April 2017 - African Financial & Economic Data

28 Apr

Unpacking Kenya as an investment destination

Kenya is one of the more pleasant countries to visit in Africa. It offers a mix of third-world buzz and opportunity along with first-world luxuries such as shopping malls, quality internet access, enough infrastructure to get things done and, more recently, craft beer.

Add to that Nairobi’s near-perfect climate (you know it is good when you’re undecided on whether to pack a business suit or not… it is just too warm for a suit, but tolerable nonetheless). It is not surprising then that so many NGOs and organisations, such as the UN, have a strong presence in Nairobi. It always interests me that there are so many large embassies in Africa: How many high-level political discussions are there between Austria and Kenya, for instance, or Iran and Kenya, or Canada and Kenya? I suppose if, as a Ukrainian, you get altitude sickness while climbing Mount Kenya, it will be comforting to know that the embassy in Nairobi has people who speak your language and can bring you some flowers before you fly out.

Regulation weighs on market

The stock market has been under considerable pressure since the beginning of 2015. It is not surprising then that Kenya was screening well on valuation. The Kenyan banks have come under pressure after the president passed a law capping the interest rates that banks can charge. Cellphone giant Safaricom is being investigated for market dominance and both the listed brewer and the listed tobacco businesses have been hurt by higher taxes as government needs revenue. With that in mind, we set off to see if conditions are likely to improve.

The Kenyan economic situation is worrying – the current account deficit is wide, the fiscal deficit is wide, there is a drought risk (agriculture accounts for 30% of the economy) and there are elections later in the year. In addition, the interest rate caps mean that lending has slowed, which will put the brakes on economic growth. All this means that there is risk to the currency. However, the shilling, which the Kenyan authorities insist is not managed, has been remarkably stable at around 100 KES/USD over the last 18 months.

27 Apr

South Africa may have many more years of Zuma rule to come

There is growing speculation in South Africa that president Jacob Zuma is lining up his ex-wife, Nkosazana Dlamini-Zuma, to succeed him as leader of the ruling African National Congress party. He must step down before elections in 2019.

Until recently the head of the African Union Commission, Dlamini-Zuma previously held ministerial posts in South Africa including home and foreign affairs.

President Zuma has not formally declared his support, but has called for the ANC to be led by a woman – a statement seen by many as a de-facto endorsement.

Support for her is seen as an attempt by the president to retain political influence after he steps down. This could spell more trouble for the country’s beleaguered economy. Rising political risk under Zuma’s scandal-prone presidency was the main driver behind unprecedented sovereign debt downgrades by Fitch & S&P earlier this month.

With more almost two years left until the next general election, much of this is speculation. But Zuma has a long and distinguished track-record at outmanoeuvring his political opponents. He is not someone to bet against.

Distributed by: WhyAfrica.com

26 Apr

Reserve Bank governor raises questions over “radical economic transformation”

Radical economic transformation is a buzzword that has gained traction in the last few months, largely thanks to rhetoric from President Jacob Zuma. But what the hell does it mean?

Well, a top economist says he’s not sure. South African Reserve Bank governor Lesetja Kganyago was a guest speaker at a public lecture on monetary policy at the University of KwaZulu-Natal’s Westville Campus and answered a question from the audience.

He said: “As an economist‚ whenever a concept is introduced‚ I try and delve through the literature to find what are the positives of this concept and what does it mean. As it stands‚ after going through the literature‚ I am none the wiser.”

Kganyago is a former director general of the national treasury.

“It’s a concept that is used by everyone and it also means the same that we are talking about here. What are the income distribution issues in our country‚ how is land distributed‚ what are the ownership structures‚ how is corporate governance in the country taking place‚ how is capital distributed in the country and so forth‚ and so forth‚” said Kganyago.

“And do the majority of citizens have a stake in the economy‚ either in the form of a job or in the form of ownership or in the form of some meaningful economic activity? And everywhere in the world it is called inclusive growth. Why we complicate it in South Africa‚ I do not know.”

WorldRemit Africa revenue to double by 2020 on mobile money, says Founder & CEO Ismail Ahmed

WorldRemit Ltd., a British money-transfer operator founded by Somali entrepreneur Ismail Ahmed, sees revenue from transactions involving Africans doubling by 2020 as more people on the continent access mobile-payment platforms and expatriates send cash home.

