August 2017 - African Financial & Economic Data

29 Aug

Automotive outlook for Africa: Bumpy roads ahead?

The author, Richard Li, is a Singapore-based partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. This article was produced for the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation.

In 2000, the overall African gross domestic product (GDP) was US$616bn. Since then, the continent has enjoyed a period of high economic growth and its GDP has risen massively by 245% to reach $2.1tn in 2016. Moreover, the World Bank recently started classifying countries according to their gross national income (GNI) and there are in fact 25 African countries that are in the middle income category in 2016.

To further sustain economic growth in Africa, there is a significant need for the transportation of goods and people. This means that there will be an accelerating demand for automotive vehicles in Africa, particularly in those middle-income countries that have a huge population mass, as well as a relatively high growth rate.

Africa, the last frontier market for automotive

According to the International Organisation of Motor Vehicle Manufacturers, there are only 44.8 million vehicles in Africa, representing only 3.5% of the global market. For Africa, with its population of about 1.2 billion, there were only 42 vehicles per 1,000 inhabitants in 2015. Compared to the global average, Africa is about 4.3 times less. This signals that there is an immense upside for market penetration in the automotive sector. Moreover, between 2014 and 2015, the automotive market in Africa grew at a relatively fast pace of 5.8%, compared to 1.9% and 2.4% for Europe and the United States respectively.

In terms of sales, in 2016, there were about 1.3 million vehicles sold in Africa, representing only 1.4% of the global market. The market is mainly dominated by two regions – Northern Africa and South Africa – with an 85% market share. South Africa sold about 547,000 vehicles, whereas for the Maghreb countries – Algeria, Morocco and Tunisia – together with Egypt, 575,000 vehicles were sold.

As for manufacturing capabilities,there is a lot of room for improvement, since Africa produces slightly less than 1% of all the vehicles in the world. Although South Africa has the biggest production capability with nearly 600,000 vehicles produced in 2016, manufacturing is stalling and is on a decline. Morocco is next with a capacity for 345,000 vehicles. These two countries represent about 91% of all vehicles manufactured in Africa. With increasing demand in other parts of Africa and with only small assembly facilities elsewhere, there are indeed many potential opportunities for automotive companies to further tap.

Challenges faced by the automotive sector

Africa is definitely not an easy market to deal with. The continent is not only geographically vast, but it is also a very fragmented market with 54 independent countries, each with their own market characteristics. In addition, since many African countries are still in the process of development, there is a dire lack of clarity in terms of soft infrastructure, such as proper regulatory frameworks, as well as economic policies for the development of industries.

The automotive sector is a capital-intensive industry that requires a long cycle for its development and for returns on its initial investments. On top of that, the captive market within specific countries may be too small to justify large-scale production facilities. Besides the lack of clear guidelines to attract investors in the automotive sector, the political instability in many African countries increases risk, thereby stifling and eventually halting the development of automotive manufacturing.

South Africa was the only African country that had been able to realise all the conditions needed for manufacturing automotive vehicles. With its population of nearly 56 million and a GNI per capita of $5,480, South Africa is the biggest automotive market in Africa – in terms of both production and sales of new vehicles. However, the recent political instability in South Africa is making global automotive companies think twice about whether they should invest further in the country. As a result of this inertia to reform and stimulate this sector, automotive companies may decelerate their future development plans there.

The Maghreb countries leading the way

The three Maghreb countries – Algeria, Morocco and Tunisia – are progressively focusing on boosting their automotive sector. Morocco has been the most successful, attracting French car manufacturers with the development of special industrial and economic zones. Renault and PSA Peugeot Citroën have committed €1.6bn ($1.9bn) and €600m ($705.7m) for their own production facilities respectively.

The Moroccan government is definitely steering the automotive industry in the right direction with the necessary framework and conducive environment needed for its development within the country. Morocco is pushing hard for the industry to rally further, aiming to produce one million vehicles by 2020. By then, its automotive exports will represent $10bn worth of vehicles to Europe and other parts of Africa. This sector will eventually represent 20% of the Moroccan GDP and create 160,000 jobs locally.

Algeria and Tunisia are also locations where French car manufacturers are setting up assembly plants. Germany’s Volkswagen is opening its plant in Algeria as well. With their close proximity to Europe, coupled with the right incentives and regulatory framework, European car manufacturers are finding it very appealing to be in these countries. Moreover, with a captive market of more than 87 million people among these three countries, selling locally helps to justify the necessary investments as well.

