Southern Cross chiefs netted £35m
Top executives sold their entire stakes in the care home company in late 2007, just before its shares began to plunge
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Rice is king, but at a price
LONDON, United Kingdom (IRIN) – Most of us, when we worry about food prices, think short term – the price today compared with yesterday; the chance that the price will have gone up again tomorrow. But Oxfam this week risked some long term predictions, and came up with alarming results. They foresaw the steepest rise of all in the price of rice, with rice in China, for instance, becoming 80 percent more expensive by 2020, and 180 percent dearer by 2030.
The price of rice is obviously of huge concern in China, India and the rest of Asia, where it has always been the basis of the diet – just as the Middle East has traditionally depended on bread, Italy on pasta, northern Europe on potatoes and Africa on maize, cassava and root crops like yams.
But tastes in food are changing, driven by urban lifestyles and global communications. Consumers, no longer limited to what they can grow in their own area, look for foods which are easy to prepare and eat. The losers have been staples which need lengthy preparation – soaking, peeling and pounding. The winners have been pasta, noodles, and above all, rice, making the price of rice a matter of pressing concern far beyond the traditional rice-eating countries.
Nigeria has a rich tradition of foods based on local crops, amala (yam skin porridge) and eba (made from cassava), ogi (fermented cereal) and pounded yam. Rice used to be a party food, noodles practically unheard of. Now rice and noodle dishes are the staple of roadside food stalls, and every night in TV advertisements, smiling housewives feed their perfect families on instant noodles and jollof rice.
Forty years ago Nigerians ate an average of three kilograms of rice a year; now it is 35kg and rising. Nigeria is one of the world’s biggest rice importers, lying third (behind the Philippines and Iran) in 2008, the last year for which International Rice Research Institute figures are available.
It should add up to big profits for the international rice traders, and it does, but they are acutely aware of the vulnerability of the system. A senior executive from one of the world’s biggest global dealers in agricultural produce said this week he was really concerned about threats to, and the sustainability of the supply chain.
“Look at Africa,” Chris Brett, senior vice-president and global supply chain manager for Olam International, told an audience at the UK’s Institute of Development Studies (part of Sussex University). “It’s absolutely amazing how much food is imported. We know that the food security agenda is very important.”
Vulnerable to price fluctuations
Of all the world’s food commodities, rice is perhaps the must vulnerable to sudden shocks. The world may produce a huge amount of the grain, but nearly all of it is eaten in the countries where it is produced – only somewhere in the region of 5-7 percent is traded on the international markets. So there is a disproportionately large effect on the price when in a major producing country has a bad harvest, or stops exporting, as India did in 2008. The supply is not limitless. 1.3 million tons is the most rice Olam has traded on the international market in a year, but that has now fallen back a little to 1.1 million. Brett told his audience: “We seem to have hit a ceiling.”
The hunger for security of supply has led Olam into production and processing, and it is now working with 12,000 rice farmers and operating two mills in Nigeria, the country where it first started as a produce buying company more than 20 years ago. “We have decided that rice is a good business for us to be getting into. Nigeria imports 2.4 million tons of rice a year; it’s not rocket science to think that if you can produce it, there’s a market.”
Production has flourished. With help from US Agency for International Development’s (USAID) MARKETS scheme, an agribusiness initiative, the farmers’ associations have received loans for inputs and improved seed, and raised their yields from 1.5 to 4.4 tons a hectare. The once-derelict mills are turning out smartly packaged sacks of “Lobi” brand rice.
It is a secure source of supply within Nigeria and insulated from currency shocks, but Olam’s problem is that Lobi at the moment cannot compete with the popular imported brands from East Asia, either on quality or on price.
Poor quality
Among Nigerian customers, local rice has a poor reputation, often well deserved. Ola Bassey, a young professional woman from Lagos, told IRIN she never bought Nigerian-produced rice. “Some people buy it, it’s cheaper, but it’s just too much stress. You have all the bother of picking the sand and stones out of it – they get the kids to do it for punishment. People would rather pay extra and not have the hassle.”
Olam’s rice mills can deal with the sand and stones, but Brett admitted to IRIN that the quality of the Lobi rice itself was still not as good as that of Mama Gold, Olam’s premium brand of imported rice, just because of the varieties of rice used by the farmers.