The seven-year-old company, in which Facebook Inc.-backer Accel Partners LP invested $40 million in 2014, will this year open a regional office in South Africa, its largest market on the continent in terms of money-transfer value, founder and Chief Executive Officer Ismail Ahmed said in an interview. Another site will start operating in Kenya, where the London-based business sees Africa’s highest number of individual transactions.

“In the next two years we should be doubling our volume every year,” Ahmed said in Kenya’s capital, Nairobi.

24 Apr

Burkina Faso Sees Cotton Output Rising 20% in 2017-18 Season

Burkina Faso, Africa’s top cotton grower, sees output rising by as much as 20 percent to 820,000 metric tons in the 2017-18 season which starts this month, an industry official said.

The target is “realistic and achievable” if rains are favorable and well distributed over the season and if parasites are kept under control, Georges Yameogo, general secretary of the nation’s cotton association, told reporters on Saturday in the capital, Ouagadougou.

The price for the new season was set at 245 CFA Francs ($0.40) a kilogram, up from 235 francs in the previous season, he said. The costs of fertilizers, insecticides and seeds remain unchanged, he said.

Burkina Faso harvested 683,000 tons of cotton in the 2016-17 season, Yameogo said. That’s below the target of 700,000 tons because of a lack of rains in September, he said. But it’s still 17 percent higher than the 586,000 tons harvested in 2015-2016, he said.

GERMANY PUSHES PLAN TO BOOST PRIVATE INVESTMENT IN AFRICA

Narrowing the gap between rich and poor is key to avoiding a destructive rise in populism, German Finance Minister Wolfgang Schaeuble said on Saturday as he laid out a plan to boost private investment in Africa.

“If we do nothing to change this, we can expect a rise in populist parties and demagogues, and a rise in instability around the world, with all its negative effects for sustainable growth”, he said in a speech in Washington.

“We are seeing it already in some parts of the world,” he said during the Global Infrastructure Forum at the Inter-American Development Bank. Schaeuble is among the officials attending the IMF and World Bank spring meetings this week.

He said Germany, which holds the presidency of the G20 group of nations, is pushing a plan to have African nations partner with certain G20 countries and international lenders, such as the World Bank, to attract outside investors to the continent.

24 Apr

Ghana to subsidise fertiliser for cocoa farmers and halt free supplies

ACCRA (Reuters) – Ghana’s cocoa industry regulator will stop supplying free fertiliser to the country’s cocoa farmers and instead subsidise the products in an effort to create a fairer market, a spokesman for Cocobod said on Friday.

The policy change is one of a series the New Patriotic Party government that won power at an election in December could implement in an effort to liberalise the sector and boost production.

Ghana, the world’s second-largest exporter of cocoa behind neighbouring Ivory Coast, is on track to exceed its 800,000 tonne target for the 2016/17 season.

For years farmers said the distribution of free fertiliser was unreliable, unfair and products went disproportionately to supporters of the previous National Democratic Congress government, a charge Cocobod denied.

At the same time, cocoa experts said the reliance on free products distorted the market by encouraging farmers to wait for government supply rather than budgeting to buy their own.

“The farmers complained that not all of them were getting the quantities that they needed when it was free,” Cocobod spokesman Noah Kwasi Amenyah told Reuters.

The price will be 80 cedis ($19) per 50kg bag, rather than the regular price of 151 cedis, he said, giving no further details.

Cocoa experts including non-governmental organisations say that Cocobod’s new executive is receptive to a policy document they have submitted that aims to stimulate an industry that is one of Ghana’s top earners of foreign exchange and accounts for about 7 percent of gross domestic product.

World Bank Cuts Sub-Saharan Africa’s 2017 Growth Forecast

The World Bank cut its growth projection for sub-Saharan Africa this year because of weak expansion in the region’s three biggest economies.

The area’s gross domestic product will expand 2.6 percent in 2017, the bank said in an emailed copy of its Africa Pulse report Wednesday. That compares with a January projection of 2.9 percent and matches the International Monetary Fund’s prediction released this week.

“The region’s three largest economies — Angola, Nigeria, and South Africa — are projected to post only a modest rebound in growth following a sharp slowdown in 2016,” it said. “Investment growth will recover only gradually amid tight foreign-exchange liquidity conditions in major oil exporters and low investor confidence in South Africa.”