Potential opportunities in Africa

Africa can offer great opportunities to automotive companies, since more countries are slowly but steadily becoming more affluent. According to data from the World Bank, there were 12 countries in 2000 that might be considered as middle-income countries. Nowadays there are 25 middle-income countries across the continent. This represents a potential market size of approximately 656 million people. From 2006 until 2016, some of the countries that have significantly raised their GNI per capita are Ethiopia, Nigeria, Egypt, Kenya and Ghana, with an increase of 267%, 188%, 166%, 134% and 130% respectively.

Besides South Africa, the other top five most-attractive middle-income countries that have big populations, are Algeria, Egypt, Kenya, Morocco and Nigeria. These are probably the most promising markets since they have a combined population size of about 462 million, with a significant percentage being able to afford their own vehicles. The automotive industry can potentially crank and rev the growth engine of these countries further.

The African marketplace is gradually looking more attractive with the continent potentially being able to absorb many more vehicles than what it does currently. However, there are many obstacles that first need to be overcome. And African governments have to be committed to provide the right conditions for the automotive sector to flourish within their countries. With the right framework, this industry can not only be lucrative for the automotive companies, but at the same time, it can turbocharge the economic growth of African countries.

Richard Li is a Singapore-based Partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. Having spent his working career in strategy consulting, he worked with various global clients and covers themes such as Corporate Strategy, Transformation, Digital Innovation and Risk Management. He can be contacted via the Steel Advisory Partners site. This article was specifically written for the NTU-SBF Centre for African Studies.

source from how we made it in Africa

29 Aug

Venture capital investment in Africa: Where the IFC is betting its money

The International Finance Corporation’s (IFC) Venture Capital arm invests in growth-stage companies that offer innovative technologies or business models geared at emerging markets. Olawale Ayeni is regional head for Africa investments at IFC Venture Capital. How we made it in Africa asked him about investment opportunities in the continent and how local start-ups compare to their global peers.

Is it true that the IFC wants to double the value of its venture capital (VC) portfolio to US$1bn by 2018?

I don’t want to go into numbers, but I can say that the IFC will focus on being more aggressive with the venture asset class, particular in frontier markets. The size of the team has increased and we are looking at [more deals on the continent]. We are not just increasing for the sake of it. It is about using equity to really unlock markets… and actually create new markets. It’s more around us trying to push the envelope in Africa to do more.

Any specific sectors or countries where you see potential investments coming from?

Basically we are looking for high-growth businesses that can use technology to enable their ability to scale rapidly. Within Africa there are both large and small markets – but we focus on all of them, as long as the potential to scale rapidly is there. The total addressable market has to be big enough for venture capital to participate.

We look at a bunch of sectors too – but mostly tech and tech-enabled businesses… We spend a lot of time looking at consumer internet technology, such as e-commerce and e-logistics platforms. Consumer internet as a sector is quite broad, but we focus on it a lot. We also focus on education technology. We actually have an investment in a company called Andela, which has done quite well. It was started in Nigeria, then [expanded to] Kenya and has recently launched in Uganda.

We are also focused on health tech, fintech and clean tech. Mobisol is one of our portfolio companies within [clean tech].

In addition to all of this, we also focus on frontier tech. Frontier tech refers to businesses using new technology solutions like artificial intelligence and machine learning – which are coming up in the world. We see an opportunity to apply these technologies to African problems today.

Which of the IFC’s current African VC investments are looking particularly promising in terms of potential returns?

We believe most of our investments are doing well, and that is why we invested in them. We have had some exits which have been good. I think the bottom line of your question, which I will address, is whether you can get high returns in Africa. I fundamentally believe you can get high returns in Africa and the way you get them is to fully understand the opportunity and then source the right team to address a very large problem.

If you are successful there are various ways you can exit – from trade sales (which is very prominent on the continent) to merger and acquisitions (M&As). In Africa, if you are able to scale quickly and solve a large problem, the chances are actually quite high that it will become the only solution available. And once you become the company which everyone goes to, you have a lot of pricing power and value to bring to the table.

