31 October 2024
This Week:
Africa and the U.S. Election
U.S. Election and European Fears
UK Raises Taxes
EU’s New Rules to Hurt African Agriculture
More Insider Threats Over Politics
China’s New Fiscal Package
Changes in Israeli Conflict
Africa and the U.S. Election
Africa has been largely absent from U.S. presidential election discussions, though the outcome will significantly affect African nations due to the continent's rapid population and economic growth, as well as its essential mineral resources. Historically overlooked by the U.S., Africa has seen increased influence from China, the Gulf, Russia, and Turkey. While U.S. President Joe Biden has promised a trip to Angola, his choice has drawn criticism for signaling inconsistent support for African democracy. Vice President Kamala Harris, the Democratic nominee, has toured African democracies and is expected to uphold Biden’s strategy toward Sub-Saharan Africa, emphasizing trade and creative industries. If former President Donald Trump, the Republican nominee, wins, analysts suggest he may emphasize military solutions over humanitarian aid, potentially escalating U.S. military involvement in response to rising Islamist insurgencies. Both Harris and Trump would focus on countering Chinese influence in African trade, a challenging task given competing interests from the Middle East and Turkey. Trump’s past recognition of Moroccan sovereignty over Western Sahara and his support for anti-immigration policies in the Sahel indicate a potential shift toward military alliances with Morocco and Mauritania. Both parties are expected to prioritize Africa’s critical minerals in competing with China, regardless of who wins.
Both Harris and Trump are expected to pursue protectionist policies toward China that could harm African economies. The Biden administration’s recent Lobito Corridor railway project aims to challenge Chinese control of Africa’s critical minerals, but critics argue it is too late to compete with Beijing and does not address African economic needs, continuing a legacy of resource extraction with limited local benefit. The U.S. African Growth and Opportunity Act (AGOA), set to expire in 2025, has primarily benefited oil-exporting African countries, with only a few non-fossil fuel exporters—such as South Africa and Kenya—seeing gains. The program’s limitations were underscored when Ethiopia, which expanded its textile sector under AGOA, was later removed by Biden, following a similar removal of Rwanda by Trump in 2018 over its ban on secondhand U.S. apparel. While Trump established initiatives like the U.S. International Development Finance Corporation and Prosper Africa, much of the focus has been on health rather than industrial growth. African countries need affordable funding for industries that produce finished goods, yet they face high capital costs, contributing to an economic downturn in Sub-Saharan Africa expected to reach a 4% decline this year. Africa is a critical continent in geopolitical competition, and the U.S. presidential election will determine essential aspects of the competition economically and militarily.
U.S. Election and European Fears
European leaders are apprehensive about the U.S. election’s impact on the Ukraine conflict and European security. Many fear that a Trump victory could disrupt U.S. support for Ukraine, embolden Russia, and strain NATO, recalling turbulent U.S.-EU relations from his previous term. Harris, in contrast, is expected to maintain support for Kyiv. European officials have preemptively arranged a $50 billion G7 loan for Ukraine and NATO command adjustments to shield support from sudden U.S. policy shifts. Some Eastern European leaders speculate Trump could take a more aggressive stance if elected. Also, Trump announced plans to impose tariffs on European imports, citing a lack of American exports to the EU. He criticized the EU's access to U.S. markets, especially for cars, while U.S. exports struggle in Europe. Trump proposed a 10% tariff on all imports, including a 60% duty on Chinese goods, sparking concerns of global trade disruptions. Meanwhile, Harris warned that Trump's agenda threatens democratic norms, accusing him of seeking "unchecked power" ahead of the closely contested election. Trump’s nationalism directly opposes the interests of many European countries, but Trump and his supporters maintain that Europe has been freeriding for too long with their low defense budgets and protectionist policies. As such, if Trump wins, then the U.S. and EU are highly likely to enter a contentious relationship once again.
UK Raises Taxes
In her first budget, UK Finance Minister Rachel Reeves announced the largest tax increases in 30 years, targeting businesses and the wealthy to fund substantial spending aimed at restoring public services. Reeves committed to balanced day-to-day spending by 2030 and authorized increased borrowing to stimulate economic growth over the long term, despite the risks of higher interest rates. Tax changes include raising employer social security contributions and adjusting capital gains and inheritance taxes. The plan will bring the tax burden to a record 38.2% of GDP by 2030, still lower than in many European nations. Reeves ruled out broad income tax increases after current thresholds expire in 2028/29 but extended a fuel duty freeze and cut tax on draught beer to support pubs. These new taxes, combined with higher wages and worker protections, are highly likely to hamper growth. Britain is already likely to have slower economic growth in 2026-2028, with any significant GDP boosts from public investment expected primarily in the 2030s. Investors have responded cautiously, with bond prices declining as increased spending dims prospects for Bank of England rate cuts in 2025. Overall, though, Reeves’ budget is likely to be harmful to UK economic growth and interests over the medium term.
