As with anything in life, it all comes down to the economics of supply and demand. The illegal organ trade has made headlines in recent weeks, with accusations of illegal organ harvesting taking place in war-torn Ukraine, while a Nigerian politician was recently convicted in the UK, for illegally sourcing a kidney for his son.
Key themes for this week include:
- United States (US) growth cooled in the fourth quarter of 2022
- South African Reserve (SARB) hikes rates by 50 basis points
- Equities broadly in the green
- Dollar under pressure as markets speculate on a rate-hike pause
AN EYE FOR AN EYE, OR A DOLLAR?
Colonel Vitaly Kiselev, of the Lugansk Police in the Lugansk People’s Republic, told media in early December 2022, that a black-market organ harvester from the European Union (EU) had arrived in the Bakhmut region of Ukraine, where there has been heavy fighting, and therefore, mortally wounded soldiers. These accusations, although not widely reported by Western media, is not only significant, but troublesome, as armed conflicts and illegal human organ trade often go hand in hand. Russian publication, New Eastern Outlook, reported during March 2021, that organ buyers and black-market transplant surgeons have long become common elements of the military landscape, much like mercenaries.
Throughout history, there have been allegations that illegal organ harvesting takes place during times of war. In some conflicts – particularly in areas where there is a breakdown of law and order – there have been reports of individuals and groups engaging in the illegal harvesting and trafficking of organs. One of the most well-known examples of this is the conflict in Kosovo during the late 1990s, where there were allegations of the illegal harvesting of organs from prisoners of war and civilians. A 2011 report by the Council of Europe alleged that members of the Kosovo Liberation Army were involved in the illegal trade of human organs during the conflict. The report claimed that organs were taken from victims who had been abducted and held in secret detention centers, with some being killed for the sole purpose of harvesting their organs. The report called for an investigation into the allegations, and several individuals were subsequently indicted by the International Criminal Tribunal for the former Yugoslavia. There have also been allegations of illegal organ harvesting in other conflicts, such as in Syria and Iraq in recent years. In some cases, it is alleged that members of armed groups have engaged in the illegal trade of organs to fund their activities. These allegations have been difficult to substantiate due to the challenges of investigating during times of conflict, but they highlight the potential for organ trafficking to occur in situations where there is a breakdown of law and order.
The illegal organ trade is, however, not just confined to times of conflict, it has become a major concern around the world recently. The illicit trade of organs has significant economic impacts on both the demand and supply side of the equation. The illegal trade poses a severe threat to the health of the donors, the recipients, and society as a whole. The aim of this week’s dive into the world of illicit organ trade is to explore the economics of this shadow world.
The global value of the illegal organ trade is difficult to determine with accuracy, due to its clandestine nature. However, it is estimated to be a multi-billion dollar industry. According to a report by the World Health Organization, the illegal trade in kidneys alone generates between $840 million to $1.7 billion annually.
The economic costs of this illegal trade are significant and wide-ranging. On the demand side, those in need of organs often resort to the black market, where the prices of organs are inflated. The high cost of organs creates an economic burden for those in need and perpetuates a system of economic inequality. Additionally, the illegal organ trade diverts resources away from the legal organ donation system, as individuals who can afford to purchase organs on the black market bypass the established waiting list, reducing the availability of organs for those who cannot afford to do so.
On the supply side, the illegal organ trade exploits vulnerable populations, often from developing countries, who are forced to sell their organs for a fraction of their true value. This leads to economic inequality and exacerbates poverty in these countries. Furthermore, the lack of regulation and oversight in the illegal organ trade puts the health and safety of both donors and recipients at risk. This can result in additional economic costs in terms of medical care, rehabilitation, and even death.
The economic costs of the illegal organ trade are not limited to those directly involved. The illegal trade undermines public trust in the legal organ donation system and can lead to decreased donation rates, which have economic consequences for the healthcare system. Additionally, the illegal organ trade can have negative economic impacts on tourism in countries where the trade is prevalent, as the reputation of these countries can be tarnished by their association with this illegal activity.
In conclusion, the illegal organ trade has significant economic costs, ranging from perpetuating economic inequality to compromising the health and safety of those involved. The value of the illegal organ trade is difficult to quantify accurately, but its impact on society is undeniable. It is essential that the international community takes concerted action to address this pressing issue, including establishing legal frameworks, increasing public awareness, and improving access to legal organ donation systems to ensure that individuals in need of organs have access to safe and affordable options.