The economy of South Africa, which vies with Nigeria’s to be the region’s biggest, expanded 0.3 percent last year, the slowest pace since a 2009 recession, due to a slump in commodity prices, weak demand for the country’s exports and a continuation of the worst drought since records started more than a century ago. Nigeria suffered its first economic contraction in 25 years in 2016 due to a drop in oil exports and foreign-currency shortages that raised inflation to a decade high.

Growth this year will be “better than the 1.3 percent in 2016, the lowest in two decades, but we are not out of the woods yet,” World Bank Africa Chief Economist Albert Zeufack told reporters in a video conference from Washington on Wednesday. “Africa is still growing at negative per-capita rates.”

Country Forecasts

The bank cut South Africa’s GDP growth forecast for this year to 0.6 percent from 1.1 percent earlier, and raised Nigeria’s to 1.2 percent from 1 percent.

Pravin Gordhan’s ouster as South Africa’s finance minister in a cabinet reshuffle prompted S&P Global Ratings and Fitch Ratings Ltd. to cut the nation’s credit rating to sub-investment grade. Moody’s Investors Service put its assessment of the nation’s debt, which is two levels above junk, on review for a downgrade on April 3.

20 Apr

African economies can be as efficient as any if they really have to

Nigeria has re-opened the airport in the capital Abuja after it completed repairs on its airplane runway a day ahead of schedule, confounding pessimists who predicted overruns. Nigeria, like many economies on the continent, is notorious for poor timekeeping and inefficiency.

But as the runway’s completion shows, such problems need not be inevitable. Nigeria’s swift response to the Ebola outbreak in 2014-16 offers another example. When needs must, African countries can be surprisingly effective at tackling complex problems.

The real issue was allowing the Abuja runway to decay to a point where repairs were needed in the first place. This points to a deeper problem of institutional inertia, whereby progress is locked in a stop-start cycle dependent on exceptional circumstances or individuals for progress.

Building efficient institutions is far from simple, but if done successfully there is no reason African states cannot be as capable as their developed counterparts.

Distributed by: WhyAfrica

20 Apr

Private equity in Africa steps up a gear in 2016: African Private Equity and Venture Capital Association (AVCA)

Private equity investment in Africa continues to go from strength to strength, evidenced by a new report from the African Private Equity and Venture Capital Association (AVCA). AVCA’s 2016 Annual African Private Equity (PE) Data Tracker shows a marked increase in the total deal value during 2016.

Overall, there were 145 PE deals reported in Africa over the course of the year, amounting to US$3.8bn – versus US$2.5bn in 2015 – highlighting the robust nature of Africa’s investment landscape amidst global headwinds and worldwide political shifts.

In terms of deal size, several large transactions in the energy and utilities sectors in 2016 contributed to the notable rise in total deal value compared with the previous year. The total value of deals above US$250mn was also significantly larger than in 2015.

African PE funds registered a final close total of US$2.3bn in 2016, which although lower than the previous year, supports an upward trend over the past 5 years.

West Africa continues to be the focus for PE investments by region, holding a 27% share of both number of deals and deal value between 2011 and 2016.

The 2017 outlook is positive, with strong indications of sustained confidence in the African PE industry. With political stability returning to North Africa, it is expected that there will be a growing appetite for investment in the region, along with under-served markets such as Central Africa.

Commenting on the report, Cyril Odu, Chief Executive Officer at African Capital Alliance, noted: “As the effects of rapid urbanization, a resilient and adapting middle class and accelerating consumption patterns begin to take shape, increasing investor interest will continue to boost deal flow and intensify capital injections. As the 2016 Annual PE Data Tracker shows, private investment in Africa is developing at an exciting rate.”

Enitan Obasanjo-Adeleye, Director and Head of Research at AVCA, added: “Africa’s PE potential is coming to fruition as illustrated here through another year of strong results. This is no flash in the pan; we now have seen strong and sustained PE investment in Africa over the past 10 years and AVCA will continue to play its role as a major enabler and champion for PE investment in Africa as the region becomes more widely recognized as the world’s most exciting and attractive frontier investment destination”.

The report has been published as AVCA prepares for its 14th annual global conference, which returns to francophone Africa for the first time in ten years as part of AVCA’s mission to showcase investment opportunities across the continent.