Friday, February 13, 2009

Food Shortages Increase; Mining Revenues Decrease

Food Shortages:
Business Daily Africa
Kenya Broadcasting Corporation
Mining Weekly

A recent study released by the UN states that many African countries are ill equipped to handle the continent’s pending food shortages. Some statistics peg the number of Africans who are chronically hungry at 40%. This news comes as Kenya revealed its 37 billion Kenyan shillings (about 465 million US dollars) international aid request. Kenya is also removing import duties on white maize and fertilizers. The UN, says that such funding will help mitigate hunger in the short term, but that Kenya and other African countries will need to invest in infrastructure projects and provide credit to farmers in order to really effect change.

The UN is not the only organization urging new infrastructure and efficiency. Danish Ambassador to Kenya Bo Jensen says that Denmark is committed helping make up for the shortage in funding for food, but that Kenyans needed to address their current problems with infrastructure that are slowing efforts to provide badly needed food. One particular problem is the Port of Mombasa. The port is unable to handle the large quantity of imports and inefficiencies at its grain terminal severely slows down the importation process. One wonders, however, where such credit and funding will come from in the current economic crisis.

In other news, global leaders in the mining industry recently met at the African mining conference to discuss the perils facing one of Africa’s most important industry. Deputy mines minister Victor Kasongo of the Democratic Republic of the Congo said that production revenue from mining is likely to be half of last year’s revenue. South Africa has been hit particularly hard with an estimated 24,000 jobs on the chopping block. Kasongo said that the Congo will be drastically cutting production taxes on mining in order to stimulate the industry.

All news at the conference wasn’t so gloomy, however. Gold has been performing particularly strong as many investors view gold as a safe way to hedge their investments during this global financial crisis. CEOs from the three largest gold producers are confident that they will have steady cash flow through 2009, banking on an average price of $900-$1000 per ounce of gold. Additionally, Australia, a country that is heavily invested in African mining operations says that it will stay committed to Africa. While Australia is as concerned as other countries about the global financial crisis, it says that this is an opportunity to invest in human resources for Africans until more money is freed up to resume exploration projects.

1) It is unlikely that anyone would disagree with the UN and Denmark’s position that Kenya and the rest of Africa should focus on infrastructure projects and other means to improve agricultural production, but where will this money come from, especially given the fact that many countries don’t even have the necessary funds to provide food for their citizens?
2) Besides offering tax cuts to mineral producers, what are some other ways to help stimulate this struggling industry? Will such a stimulation even be possible until global demand for commodities bounces back?

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