DATA IN A NUTSHELL
The US economy expanded by an annualised 2.6% quarter-on-quarter in the fourth quarter of 2022, slightly below initial estimates of a 2.7% expansion, taking the total US Gross Domestic Product (GDP) to 2.1% for the year in 2022. In the final quarter of 2022, consumer spending rose 1%, missing the mark of 1.4% that markets expected, as spending on services was noticeably less than initially estimated. In addition, spending on goods dipped by 0.1%, less than initial estimates of a 0.5% decline, with jewellery leading the fall. The number of Americans filing for unemployment benefits rose by 7,000 from the previous week to 198,000 for the week ending 25 March, slightly above expectations of 196,000. While surpassing expectations, the result remained at historically low levels, in line with the hot payroll figures for February and the US Federal Reserve’s (Fed’s) outlook of low unemployment.
Consumer confidence in the euro area dipped to -19.2 in March. Consumers were less optimistic about the general economic situation in their individual countries and the region as a whole, while their intentions to make major purchases improved. Consumers’ views on their household’s past financial situation and the future financial situation remained stable.
Industrial profits in China plunged by 22.9% year-on-year in the first two months of 2023, as factory activity struggled to recover from the slump caused by pandemic disruptions. The decline followed a 4.0% fall in 2022. Profits of state-owned industrial firms decreased after rising last year, while private sector profits declined even further. Among the 41 industries surveyed, 28 suffered losses.
South Africa’s private sector credit advanced 8.28% year-on-year in February, slowing from an 8.42% rise in the previous month, marginally overshooting market expectations of 8%. Producer prices in South Africa increased 12.2% year-on-year in February, their slowest pace since March 2022, and below market forecasts of 12.3%.
The South African Reserve Bank (SARB) raised its benchmark repo rate by 50 basis points to 7.75% on Thursday, contrary to market expectations of a 25 basis point hike. The hike marked the ninth consecutive rate hike since the SARB embarked on the hiking cycle in November 2021, bringing borrowing costs to their highest levels since May 2009. Policymakers revised headline inflation for 2023 upward. It is now expected to be 6%, up from 5.4%, due to higher prices of core goods and food in the near term. Despite this, food and fuel inflation are expected to ease, resulting in a headline forecast of 4.9% for 2024 and 4.5% in 2025.
EQUITIES TRADE BROADLY STRONGER
US stock futures tied to the three major indices gained nearly 0.5% on Thursday, putting Wall Street on track to extend gains from the previous session as investors shift their focus back to the Fed’s future policy path amid easing concerns about a banking crisis. A slurry of Fed speeches and economic releases this week – including the highly anticipated core Payment-Card Industry (PCI) price index, due today – will offer insight into the likely future path of interest rate hikes. On the corporate side, Faraday Future Intelligent Electric, jumped more than 25% in premarket trading after the company said it had begun production of its first luxury electric car.
Equities in London gained for a fourth straight session on Thursday, driven by gains in the real estate and utilities sectors. With the banking crisis showing signs of calming down, investors pivoted back to riskier assets. Increased speculation that a peak in interest rates is near, also contributed to improved sentiment and risk appetite. Property developer, Unite Group, and technology company, Ocado Group, were the top gainers on the FTSE 100, up roughly 3% each. In other corporate news, SSE lifted its annual earnings expectations, bolstered by the strong performance of its flexible generation plant, with share prices of the British power company advancing nearly 2.5%.
European stocks gained over 1% Thursday afternoon, with both the pan-European STOXX 600 and Germany’s DAX 40 hitting their strongest levels since 9 March, as investors digested key inflation data, coupled with an ease of concerns around the recent banking turmoil. The latest Consumer Price Index (CPI) reports showed inflationary pressures in both Germany and Spain cooled sharply in March, with rates of inflation falling to seven and 20-month lows, respectively. The readings, however, remain well above the European Central Bank’s (ECB’s) target of 2%. Investors now await eurozone price data due today for further cues on the Central Bank’s next moves. Among single stocks, shares of retail giant, H&M, rallied after reporting a surprise operating profit for the December to February period, while wind turbine maker, Vestas, climbed after it won a tender in Brazil. Banks and real estate shares were also among the best performers.