In terms of [high-return] sectors, it is still broad. We see a lot in the over-the-top (OTT) sector where people are leveraging the mobile connectivity that has been growing rapidly in Africa for the past seven years. People are building digital infrastructure around that with a lot being quite profitable. We also [see the same] in the e-logistics space, which is fundamentally trying to solve Africa’s supply chain problem. About 80-90% of the retail market in Africa is informal, and the supply chain is very haphazard. So a lot of people are using technology to really disrupt the informal supply chain.

And then there is the education tech space. Africa is a young continent and there are a bunch of players that are leveraging the ability of young people to adapt to technology quickly, and then provide that talent to a global audience. Andela is an example of that and doing quite well. Another example in this space is GetSmarter in South Africa, although it is not one of IFC’s investments. It just got acquired for over $100m. That is an example of a successful exit in Africa.

I could go on and on about different sectors but the overriding notion is that it is all about opportunity at the end of the day, and having the right team to design solutions to solve very big problems in a large market – and tech can be used as a turbocharger for scale.

In your opinion, how do African start-ups in general compare to those in other part of the world?

Start-ups are always different all over the world… But with looking at how entrepreneurs should approach opportunities, the advice I would like to give is that African start-ups need to have a bigger vision and dream more. In my view you are only limited by how big you can actually dream. Drawing from my experience with meeting start-ups from San Francisco, their vision is very big. If you ask what their vision is, they always start with saying they want to change the world.

I think African start-ups are more humble and reserved in the way they communicate their vision. That is the difference I see. But [my advice] is that [entrepreneurs] can start with a small problem, as long as that problem is applicable to a very large market. I can’t over emphasis that enough. There are various asset classes, but for the venture asset class the size of the problem matters a lot. It needs to be big.

So this is a lesson that African start-ups can take from their peers in Silicon Valley?

Yes, from a vision and market [size] perspective, this is a lesson they can learn from Silicon Valley. But there are also lessons Silicon Valley can learn from African start-ups. In my experience African start-ups are ultimately more capital efficient, just given the nature of the capital raising and funding activities on the continent. African start-ups are actually very capital efficient from day one. So that is one lesson Silicon Valley can learn from them.

from How We Made It In Africa

29 Aug

Weathering Africa’s commercial real estate storm

The brilliant thing about working in Africa is the continent’s ability to change – and adapt – almost instantly. While at first glance this is often interpreted as a challenge or a risk, the importance of adopting a “glass-half-full approach has never been more essential than in Africa’s current real estate environment”, says Gerhard Zeelie, head of Africa property finance at Standard Bank.

In Africa, things can change very quickly.

In May last year, for example, Nigeria was in the throes of a US dollar liquidity crisis. Barely 12 months later this is largely resolved. Just as tweaking foreign exchange regulations along with positive market changes improved liquidity in Nigeria, an uptick in the oil and copper prices coupled with market-friendly, transparent forex regimes could, equally as easily, change Luanda or Lusaka’s commercial real estate prospects – overnight. Similarly, large global energy investments touted for Mozambique are currently dispelling default-driven negative sentiment as investors again turn positive about the region.

“The variables that threaten risk in Africa are equally what contributes to making the continent such a rich landscape of opportunity – especially in the continent’s real estate sector,” says Zeelie.

Africa’s commercial real estate sector is currently, without doubt, a tenants’ market. Despite a more settled Naira and easing USD liquidity in Nigeria, challenges importing goods – until recently prohibited for foreign currency allocation – is keeping smaller businesses and retailers under pressure, forcing landlords to continue offering tenants discounts, or capped USD-based deals. New malls remain at 50-60% occupancy levels as “tenants shy away from the more expensive USD-based rentals, or remain unsure of whether they will be able to get prohibited, non-essential, stock through ports”, says Zeelie.

Similar concerns follow the office rental environment as businesses adopt a wait-and-see attitude, deferring office moves, upgrades and corporate office expansions.

These kinds of challenges mean that commercial real estate developers are struggling to convert Africa’s resilient consumer demand into competitive rentals. “This is not only constraining income in the sector but also leading to a depreciation in the value of the continent’s real estate stock as, increasingly, space in new developments stands empty or achieves lower rentals than before,” observes Zeelie.

The intensity of the storm in the continent’s commercial real estate sector varies.

