May 2017 - African Financial & Economic Data

30 May

Egypt announces $2.49 billion package to cope with inflation

Egypt on Monday announced a $2.49 billion package of income tax discounts, bonuses for state employees, increased pension payments and cash subsidies for lower and middle income Egyptians to cope with soaring inflation.

The package will go into effect July 1, the start of the fiscal year, according to a Cabinet statement.

The measures are partially designed to defuse discontent over steep price hikes resulting from reforms introduced in November, including floatation of the Egyptian pound, the introduction of value added tax and partial lifting of subsidies on fuel.

The reforms, part of a deal to secure a $12-billion loan from the International Monetary Fund, sent inflation soaring to more than 30 percent. More of the subsidies on fuel and electricity are expected to be lifted this summer.

“This inflationary wave is clearly not demand-driven, it was caused by a sudden increase in costs,” said Omar El-Shenety, managing director at Cairo-based investment bank Multiples Group to Bloomberg. That means that higher interest rates “will do little to contain it,” he said.

President Abdel-Fattah el-Sissi says the reforms, though biting, were the only way to revive the economy, battered by years of turmoil and high-profile terror attacks blamed on Islamic militants waging an insurgency in the north of the Sinai Peninsula.

With presidential elections due a year from now, el-Sissi risked his once sweeping popularity when he introduced the reforms. He has not said whether he would run for a second, four-year term, but he most likely would.

Monday’s package is welcome news to millions of Egyptians because it comes soon after the start of the holy month of Ramadan, when observing Muslims refrain from food and drink from dawn to dusk. During the month, Egyptians spend much more than they unusually do on food, feasting on large sunset meals along with traditional sweets. Food prices usually inch higher in response to Ramadan’s increased demand.

26 May

South Africa’s Zwane Seeks 30% Minimum Black Mine Ownership

South African Mines Minister Mosebenzi Zwane has proposed raising the mandatory black ownership of mining assets to 30 percent from 26 percent, drawing opposition from some ruling-party officials who fear it will deter investment, two people familiar with the situation said.

The proposal is part of a long-delayed draft mining charter outlined by Zwane, an ally of President Jacob Zuma, to the African National Congress’ economic policy committee on May 13. Senior party policy officials warned of the potential negative consequences of his plans, said the people, who asked not to be identified because Zwane hasn’t formally proposed the changes for public comment before they become binding.

Zuma’s cabinet on Wednesday approved the draft mining charter, which will be released for public comment once it has been gazetted. ANC spokesman Zizi Kodwa didn’t answer calls seeking comment. It’s unclear whether the cabinet demanded changes.

South Africa’s Chamber of Mines said this week that the government needs to finalize its mining regulations if falling investment in the industry is to be reversed. Zuma, who’s due to step down as leader of the ANC in December and as the nation’s president in 2019, has called for “radical economic transformation” to more fairly distribute the benefits of South Africa’s economy among the black majority.

24 May

Zim poultry producers burdened by VAT on inputs, capital investment

THE Zimbabwe Revenue Authority (ZIMRA) has instructed chicken abattoirs to pay 15 percent value-added-tax (VAT) on all inputs, including capital investments used in broiler production, post statutory instrument (SI) 26A of 2017.

On February 1 2017, government imposed 15 percent VAT on all meat products and cereals under Statutory Instrument 20 of 2017, triggering an immediate increase in the prices of most basic foodstuffs, as retailers passed the cost on to consumers.

Finance Minister Patrick Chinamasa did suspend the tax following an outcry, but poultry industry players say Zimra has come back for another pound of flesh.

Zimbabwe Poultry Association (ZPA) chairperson Solomon Zawe revealed in an industry update that demand for broiler meat was negatively affected by the introduction of VAT of 15 percent on meats during February.

“Prior to this, broiler meat was zero rated for VAT purposes. Although this was later changed to VAT exempt through SI 26A of 2017, the industry remains under strain as VAT exemption implies poultry abattoirs cannot reclaim VAT charged on inputs, maintaining upward pressure on cost of production,” Zawe said.

“In addition, ZIMRA has instructed chicken abattoirs to pay VAT on all inputs, including capital investments, used in broiler production post SI 26A,” he said.

Meanwhile, Zawe said cash shortages continue to curtail demand especially in the informal live markets where cash sales were the norm.

23 May

Congo to Revisit Mine-Law Proposals Rejected by Industry in 2015

A revised mining code that the Democratic Republic of Congo’s government will present to parliament is the same draft proposal introduced to legislators in 2015 and opposed by industry, Mines Minister Martin Kabwelulu said.

The proposed changes should be presented to parliament this week, but a date has yet to be set, Kabwelulu said Monday by mobile-phone text message from the capital, Kinshasa.

“It is the same draft,” he said.

A proposed revision of the 2002 mining code was approved by the government in March 2015 and introduced to parliament, but never debated. Planned changes include:

Increasing profit taxes to 35 percent from 30 percent
Raising the government’s free share of new mining projects to 10 percent from 5 percent
Lifting royalties on copper and cobalt to 3.5 percent from 2 percent.

