessible. However, there are also some concerns about CBDCs, such as the potential for privacy concerns and the impact they could have on commercial banks. It is still too early to say when or whether a digital euro will be launched, but the ECB's pilot project is a significant step forward.
US inflation still high, interest rate hike possible: Federal Reserve Chair Powell.
Federal Reserve Chair Jerome Powell says that US inflation is still too high despite a recent slowdown. He says that the Fed may raise interest rates again if there is evidence of "persistently above-trend growth" or a reversal of the decline in job openings and wage growth.
Powell emphasizes that the Fed aims to control inflation without pushing the US economy into a recession. Although inflation has decreased by more than half since its peak in June last year, it remains above the Fed's long-term target of two percent.
Powell says that the Fed's current policy stance is "restrictive," suggesting that monetary policy is working to slow down the economy and reduce inflation.
In other words, the Fed is keeping interest rates high to make borrowing money more expensive. This is because the Fed believes that high-interest rates will discourage people from spending and investing, which will help to slow down the economy and bring inflation down.
It is important to note that the Fed's policy stance is not without risk. Raising interest rates too high could push the economy into a recession. However, the Fed believes that the inflation risk is too great and that taking steps to bring it down is necessary.
Egyptian government plans to issue $700m worth of green bonds in 2024
Egypt plans to issue green bonds worth $700m to fund green projects that will benefit the private sector or involve a partnership with it. The bonds are expected to be issued next year.
Green bonds are fixed-income instruments that allocate their proceeds to finance or refinance eligible green projects. Some of the projects that green bonds can finance are renewable energy, energy efficiency, sustainable waste management, and clean transportation.
Egypt previously issued green bonds worth $750m in 2020-2021, making it the first country in the Middle East and North Africa region to do so.
The issuance of green bonds is part of Egypt's goal to increase its investments in green projects by 50% by 2025. Egypt is also considering issuing sustainability bonds and social bonds at a later stage.
What are the benefits of green bonds?
Green bonds offer several benefits, including:
Egypt's issuance of green bonds is a positive step towards promoting sustainable development and attracting foreign investment. The bonds will be used to fund green projects that will benefit the private sector and the environment.
China Rebrands BRI Amid Global Chaos
The big question now is: Can the world solve its major problems without involving Beijing? The US's strategy for peace in the Middle East isn't working. Even once a close ally, Saudi Arabia criticizes Israel and its US ties. Still, Saudi Arabia was present at China's BRI forum, suggesting a preference for economic growth over political turmoil.
Many thought the BRI was losing momentum, but the recent forum showed otherwise. In comparison, US-led economic efforts struggle to gain traction. China is also refining the BRI. Instead of focusing solely on massive infrastructure projects, there's a shift towards digital advancements, green initiatives, and people exchanges.
US-supported initiatives like the India-Middle East-Europe Economic Corridor can't match the revitalized BRI. Saudi Arabia might also step back from US deals if the US continues its unconditional support for Israel, especially after the recent conflict initiated by Hamas.
Is China's rebounding BRI at a time filled with global uncertainty a win for Beijing and a setback for Washington?
Why Did CBDC Fail in Nigeria? Valuable Lessons for Developing Countries
Nigeria's attempt to implement a Central Bank Digital Currency (CBDC) failed because it did not have public acceptance. The government's efforts to restrict cash usage to promote CBDC adoption backfired, leading to public protests and dissatisfaction. This highlights the importance of an inclusive approach to CBDC implementation, emphasizing community engagement, education, and understanding existing transaction habits.
Lessons for Developing Countries
Critical Minerals Africa 2023 summit highlights the importance of value addition and diversification.
The Critical Minerals Africa 2023 summit, held in Cape Town from October 17-19, emphasized the importance of value addition and diversification for the future of Africa's critical minerals sector.
Deshan Naido, CEO of AngloGold Ashanti, stressed the need for Africans to take control of their critical minerals supply chains. "If the critical minerals supply chain doesn't change, then we have failed as Africans," he said. "We have the opportunity to do what the international oil giants did 50-60 years ago. We have the bargaining power for the deposits that sit on the continent."
Panelists at the summit discussed how mining companies can diversify their operations across multiple sectors and foster synergy between mining and energy sectors. They also highlighted the importance of establishing value-added activities to maximize resource efficiency and ensure the sustainability of the extractive sector.
"Africa does not have to accept its position within global supply chains," said Alex Benkenstein, CEO of Orion Minerals. "Mineral processing is energy intensive and requires a steady supply. This is not an absolute barrier – it can be rectified."
Dr. Marit Y. Kitaw, Director of the African Minerals Development Centre, emphasized the need to add value, create jobs, transfer skills, and boost economies of scale through processing, refining, and value addition.
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The Critical Minerals Africa 2023 summit was held alongside the African Energy Week 2023 conference, offering delegates access to the full scope of energy, mining, and finance leaders in Cape Town. The two events highlighted the importance of collaboration between the mining and energy sectors and the need for investment in value-added activities.
Origin fraud: A challenge to trade facilitation in Africa.
Mr. Charles Arthur Ntiri, Head of Export at the Ghana National Chamber of Commerce & Industry (GNCCI), says origin fraud is one of the challenges confronting trade facilitation on the African continent.
Origin fraud is the practice of intentionally misrepresenting the source of goods in international trade. It can be done by providing false information or documents that incorrectly declare the country of origin to obtain preferential treatment or circumvent trade barriers.
Mr. Ntiri spoke at the 8th Media Seminar for selected media organizations organized by the Ghana Standards Authority (GSA) in Accra on the theme: “Contemporary Trends and Developments in Ghana’s Shipping and Logistics Industry.â€
He said origin fraud could be done in making false documentation, Transshipment, and tariff engineering.