In Nairobi, for example, “a better regulatory setting, an easier business environment more generally, and a more diverse economy – with multiple earners of foreign exchange – collectively contribute to a more resilient tenant profile and higher occupancy, even though vacancies exist in certain nodes and sectors”, says Zeelie.

Kenya, or, more correctly, Nairobi’s commercial real estate market, is, however, the exception rather than the rule in Africa.

When projects don’t perform as anticipated, African commercial real estate developments require more patient funding structures which can be achieved through the correct ratio between debt and equity. “Projects conceived in earlier, more positive, business environments on very different numbers, for example, should be restructured,” says Zeelie. While a restructure will often involve a higher level of equity finance, “the bank should also display some flexibility in its approach”, he adds.

For example, if financiers have a view on how long negative conditions may last in certain markets they may be able to extend the tenors or repayment terms of financing facilities – provided there is not a significant deterioration in the risk. Or, if clients have access to shareholder funds, it might be cheaper to put more hard currency into the structure. There may also be options to convert debt into local currency, provided there is enough liquidity in the market.

“Another solution could be to negotiate upfront payment of the present value of all lease payment with key tenants,” says Zeelie. Over the long term this provides these tenants with predictability – and probably a discount – while injecting much needed capital, now, into commercial real estate financing structures, enabling landlords to manage rentals with smaller clients in the short term.

source from How We Made It In Africa

29 Aug

Is the African mining sector becoming uninvestable?

At the recent Africa Forum hosted by Hogan Lovells, in London, a number of common, positive themes came through: Africa is a continent of endless possibilities and opportunities; Africa has significant natural and human resources which can be unlocked for the benefit of all Africans; and the investability of many African countries has improved, for various reasons, including mature banking, finance and legal institutions, investment-friendly policies and regulatory frameworks, and national development plans which demonstrate governmental support for sustainable infrastructure and development.

Why then, within the context of a mostly positive view of investment in Africa, is the question posed whether the African mining and natural resources sector, is becoming uninvestable?

Firstly, positive views of investment in Africa don’t always extend to the mining and naturals resources sector. While it is often acknowledged by stakeholders that the mining and natural resources of a country can contribute meaningfully to growth, development and transformation, there is a growing questioning of the impact of mining on aspects such as the environment, host communities, social structures, tourism, and industries such as agriculture, versus the benefits that often flow from mining and beneficiation operations. As the voices of concern increase and develop, the benefits that flow from mining and beneficiation operations are likely to be questioned, even further.

Secondly, the recent mining policy and regulatory changes in Tanzania and South Africa have brought into sharp focus the fragility of investment decisions relating to so-called frontier markets, such as Tanzania, and emerging markets, such as South Africa.

With a decrease in the number of investable frontier markets (equity and bond markets which are typically smaller than emerging markets and where there is less liquidity) and investment instability in emerging markets, such as South Africa, the recent events in these two countries are more concerning.

Tanzanian president, John Magufuli, signed into law the Natural Wealth and Resources Bill 2017, and the Natural Wealth and Resources Contracts Bill 2017, on 3 July, 2017. These laws, which were fast-tracked though the Tanzanian parliament, in a matter of weeks, have far-reaching consequences for foreign companies with investments in Tanzania, one of the continent’s largest gold producers.

There has been extensive investment in Tanzania’s gold mining industry, with a large percentage of the investment, focused on prospecting operations, which are of course critical in the creation of a pipeline that can be converted into mines, in the future. Many of these investors are listed in Australia, and the Australian Stock Exchange took the drastic step of suspending trading of various junior mining companies, following the announcement of the enactment of the laws, by President Magufuli. The uncertainties flowing from the new laws are likely to impact on these junior mining companies, who are focused on exploration, quite dramatically and it will make capital raising exercises extremely difficult, if not impossible. Where ownership of mining assets in a company are put at risk, this is likely to scare off would-be investors, and make existing investors exercise extreme caution.

Key changes brought about by the new legislation in Tanzania include the following:

The Tanzanian government is given the right to re-negotiate or dissolve current mining contracts with multi-national companies
The state will be required to own at least 16% of mining projects
Export royalties have been increased
The Tanzanian government can reject a mining company’s valuation where the government believes that the transfer price is too low, and the Tanzanian government is entitled to purchase the consignment of the minerals, at the price declared by the mining company
The right to international arbitration is removed
The Tanzanian government is also pushing for compulsory listing of mining companies on the Dar es Salaam Stock Exchange, with the complexities that this will bring, particularly because of the potentially small pool of investors who can take up the public offerings.