Congo is Africa’s biggest copper producer and the world’s largest source of cobalt. Baar-based Glencore Plc, London-listed Randgold Resources Ltd. and China Molybdenum Co. all have mining projects in the country.

The chamber of mines at the Federation des Entreprises du Congo, the country’s biggest industry group, opposed the revisions when they were submitted to parliament in 2015. “It would spell disaster for both the copper and gold-mining sectors,” the FEC said at the time in a position paper on the new code.

22 May

Africa’s growth seen benefiting from rebound in commodity prices: report

Africa will see a lift-off in economic growth this year and next on the back of a rebound in global commodity prices, an annual report predicted on Monday.

The African Economic Outlook, co-authored by the African Development Bank, the OECD and the United Nations Development Programme, expects the continent’s economy to grow by 3.4 percent in 2017 and 4.3 percent in 2018, up from an estimated 2.2 percent last year.

The report was released as the African Development Bank began its annual meeting, this year being hosted by India in the capital of Prime Minister Narendra Modi’s home state of Gujarat.

Modi invited African leaders to a summit in 2015 and has sought to promote ‘south-south’ economic ties with a continent that has a large Indian diaspora but has seen far larger inward investment from China.

The report said that a decline in commodity prices starting in mid-2014 had a devastating impact on several commodity-exporting African economies. Nigeria, for example, which has the biggest share in Africa’s GDP, slipped into recession.

Africa has been worryingly dependent on commodities to power economic growth. The fall in raw materials prices inflicted a significant shock on sub-Saharan Africa as fuels, ore and metals account for more than 60 percent of the region’s exports.

However, commodities have staged a comeback since late last year, buoyed by an improvement in the world economic outlook together with the return of risk appetite among global investors.

If the rise in commodity prices is sustained, the report said, it would trim the continent’s current account deficit to 5 percent of GDP this year from 6.5 percent in 2016.

Africa is expected to witness a marginal improvement in external inflows that are estimated to inch up to $179.7 billion in 2017 from $177.7 billion a year ago.

The report urged the countries in the region to diversify their exports to reduce their exposure to commodity-price shocks and take measures to boost trade within Africa.

19 May

Private equity set to boom in Africa, says Baker McKenzie & the Economist Corporate Network

Africa looks set for a bright future on the private equity front with activity on the rise, according to a new report which predicts that around a billion dollars could be invested in the next five years.

Private equity activity in Africa will inject billions of US dollars of sustainable investment over the next five years with deals growing from a low base equivalent to 0.18 per cent of Africa’s GDP in 2016, the report says. According to the research – ‘A growth engine: Trends and outcomes of private equity in Africa’ – every 0.01 per cent increase will mean $200 million more investment and could easily reach $1.1 billion over the next five years. The report reveals a number of interesting trends about investment in Africa. Private equity investors in Africa tend to be distinct from other parts of the world, holding investments for longer than in developed markets and using less debt and improve corporate strategy and governance. Furthermore, they invest more in growth and job-creation, often scaling small businesses to a size viable for trade buyers.

18 May

Steinhoff Plans Africa Spinoff After $3 Billion Expansion

Steinhoff International Holdings NV plans to list its African assets separately as the acquisitive retailer seeks a new prize for shareholders following this year’s failed merger talks with Shoprite Holdings Ltd.

The company said Wednesday it will seek to list businesses including clothing retailer Pepkor and furniture chain JD Group Ltd. on the Johannesburg Stock Exchange, about 18 months after moving its primary listing to Frankfurt from the South African commercial hub.

The move reflects the parent company’s transformation into a global retail giant with about two-thirds of its revenue generated outside Africa — a proportion that’s growing after Steinhoff last year spent more than $3 billion on takeovers in the U.K., U.S. and Australia. The listing is aimed at creating value for Steinhoff investors, including billionaire Christo Wiese, after a roughly 10 percent drop in the shares since discussions with Shoprite ended in February.

“This is very much a plan B,” Evan Walker, a money manager at 36one Asset Management in Johannesburg, said by phone. “It looks like a last-ditch attempt to get a bit of value in the business.”

The planned separation is “a natural progression” for Steinhoff following its expansion, the company said in a statement. Wiese, 75, became Steinhoff’s biggest shareholder when he sold clothing chain Pepkor to the company for 62.8 billion rand ($4.8 billion) in 2014. He is also the largest investor in Cape Town-based Shoprite, and was at the heart of the combination talks between the two companies.

In addition to Pepkor and JD, Steinhoff’s African assets include sports-shoe specialist Tekkie Town and Poco furniture stores. Combined sales for the company’s businesses on the continent were 4.3 billion euros in the 12 months through September.