Growing rice in Nigeria is also more expensive than growing it in Thailand, the Philippines or China. It is dry upland rice, produced without irrigation, and only one crop a year is possible. Farmers in East Asia cultivate wet paddy rice and can have three harvests a year.
At the moment Olam can sell Lobi more cheaply than the imported varieties because of the duty that has to be paid on imported rice. That duty has already been suspended once, for six months, in 2008. Brett’s nightmare is that a new rise in global food prices will lead to the removal of protection.
“The threat is that I wake up one morning and find the Federal Government has decided to cut import duty on imported rice. Nigerian farmers are never going to be as productive, and at the moment we don’t have the tonnage. But give us another two years, and we should see a stronger commercial viability.”
Currently Nigerian farmers produce only 10 percent of the rice sold on the local market, according to a USAID survey, while Thailand supplies 74 percent of the rice Nigerians buy.
eb/cb
– Provided by Integrated Regional Information Networks.
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Turkey’s textile woes dent cotton import prospects
Turkey, the third-ranked cotton importer, is to buy less than had been expected, thanks to industry troubles and a jump in its own production
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Colombia coffee harvest reviving as rust retreats
Colombia is achieving “impressive” results from a campaign to counter coffee rust, leaving it on course for rises in output and exports
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Coffee prices continue to climb
New York, NY, United States (AHN) – Coffee lovers face rising prices because prices for coffee beans continue to rise on commodity markets.
Retail prices for bagged coffee on grocery store shelves have already gone up and more price increases are expected.
Poor growing conditions in South America and other coffee-producing areas has caused concern over shortages of supplies, resulting in investor speculation in commodity markets that has driven up coffee futures prices by 95 percent during the past 12 months.
Companies that roast green coffee beans and sell bagged coffee have raised prices by varying amounts in response to the increased prices they must pay for green coffee beans.
Earlier this week J.M. Smucker increased prices by 11 percent. It marks the fourth time it has raised prices in a year. Smucker sells Dunkin Donuts, Folgers and Millstone brands. Kraft, which owns Maxwell House, has raised its prices three times recently.
Then on Wednesday, Starbucks announced plans to raise prices in mid-July by 17 percent for bagged coffee.
Green Mountain Coffee Roasters also announced plans to raise coffee prices by 10 percent.
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Needed but discouraged, Mideast entrepreneurs struggle
Cairo, Egypt David Rosenberg – When Hind Wassef, a thirty-something Cairo resident, got the idea to open a boutique bookstore with three friends in 2002, the idea seemed promising. Greater Cairo counted 16 million residents, including large numbers of university-educated people. The city’s existing bookstores were dour and drab affairs that would present little competition. President Husni Mubarak’s government was taking measures to encourage private enterprise.
But Wassef and her partners received little encouragement. Rather than seeing the absence of competition as a chance to address an untapped market, friends, family and others warned that the business would never take off. Egyptians don’t read and if bookstores are dull, there must be a good reason. Don’t take any chances.
“Nobody had seized the opportunity. No one felt that it would work,” Wassef told The Media Line. “We were fighting this image that nobody reads. We kept hearing that whenever we shared our idea with somebody.”
Wassef and her partners stood their ground, investing their own capital in what became Diwan Bookstore, which combines hints of Middle Eastern décor with modern accoutrements and reader-friendly touches like sofas, on-line ordering and a virtual community of readers. Diwan not only sells books like its fusty competitors, but DVDs and stationery. Its stock includes literature in English, French and German as well as Arabic.
The Diwan partners succeeded. But if Egypt and the rest of the non-oil Middle East is going to pull itself out of the economic morass it’s in today, it will need millions of others like her, who are willing to risk quitting secure jobs and their reputations, investing their money or taking on loans. That will demand a delicate combination of institutional reforms to free markets as well as a different mindset for people used to counting on the state to provide jobs and hand out assistance.
The U.S., Europe and Saudi Arabia, not to mention an array of global financial institutions, are set to provide Egypt, Tunisia and other countries billions of dollars in financial aid. But economists warn that the money is only a stopgap – that the real economic growth that the non-oil Middle East desperately needs in order to sustain a rapidly-growing population can only come when ordinary people create innovative, efficient businesses.