While multi-national mining companies with investments in Tanzania continue to engage with the Tanzanian government, some of the multi-national companies have declared disputes with the Tanzanian government and are referring these disputes to arbitration. None of this is good for the Tanzanian mining sector.

On 15 June, 2017, the South African minister of minerals, Mosebenzi Zwane published the “Reviewed Broad-Based Black Economic Empowerment Charter for the South African Mining and Minerals Industry, 2016″, (“Mining Charter 3“).

The response was immediate, dramatic, and far reaching. It is estimated that mining stocks lost approximately R50bn (US$3.8bn) in value, following the announcement, with the rand losing ground, and the Chamber of Mines, the body that represents the majority of the mining companies, launching legal proceedings against Minister Zwane. The grounds of challenge go to the heart of the minister’s powers and functions under the mining legislation and the Constitutionality of Mining Charter 3.

While Minister Zwane has labelled the legal challenge as being anti-transformation, the Chamber of Mines and other bodies representing mining interests have consistently expressed the position that the industry is committed to transformation, that the industry has demonstrated its commitment through the implementation of appropriate programmes of transformation – including in respect of the host communities through the social and labour plans, which are a requirement under the mining laws, but that the targets in the Mining Charter must be achievable, sustainable, and the timeframe should take into account the reality that the mining industry finds itself in, with the spectre of further job losses in the near future (while figures vary, the suggestion is that in excess of 80,000 direct jobs have been lost, in the industry, over the last three to five years. Various South African mining companies have recently announced proposals for further job losses, which may exceed 20,000 direct jobs).

Mining Charter 3 made significant amendments to the transformation requirements under the previous versions of the mining charter. Key changes include the following:

Holders of new prospecting rights must have a minimum of 50% plus one black person shareholding
A holder of a new mining right must have a minimum of 30% black person shareholding (up from the previous 26%)
The 30% black person shareholding in new mining rights must be distributed amongst three beneficiaries, namely a minimum of 8% for employee share ownership plans, a minimum of 8% for mine communities to be held in a community trust, and a minimum of 14% to Black Economic Empowerment entrepreneurs
For employee share ownership plans, a minimum of 8% for mine communities to be held in a community trust, and a minimum of 14% to Black Economic Empowerment entrepreneurs
A holder of a new mining right must pay a minimum of 1% of its annual turnover in any given financial year to the black person shareholders prior to, and over and above, any distributions to the shareholders of the holder
While there is limited recognition of the “once empowered, always empowered” principle, unless the historical Black Economic Empowerment transaction achieved 26% black shareholding or more, the historical transaction is not recognised
Where a historical Black Economic Empowerment transaction is recognised, the holder is required to top up the black person shareholding from the existing level to a minimum of 30% black person shareholding within 12 months;
Even where a holder of a mining right maintained a minimum of 26% black person shareholding as at 15 June, 2017, the holder is required to top up its black person shareholding to a minimum of 30% within 12 months from the date of publication of Mining Charter 3;
Minimum requirements are specified in relation to procurement, supplier and enterprise development. A holder is required to spend a minimum of 70% of total mining goods procurement spend on South African manufacturedgoods, with the 70%, being broken down into specified requirements. A minimum of 80% of total spend on services must be sources from South African-based companies, with the 80%, being broken down, into specified requirements;
A foreign supplier (a foreign controlled and registered company, supplying the South African mining and minerals industry with mining goods and services, which does not have at least a Level 4 DTI Code BEE Status, and 25% plus one vote black ownership) must contribute a minimum of 1% of its annual turnover generated from local mining companies towards the Mining Transformation and Development Agency;
Employment equity targets are increased, and there are specified requirements from board level, to core and critical skills.

There were glimmers of hope when, following negotiations between the Chamber of Mines and Minister Zwane, Minister Zwane agreed to suspend Mining Charter 3 pending the outcome of the legal challenge initiated by the Chamber of Mines. However, the following week, Minister Zwane published his intention to issue a notice placing a moratorium on all applications for new prospecting and mining rights, renewals of prospecting and mining rights, and ministerial consents in terms of Section 11 of the Mineral and Petroleum Resources Development Act, No. 28 of 2002 (“MPRDA”) (in summary where a right or an interest in a right is to be transferred or there is a change of control, ministerial consent is required).