Mr. Ntiri also spoke on the significance of the African Continental Free Trade Area (AfCFTA) Certificate of Origin. He said countries may suffer substantial revenue losses when goods are wrongly declared as originating from countries with lower or zero tariff rates, resulting in a decrease in customs duties collected.
He also said origin fraud could lead to unfair competition for legitimate exporters who comply with rules and accurately declare the origin of their goods, as fraudulent traders might enjoy advantages such as lower costs or preferential treatment.
Apple is finally getting serious about generative AI
Apple is finally getting serious about generative AI, a powerful new technology that can be used to create text, images, and other content. The company has recently posted several job openings for people to work on generative AI projects and has also invested heavily in the technology.
Generative AI can be used to power a variety of features, such as autocorrect, smart replies, and even AI-generated music and writing. Apple reportedly plans to use generative AI to improve Siri, the Messages app, and other popular apps and services.
Apple's rivals, such as Microsoft, Google, and Meta, have already begun to deploy AI-powered features in their products. Apple is now catching up, and we'll likely see a lot of new and innovative generative AI features from the company in the coming months and years.
How investors can decarbonize their portfolios
Investors have a key role to play in decarbonizing the global economy. By reducing their portfolio carbon footprints and holding governments, issuers, and asset managers accountable to their decarbonization pledges, investors can help accelerate the transition to a net-zero future.
There are two main ways for investors to decarbonize their portfolios:
Depending on their circumstances and investment objectives, investors can choose to implement one or both of these approaches.
Here are some tips for investors who are looking to decarbonize their portfolios:
Region’s capital market regulators seek expansion with inclusion of DRC and South Sudan.
The East African Securities Regulatory Authorities (EASRA), a regional organization of securities regulators from Uganda, Kenya, Rwanda, and Tanzania, is considering expanding its membership to include more East African states, particularly the Democratic Republic of Congo (DRC) and South Sudan.
At their recent consultative committee meeting in Kampala, EASRA members discussed various topics related to capital markets development, including regulatory sandboxes, ESG (Environmental, Social, and Governance) practices, Private Equity and Venture Capital regulations, Crowdfunding, and Islamic financing. They also placed particular emphasis on supporting Small and Medium-sized Enterprises (SMEs) through various financial mechanisms.
The meeting was attended by notable figures such as Keith Kalyegira, CEO of Capital Markets Authority Uganda; Wycliffe Shamiah, CEO of CMA Kenya; CPA Nicodemus D. Mkama, CEO of Capital Markets and Securities Association (CMSA) Tanzania; and CMA Rwanda, represented by Carine Twiringiyimana, a Financial Analyst at CMA Rwanda.
How Emerging Technologies Can Drive Africa’s Digital And Financial Inclusion – Airtel Africa’s Group CEO
Airtel Africa CEO Segun Ogunsanya has challenged the telecommunications industry in Africa to leverage emerging technologies to enable all people on the continent to connect, engage, and transact with the rest of the world.
Speaking at the Mobile World Congress in Kigali, Rwanda, Ogunsanya said that telecom players can step up efforts to bridge the digital divide, drive financial inclusion, and deepen the availability of affordable smart devices through these technologies.
He cited Generative Artificial Intelligence (GenAI) as a powerful tool for predicting customer behavior and deepening customer needs and preferences insights. Opportunity also exists in intelligent connectivity, a concept that foresees the combination of 5G, the Internet of Things, and Artificial Intelligence to accelerate technological development and enable new disruptive digital services.
"The telecom industry is uniquely positioned to make it easier for people to enter the digital world by deploying these technologies," Ogunsanya said. "This is through significant investments in building digital highways across the continent while creating a vibrant mobile money ecosystem. Through collaborations with equipment manufacturers and other key stakeholders, we can put smart devices in the hands of every African."
The Airtel Africa Group argued that a significant proportion of Africa's young population remains unreached, with 59% smartphone penetration and only two out of ten Africans having a mobile money wallet.
Ogunsanya said emerging technologies could be used in AI-aided e-learning to design the best curriculum based on students' learning abilities; e-health to improve patient monitoring and make health facilities more efficient; Agritech that uses AI and connectivity in crop disease detection tools; and financial inclusion, by triangulating the digital highway, unified payment system, and intelligent mobile wallets.
Green bonds propel 2023 global ESG debt market
Green bonds are leading the way in the global ESG debt market, with issuance up 8% in 2023 compared to last year, according to a new analysis by Bloomberg Intelligence.
The green bond market has been resilient in the first nine months of the year, with issuance exceeding $505 billion, or 48% of total sustainable issuance. Social bond issuance has also increased slightly this year, up 2% compared to 2022.
However, total sustainable issuance is down 16% so far in 2023, in line with other security types. This is likely due to a number of factors, including rising interest rates and the ongoing war in Ukraine.
Despite the overall decline in issuance, the euro increased to 34% of sustainable debt issuance in September, after a weaker July and August. The euro was also the preferred currency during the first nine months of 2023, with more than $400 billion dollar-equivalent, accounting for 38% of the total.
The dollar is in second place for the year at 30%, with $312 billion. However, this is down roughly 6% from a year ago. The yuan has increased on a year-to-date basis, with 8% of total issuance, up from 6% a year ago.
Christopher Ratti, senior ESG analyst at Bloomberg Intelligence, said: “We continue to expect the euro to be the major issuing currency, as government support appears to be less fractured when it comes to environmental, social and governance issues.â€
The world’s largest sustainable debt issuers used a variety of security types in the third quarter, Bloomberg Intelligence found, with five different types among the top 10. This suggests that the market continues to evolve and that there is room for innovation.
Read more: https://esgclarity.com/green-bonds-issuance/