The region is a private enterprise laggard by almost every measure. Much of the non-oil Middle East – countries like Egypt, Jordan, Syria and Tunisia, without the benefits of petroleum profits – took steps over the last two decades to encourage private business.
But it was too little effect. The biggest beneficiaries tended to be people like Ahmed Ezz in Egypt, who exploited their ties to politicians to buy state-owned businesses, rather than ordinary people like Wassef.
The International Institute for Finance estimates that private investment averages less than 15 percent of the gross domestic product in the Middle East and North Africa (MENA), compared with more than 20 percent in other regions. Business executives and the firms they own and manage tend to be among the oldest in the world, a testament to the absence of the kind of start-up dynamism driving the world’s fastest-growing economies.
“A more open and enabling environment for the private sector is important both for faster growth and for greater acceptance of private sector-led growth among the population,” the International Monetary Fund said in a report to the Group of Eight conference last week, spelling out policy reforms the Middle East requires. It noted that per capita growth in the MENA region over the past 30 years was the slowest in the world.
On paper, the Middle East looks like a great place for entrepreneurs. In the World Bank’s 2010 annual ranking of business climate Doing Business, Saudi Arabia was in 11th place, ahead of South Korea and Germany. Bahrain was 28th and the United Arab Emirates 40th. That puts them way ahead of China. Egypt at 94th place was 40 places ahead of India.
In the Arab world, it takes an average of nine procedures and 22 days to start up a business, according to the World Bank. That makes it the third fastest in the world. The cost for starting a business is a relatively high 46.2 percent of per capita income, but that is far less than it was a few years ago.
Indeed, the absence of young, innovative enterprises is an inviting proposition for those who want to take advantage of it. So is the relative ease of expanding out of your home country to markets elsewhere in the region, which share the Arabic language and cultural norms. The Arab world counts a population of close to 300 million people, almost the same as the U.S., and includes some of the world’s wealthiest countries.
Mohamad Haj Hasan was thinking just these things in 2007 when he started the on-line jobs site Akhtaboot (Arabic for octopus) in his home country of Jordan. The site matches job seekers with over 500 registered employers, including international players such as Google, FedEx, and LC Electronics.
“The region offers a lot of opportunities because there are lots of kinds of business that don’t exist yet,” he told The Media Line. “I liked the economics of the Internet, especially being based out of Jordan. Jordan itself doesn’t offer a great market. All successful companies in Jordan, whether they are goods or services, they export ….[but] it had reasonable costs when it comes to employees and rent, and it has pretty high caliber talent.”
Haj Hassan moved quickly once he had established himself in Jordan to enter the much bigger markets of Egypt and Saudi Arabia. “It was easy to get cash flow positive, but once we did that – because Jordan is a very limited and tough market – we opened Saudi Arabia and Egypt,” he recalls.
But investors in MENA, especially executives in small and medium-sized firms, say they are discouraged by fickle regulations, corruption and an uneven playing field that favors older firms at the expense of new ones.
Wassef certainly encountered her fair share of such obstacles as Diwan expanded to what today is 10 outlets across Egypt. Some of the barriers were silly, like the one that gives local officials the right to vet what products a store can carry. Diwan ran into problems because it wanted to sell books and DVDs, Wassef recalls.
Others, such as censorship, are more serious for someone in the book business. Wassef says she often spends time in long discussions with customs officials and regulators, who have wide powers, often arbitrarily exercised, over business regulations.
“If you’re involved in buying and selling there’s always the suspicion that you’re doing something wrong,” she says of government officials. Often she has to negotiate to get books subject to censorship past customs. “You have to use the personal touch. You meet and have a talk with them. They say they have instructions from the top and you say ‘Well, it’s just a cookbook’ and they say ‘Oh, I see.’”
Being a woman isn’t a handicap; being a business person of either gender is the real problem. “As a woman, you can sometime get your way more easily,” she adds.
David Wachtel is senior vice president for marketing and communications at Endeavor, which helps entrepreneurs by providing mentorship, expert networks and strategic advice. The New York-based non-profit added the Middle East to its portfolio in 2007, starting with Egypt and most recently adding Lebanon. Regulations aside, he says, much has to be done to change the culture of business in the Middle East.