EU’s New Rules to Hurt African Agriculture
The EU's new Deforestation Regulation (EUDR), set to take effect by 2025, requires companies importing coffee, cocoa, and other commodities to trace products back to their origin farms to ensure they are deforestation-free. This is a major shift for African producers, where coffee and cocoa are often sourced from millions of small farms through complex supply chains with limited traceability. While some, particularly in West Africa’s cocoa sector, see EUDR as a potential means for fairer trade and guaranteed prices, there are concerns that this will be a burdensome regulation that hurts African economies. The system’s complexity may favor larger farms and countries with streamlined commercial plantations, potentially hurting smallholders in Africa who lack resources to comply with stringent mapping requirements. While the EU offers funding to support traceability, the costs largely fall on companies and cooperatives. Some African nations and NGOs advocate a "territorial approach" to simplify compliance. If EUDR is poorly implemented, it is likely to burden farmers and risk pricing out smaller producers, underlining that the cost of forest protection shouldn’t fall on small farmers alone.
More Insider Threats Over Politics
Cisco, known for a typically reserved culture, has faced internal conflict as employees express polarized views on the Israel-Palestine conflict. CEO Chuck Robbins initially acknowledged both Israeli and Palestinian suffering, but tensions rose when employees accused Cisco of marginalizing its Palestinian advocacy groups and restricting calls for transparency regarding sales to Israel. Employees shared allegations of harassment on both sides, prompting Cisco to introduce civility guidelines and investigate complaints, leading to some disciplinary actions. A LinkedIn photo of Francine Katsoudas, Cisco’s chief people officer, posing with Palestinian Network members in unofficial T-shirts sparked further controversy, leading Katsoudas to clarify her unawareness of the symbolism. Cisco later removed images featuring the T-shirts. Despite efforts to foster inclusivity, employees remain divided, with some expressing disillusionment with Cisco’s handling of the issue. This highlights the persistent insider threat over the Israel-Palestine issue, which has impacted several sectors. Employees protests are most common, but the longer the war goes on, the more likely violence could be used by such insider threats.
China’s New Fiscal Package
In late September 2024, China’s stock market surged unexpectedly as Beijing introduced stimulus measures, signaling a shift in market management. Unlike prior aggressive boosts, Xi Jinping’s strategy focused on stabilizing financial markets to support long-term goals in sectors like tech and green energy, aligning with broader economic aims. The approach aimed to curb past speculative excesses, refocus wealth from property to equities, and leverage institutional investments to address challenges, including an aging population and underfunded pensions. Yet regulatory and governance issues may hinder these ambitions over the medium term. With this success, China’s new fiscal plan targets economic stability by addressing municipal debt and excess property inventory rather than offering immediate growth stimulus. The package includes over 10 trillion yuan in debt issuance, focused on reducing local government off-books debt and aiding cash-strapped property developers. However, analysts are skeptical about the short-term growth impact, viewing the plan as stabilizing rather than expansionary. Long-term growth challenges persist due to low household consumption and high debt levels, potentially limiting the package's effectiveness in reviving economic momentum.
Changes in Israeli Conflict
Hezbollah has appointed Naim Qassem as its new leader after the recent neutralization of former leader Hassan Nasrallah by Israeli forces. Although Qassem served as Nasrallah's deputy since 1991, analysts had anticipated that Hashem Safieddine, Nasrallah's cousin, would succeed him. However, Safieddine was killed in an Israeli airstrike on Beirut in early October. Israeli Defense Minister Yoav Gallant responded to Qassem’s appointment with a warning, stating on social media that his tenure may be short-lived. Qassem has indicated Hezbollah's readiness for a prolonged conflict with Israel.
In addition, the Israeli Knesset passed two laws prohibiting the United Nations Relief and Works Agency (UNRWA), which supports Palestinian refugees, from operating within Israel. The laws, effective in three months, end all formal ties between Israel and UNRWA. Israel has long accused UNRWA of supporting Palestinian militants and recently concluded an investigation that led to the termination of nine UNRWA staffers suspected of involvement in Hamas's 2023 attack on Israel. Human rights activists argue that the legislation undermines UNRWA’s role in providing humanitarian aid, such as food, healthcare, and education, to Palestinian refugees. In response, Israel has suggested it might assume responsibility for aid distribution in Gaza but has not outlined a specific plan.
"Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric."
- Bertrand Russell
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