The minister indicated his intention to issue the moratorium notice under Section 49 of the MPRDA which vests the minister with the authority to issue a notice prohibiting prospecting or mining in respect of certain geographical areas or certain minerals for a particular period, having regard to the national interest, the strategic nature of the mineral in question and the need to promote the sustainable development of the nation’s mineral resources.

The widely expressed view was that the minister had exceeded his powers under Section 49 of the MPRDA by intending to issue a blanket notice. Litigation was again initiated, and at the time of publishing this article, there is uncertainty regarding the status of the moratorium notice.

On a positive note, stakeholders across the spectrum, including the largest, recognised trade unions in the mining industry, have spoken out against the actions of Minister Zwane, and there have been widespread calls for his resignation or sacking.

But this of course does not remedy the turmoil which the South African mining sector finds itself in, and large scale job losses loom.

While the South African and Tanzanian mining sectors are in turmoil, this does not mean that Africa is uninvestable.

Africa has a significant and, often, thriving mining and minerals industry, providing millions of jobs and opportunities. It is also a source of significant foreign direct investment, and the mining sector remains a substantial contributor to the GDP of many African countries with the benefits that this brings to the growth of those economies.

It is likely that demand for certain precious metals will continue to grow, and that the demand for the so-called “battery metals” will grow exponentially. All of this creates opportunities for investors, provided that the investors have a proper understanding of the various risks that are faced in these investment opportunities.

The investability of Africa is likely to depend, significantly, on balancing the growing need for mineral resources while at the same time, addressing concerns that multi-national companies extract value without returning benefits for the host countries, and ensuring that the vast socio-economic benefits that can flow from mining operations, materialise.

Warren Beech is global head for mining at Hogan Lovells in Johannesburg. Jessica Black Livingston is a deputy for mining at Hogan Lovells in Denver.

from How We Made It In Africa

29 Aug

Swapping ‘rubbish’ for food in Dunoon

Cape Town – Every Tuesday morning between 09:00 and 11:00, a handful of Dunoon residents gather at the Recycle Swop Shop at Inkwenkwezi Secondary School, bringing material for recycling.

In a long steel container, food and household items, toiletries, and donated clothes line the shelves, GroundUp reported.

Residents are “paid” with tokens according to the amount of items delivered for recycling and the tokens are then exchanged for food and clothes.

For some 30 women, this is their only job and their only way of providing for their families.

Alice Mahase starts her day at 05:00 seeing to her children and household before she sets off to collect plastic, mostly bottles.

‘Something purposeful’

On Tuesdays she delivers it all to the Swop Shop in blue recycling bags.

“I don’t have a job and I don’t want to just sit at home. I have been with the shop for four years and every week I can buy some clothes, food and stuff for my baby”

Louise Vonofakidis, who has run the container shop for five years said this way residents who couldn’t find jobs could still “do something purposeful for their families”.

Groups of friends club tokens together so that they can buy in bulk, she said.

The collected materials are sold to a recycling depot and the money is used to buy the food and household goods for the token system. There is always a shortfall.

Corporate sponsorships help but the organisation has to cover the deficit, which is why the project is in need of more local business support.

Manager Riaan van der Westhuizen and his wife Maria launched the project seven years ago after meeting with Marilyn van der Velden, who started the first Swop Shop in Hermanus.

“The original Recycle Swop Shop started out as a project that uses recycling as a tool to ‘help children help themselves’ and to provide ‘a hand up rather than a hand out’,” said Van der Velden.

The project was adopted by an organisation in Durban, The Domino Foundation, which provided sponsorship and corporate exposure.

Earlier this year, the foundation sponsored a team in the Cape Argus Cycle Tour to raise awareness about the Dunoon project.

The Van der Westhuizens also ran a swop shop in West Bank near Kuilsrivier but due to security and safety reasons, it closed.

Today, the Swop Shop has a presence in Dunoon and at a primary school in Philippi. The project’s goal is to empower the community and benefit their environment.

from News24

29 Aug

How a new cruise ship terminal could boost Durban’s economy

While sub-Saharan Africa is on the map for foreign investors in many other sectors, the cruise ship industry mostly passes the region by. It is hoped that this situation could change once the new Durban Cruise Terminal opens for business.