“The whole issue of the cost of failure in the Middle East for entrepreneur is quite high,” Wachtel told The Media Line. “It isn’t acceptable to take risks and fail. This is reinforced by institutional issues like the lack of bankruptcy legislation.” In Egypt, for instance, there is no such thing as a business bankruptcy. Owners must take personal obligations. “That raises the bar.”
Other problems are the preponderance of family-owned business. The next generation may have the will to shake up an enterprise by entering new markets, developing new products, streamlining management, but older family members often will hold them back. Often no one controls the company at all as shares are divided among more and more heirs.
The Middle East also lacks angel investors and others willing to risk capital on new and untried businesses, Wachtel adds. Banks are also unfriendly to start-up entrepreneurs, says Imad Malhas, a Jordanian who founded and owns the high tech company IrisGuard.
“Financing and money is a big issue. Banks are the biggest problem in Jordan – they won’t give you money based on your business plan,” Malhas told The Media Line. “In the end, they want collateral – your father or someone else who’s wealthy enough to sign. They’ll go through the motions of studying your business plan, but in the end they want collateral. That needs to change big time.”
IrisGuard is an unusual start-up by Middle Eastern standards – a path-breaking, technology start-up that is the market leader in its field. Formed in 2001, the company developed a camera that photographs the iris, which is as unique as a fingerprint to every person. It’s used by Cairo Amman Bank to verify customers’ ID and by the United Arab Emirates to screen incoming travelers.
Malhas says an important element in fostering new business is mentoring. He acts as a mentor himself, and is also working both inside his company and out to teach young Jordanians the ropes. Together with the King Abdullah II Fund for Development, he is helping to run a program that sends young Jordanian engineers to work in multinational companies abroad in the hope they will later put their technology and management skills to work back in Jordan. IrisGate, which runs its research and development center in Britain, does the same on a smaller scale.
Budding entrepreneurs don’t have many role models and people they can turn to for practical advice in their home countries, Malhas says.
“The problem with doing mentoring is our young kids look at these guys like John Chamberlain from Cisco and say ‘There’s no way on earth that’s something we can aspire to.’ If you do $10 million in sales in the Middle East in the first five years, you’re super successful.”
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Libya’s opposition offers amnesty to Gaddafi supporters
Libya’s opposition provisional government has raised the pressure on Gaddafi, promising amnesty to his supporters if they switch sides immediately
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Cocoa price revival ‘will not last long’
Technical factors, a reluctance by investors to go short, plus bargain hunting by commercial buyers will only prop up cocoa prices temporarily
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Philippines raises typhoon warning over seven provinces as Tropical Storm Songda approaches
Manila, Metro Manila, Philippines (AHN) – The Philippine weather bureau raised storm warnings over seven provinces as tropical storm Songda fast approaches the country.
According to the weather bureau, the storm was centered as of 4 a.m. of Wednesday 365 kilometers (227 miles) east of Catarman, Northern Samar.
Songda has maximum sustained winds of 105 km (65 miles) per hour near the center and gusts of up to 135 kph (84 mph).
Storm signal no. 2 was placed over Northern and Eastern Samar, Catanduanes, Albay, Camarines Norter, Camarines Sur and Sorsogon.
Storm signal no. 1 was raised over Marinduque, Masbate, Burias Island, Ticao Island, Southern Quezon, Polillo Island and Biliran Island. The weather bureau forecast winds of 45 to 60 kph (28 to 37 mph).
The weather bureau said Songda is expected to intensify into a typhoon within the next 24 hours. If the storm stays on its present course, Songda is forecast to make a landfall in the Cagayan-Isabela area on Friday afternoon.
Forecasters cautioned the storm could still change path because of the presence of a high-pressure area that could block it from hearing further north, but instead push it to the west and hit the provinces in Bicol region.
The regions Bicol and Eastern Visayas started to feel the effects of the storm on Tuesday. The weather bureau predicted heavy rains would hit the provinces of Isabela, Quezon and Aurora.
However, Metro Manila would likely be spared by the storm, but may experience moderate to heavy rains later this week because the southwest monsoon is expected to dump 4.17 millimeters (0.16 inches) per hour of rainfall in the national capital region.