17 May

It’s ANC Against Zuma as Eskom Hails Return of CEO

The newly reinstated head of South Africa’s power utility has been accused of attempting to influence a former minister, reversed plans to close power plants that his predecessor claimed weren’t needed, and set the country’s ruling party against its president.

He’s only been back on the job for two days.

Brian Molefe, who returned as Eskom Holdings SOC Ltd.’s chief executive officer on Monday to staff posters welcoming back ‘Papa Action,’ was moved to tears when he left the role in November. He resigned following a graft probe by the Public Protector that found he made decisions favoring the Gupta family, who are friends with President Jacob Zuma. Molefe’s surprise reappointment, announced Friday by Eskom Chairman Ben Ngubane, sparked a backlash that’s stretched from opposition parties to labor unions and even the ruling African National Congress, which told the government to reverse the move.

“Politically and ethically the reinstatement stinks to high heaven,” Aubrey Matshiqi, an independent political analyst, said. “It seems to me that power has become so dispersed — that some power lies in the state, some power lies in the government, some power lies in powerful economic actors, some power lies in powerful families.”

Molefe’s reinstatement has exposed widening rifts within the ANC and between some party leaders and Zuma’s government. It’s revived scrutiny of the influence wielded by the Guptas, who are in business with the president’s son, Duduzane, and means investors must digest yet another surprise appointment, less than two months after Zuma replaced Finance Minister Pravin Gordhan in a sweeping late-night cabinet overhaul.

ANC officials told the government that it should rescind Molefe’s reappointment at a meeting Monday attended by Zuma, party Secretary-General Gwede Mantashe said on Tuesday. Action should be taken immediately, he said. The Democratic Alliance, South Africa’s main opposition party, filed a court application on May 15 to set aside Molefe’s appointment.

Eskom spokesman Khulu Phasiwe didn’t pick up a call seeking comment and the utility’s media desk didn’t immediately return an email seeking comment.

Molefe’s second day back was already off to a poor start after former South African Minerals Minister Ngoako Ramatlhodi alleged the CEO was present during a 2015 meeting when Eskom Chairman Ngubane tried to pressure the then-minister into suspending Glencore Plc’s mining licenses in the country during a dispute between the two companies. Ngubane threatened to go to the president if the request was refused, Ramatlhodi said.

Read more: It’s ANC Against Zuma as Eskom Hails Return of CEO

16 May

Britain’s Equinox to invest $250 million in Kenya bio-gas power project

Britain’s Equinox Energy Capital is close to concluding a $250 million (£194 million) fundraising round to invest in a project in western Kenya to produce electricity from invasive lake weed water hyacinth, the Kenyan presidency said on Friday.

Water hyacinth has choked off large parts of Lake Victoria, a fresh water lake that straddles Kenya, Uganda and Tanzania, and has alarmed environmentalists with its spread over the past two decades.

The government has had little success in eradicating the weed, which now covers the lake’s surface like a carpet of grass, cutting off local communities from vital fishing grounds and choking regional ports.

The project will be developed in phases and it is envisaged having annual capacity to produce 35 megawatts when completed. Construction is due to start this year and is expected to last 12-18 months, an official at the company said.

The first phase will have 8 MW of capacity and the plant will be located in the western county of Homa Bay.

The power plant will use the bio-gas method, harvesting the hyacinth, using bacteria to break the sugars in the weed into methane gas that can then be burnt to produce electricity, Chris Evans, an associate at Equinox, told Reuters.

He said the company is negotiating with Kenya Power, the country’s main electricity distributor, to allow it to inject the electricity into the national grid.

Distributed by: REUTERS

15 May

Libyan Oil Output Creeps Higher Ahead of OPEC Decision on Cuts

Libya is ratcheting up oil output with less than two weeks to go before the world’s biggest exporters decide whether to extend production cuts to clear a supply glut.

The OPEC member with Africa’s largest crude reserves is pumping more than 814,000 barrels a day, thanks partly to rising output from two fields that re-started last month, Jadalla Alaokali, a board member at the National Oil Corp., said Sunday by phone. Libya was producing about 700,000 barrels a day at the end of April, he said at that time. Output from the politically divided country is at its highest since October 2014 when it pumped 850,000 barrels a day, data compiled by Bloomberg show.

The revival in Libyan production coincides with efforts by the Organization of Petroleum Exporting Countries and allied suppliers to curtail output. OPEC ministers plan to meet on May 25 to decide whether to extend cuts in their production beyond June. The recent increase in Libyan output, together with a surge in North American shale production and signs of recovery in Nigeria, may undercut OPEC’s strategy to re-balance the market and prop up prices.

Libya pumped as much as 1.6 million barrels a day before an uprising in 2011, and it was exempted from OPEC’s cuts due to internal strife. It’s targeting production of 1.32 million barrels a day by the end of this year, the NOC said last week in a statement.

Crude from Sharara, Libya’s biggest field, started flowing in late April to the Zawiya refinery following a three-week closure. El Feel, a field also known as Elephant, re-started last month as well, after having been halted since April 2015.