The Nikkei 225 Index fell 0.36% while the broader TOPIX Index dropped 0.61% on Thursday, retreating from two-week highs following profit taking following a solid run-up. Positive news involving China’s technology sector, expectations that major central banks would soon pause interest rate hikes and easing concerns about the recent banking turmoil boosted risk sentiment globally.
South African Top 40 Index (SA40) traded at 71 614 on Thursday, trading 1.06% stronger compared to the previous session. Looking back, over the last four weeks, the SA40 has gained 1.36%.
COMMODITIES REMAIN CAUTIOUS
West Texas Intermediate Crude futures traded around $74.00/barrel on Thursday as signs of a recovery in demand offset a smaller-than-expected drop in Russian supplies. The latest International Energy Agency report indicated that US crude inventories unexpectedly declined by 7.489 million barrels last week, the highest number since November 2022, defying expectations for a 0.092 million barrel rise. In addition, a dispute involving Kurdish authorities halted exports of around 400,000 barrels a day from the Ceyhan port in Turkey. In contrast, reports showed that Russia’s crude production declined by about 300,000 barrels a day in the three weeks of March, roughly
200,000 barrels less than the targeted cuts.
Gold steadied around $1,965/ounce on Thursday after posting losses in the previous two sessions, as investors continued to monitor risks to the global financial system. US banks’ top regulator, who appeared before Congress this week, indicated that failures at Silicon Valley Bank were due to poor risk management, rather than broader systemic problems across the financial sector. Meanwhile, the White House is reportedly preparing for federal banking regulators to impose new rules on mid-size banks. Traders now look ahead to core US personal consumption expenditure data for clues on the Fed’s next move as well as remarks from several Fed officials.
Copper futures eased to the $4.05/pound mark from the three-week high of $4.12/pound touched on 23 March as persistent woes in the global banking sector continued to weigh on prices for key base metals. Concerns that the Fed will defy market expectations and refrain from cutting interest rates this year also pressured projections for industrial demand. On the flip side, threats of low supply kept copper prices nearly 7% higher year-to-date. Mining exports from major producer Peru sank almost 20% annually in January due to the widespread protests, while inventories at the Shanghai Futures Exchange tumbled 36% since their peak in February. The depletion of stocks worldwide drove key commodity trader, Trafigura, to forecast that copper prices will reach a record high this year, while supply and demand imbalances led investment bank, Goldman Sachs, to expect a global shortage of visible copper inventories by September.
SOUTH AFRICAN RAND GAINS AS SARB SURPRISES
The dollar weakened against a basket of major currencies on Thursday, with the US Dollar Index depreciating toward the 102 mark as investors reassessed the outlook for monetary policy. The financial turmoil, which started earlier in March with the collapse of two regional banks, prompted investors to reprice expectations of future monetary tightening by the Fed. Money markets are now pricing a pause in interest rate hikes in May, with rate cuts expected soon after that. All eyes now turn to a critical measure of US inflation, personal consumption, and several speeches from Fed officials this week. The most pronounced selling activity was against the euro and the British pound.
The euro soared back above $1.08, moving closer towards a seven-week high of $1.0929 touched on 22 March, as worries over global banking turmoil and recession eased, following news on Monday that regional US lender First Citizens Bancshares’ bought all of Silicon Valley Bank’s deposits and loans. At the same time, investors await key euro area inflation data due today. The euro will likely continue to appreciate against the dollar as the policy divergence between the ECB and the Fed is set to widen.
The Sterling also gained, to trade at $1.23, not far from a seven-week high of $1.234 touched on 23 March, after Bank of England (BoE) Governor, Andrew Bailey, said on Monday that further monetary tightening would be required if signs of persistent inflationary pressure became evident. He also said there were “big strains” in the global banking sector but added that banks in Britain were resilient and able to support the economy. Last week, the BoE raised its key bank rate for an eleventh consecutive time to 4.25%. Recent data showed that Britain’s inflation unexpectedly accelerated to 10.4% in February, well above the bank’s target of 2%.
The South African rand gained momentum against the greenback, as SARB unexpectedly hiked rates by 50 basis points, instead of the expected 25 basis points, following an increase in inflation to 7%, in February. The rand responded positively, rallying below the R18.00/$ mark, to trade at R17.80/$ shortly after the announcement.
The rand is trading at R17.85/$, R19.46/€ and R22.11/£.
*Please note the Weekly Wrap will not be published on Friday 7 April 2023, due to the Easter holidays.