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Increasing food prices caused by Local, not global, market forces
LONDON, United Kingdom (IRIN) – Banu Bibi’s shopping basket is becoming emptier. When she goes shopping in Dhaka, Bangladesh, she spends more than a year ago, but that money buys less. In 2010, for 134 taka (US$1.80), she could afford lentils and laundry soap, and the family’s favourite fish. This year she has to spend 185 taka ($2.50) just for the basics: more rice to make up for the lack of other food, and cheaper vegetables.
Banu Bibi lives in one of eight communities picked by a research team from the Institute of Development Studies in the UK to track the effects of rising food and fuel prices. For three years, with the help of partner organizations in Bangladesh, Indonesia, Zambia and Kenya, they have been talking to people in selected rural and urban communities about how rising prices affect their lives.
Banu Bibi’s experience is fairly typical. Her family is not starving; they still have food, but it is not the food they like and is not as nutritious as it could be. They certainly ate more and ate better before the food price shock and financial crisis of 2008. And across the world, homemakers are having to work harder, spending more time shopping or looking for food, and planning more carefully to stretch their budgets to feed their families.
A woman in Lango Baya, Kenya, spoke for many when she told the researchers: “You go to a shop to buy something with the same amount as you paid the previous day, only to be told that prices have risen.”
Although food and fuel prices did fall after the initial spike in 2008, they never went back to their previous levels, and this year they have jumped again. Only one of the four countries studied has experienced some respite this year – Zambia, where the price of maize, the staple food, has not increased.
Local locus
While the two previous studies concentrated on the mechanisms people used to cope with the rising prices, this time the researchers decided to ask some more political questions – why did people think prices were so high? Who was to blame? And what should be done about it?
“It was an interesting time, with the Arab Spring and unrest around the world, and we wanted to ask how people felt about the food and fuel price rises,” the research team leader, Naomi Hossain, told an audience at the University of Sussex, recently.
Her presentation coincided with the publication of a report into the global causes of rising prices by the British charity, Christian Aid. It analyzed recent movements on commodity markets, and concluded that much-vilified hedge funds were not the real culprits, instead singling out pension funds. They have very large pots of money, and have been pulling out of volatile stocks and shares and investing in funds linked to a basket of commodity prices, forcing fund managers to protect their positions by buying commodity futures on such a scale that they move the market.
But although commodity price rises are now an international phenomenon, extensively reported in the media, the people Hossain and her colleagues spoke to only looked for causes within their own country, citing hoarding and speculation, changing climate and environmental problems in their own area, and – overwhelmingly – their governments’ failure to care about the poor.
One interviewee in Bangladesh told them, “I don’t believe in this global market story at all. It is just an excuse for the government not to do anything.”
Hossain describes “a real failure of global civil society to get people to see how their livelihoods are connected to the global economy. I am not surprised people prefer local causes. It gives people a sense of agency; if it’s a global problem, then what can they do?”
Moral focus
But she has a certain sympathy for governments. There are more social protection schemes in place, for instance, than at the time of the first survey, despite governments having their budgets squeezed, but even so they get little credit.
Those who believe the government should “do something”, suggest banning exports, controlling prices, punishing hoarders and subsidizing basic foodstuffs. The researchers found a sense that it was the moral duty of a government to provide for its people, sometimes linked to notions of democracy. A woman in Kenya told them, “In the new constitution, we have the right to be provided [with] food by the government.”
The moral sense also extended to the business community. A rural doctor in Bangladesh said, “The businessmen should get some moral teaching. If they were afraid of Allah and conducted business honestly, the situation would improve.”
All in all, says Hossain, “There is a popular consensus about what is legitimate, about social norms and obligations. People set moral limits to the freedom of the markets.”
High food prices are not bad news for everyone. Another IDS research fellow, Xavier Cirera, pointed out that the rises followed a long period of low food prices, which had been very hard on farmers. “We always have to ask the question, what is the real price of food? And how can governments ensure better safety nets for the poor while ensuring that traders pass the benefits of price increases back to the producers? The evidence is that farmers are getting some benefit and are responding. But they are not realizing the full benefit of higher prices.”
eb/mw
– Provided by Integrated Regional Information Networks.
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