According to Andrew Pike – head of the ports, terminals and logistics division at law firm Bowmans – the facility, expected to be completed in 2019, could be just what the African cruise industry needs. He heads the Bowmans team advising KwaZulu Cruise Terminal (KCT), the preferred bidder for the tender to develop and operate the project.

How we made it in Africa asked Pike about the expected economic impact of the terminal and opportunities to grow the regional cruise industry.

MSC Cruises SA, part of one of the world’s largest passenger liner operators, is a joint-venture partner of KCT, the entity that will build and operate the new Durban Cruise Terminal. However, MSC already operates a number of cruises from Durban, which raises the question whether the terminal will give preference to MSC, or if it will accommodate all operators equally?

No, the terminal concession will be offered on a common-user basis, meaning that the terminal operator, KCT, will be obliged to give reasonable equality of access to any cruise liner wishing to use the terminal. Accordingly, there can be no positive discrimination towards MSC Cruises ships.

Is the rationale behind the new terminal to: 1) Entice operators to develop entire new cruises that stop at Durban; 2) Motivate those currently passing Durban to dock at the city; or 3) To give passengers of liners already stopping at Durban an improved experience?

Ideally, and as far as possible, all three, but the principal motivation at present is to improve the experience for passengers already passing through the existing terminal at N-Shed. The existing terminal is not a world-class facility and the new terminal will give them a far better experience. This in turn will hopefully drive other cruise operators to call in Durban on an ad hoc basis or even to schedule new cruises to Durban because of their confidence that they will be received in a world-class facility. So the bigger picture is to increase tourism to Durban.

Is one modern cruise terminal enough to lure operators to the southern tip of Africa? Don’t you need facilities such as these all along the coast of the continent?

One may be insufficient, but it provides an anchor for cruises on the African coast. Once there is one modern terminal in southern Africa which is successful, it may well prompt other cruise operators to develop similar, or at least complementary, facilities in other jurisdictions such as Mozambique, Tanzaniaand Kenya.

How will the new cruise terminal impact Durban’s economy?

In the short term there will be some employment creation during the construction phase. In the longer term there will be further employment and tourism benefits as the new terminal will have a retail component and will also link through to the Point precinct, meaning that the terminal plus all of the other facilities in the area become an attraction for tourists and boost local businesses.

One would also hope that the whole package will result in increased passenger throughput and consequently provide opportunities for tour operators into the greater Durban and KwaZulu-Natal province, such as Valley of a Thousand Hills tours, eco-safaris to small reserves in the area, and of course increased pedestrian traffic through markets such as Wilson’s Wharf, Victoria Street Market and the like.

Overall, the facility will put Durban more on the map for foreigners who know nothing about the city. CNN once described Durban as “The coolest city you’ve never seen”. The new terminal will get Durban seen and, whether foreigners pass through the terminal or not, word of mouth from those terminal passengers will provide a strong boost for Durban tourism.

from How We Made It In Africa

29 Aug

Number of mortgage accounts declines for first time in decade

The uptake of home loans dropped for the first time in a decade as banks tightened access to mortgage financing with last September’s coming into force of a law capping interest rates.

The Central Bank of Kenya (CBK) says in a newly-released report that the number of active mortgage accounts fell by 373 or 1.5 per cent to 24,085 at the end of December – a significant reversal from where it stood in the previous period when the number of loan accounts grew at a compounded annual rate of 12.9 per cent between 2006 and 2015.

Kenya had 7,275 mortgage accounts in 2006, which steadily grew to 24,458 in 2015.

The CBK says the lenders reacted to the rate capping law by tightening the credit standards for such loans, while also shunning longer term loans, where mortgages belong, in favour of short-term credit.

Banks refused to lend to mortgage borrowers even as demand rose as more Kenyans sought to take advantage of the lower lending rates to buy homes.

“There is increased demand for mortgage loans due to perceived affordability after the introduction of interest capping law in September 2016.

READ: Saccos to give interest-free mortgage loans

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There is also increased appetite for mortgages as more borrowers perceive that they can qualify for higher amounts,” said CBK in its 2016 banking supervision annual report.

“But commercial banks have on the other hand introduced tighter credit standards so the actual mortgage disbursements have been lower than the increased demand,” the CBK says.

The trend makes for gloomy outlook for the mortgage sector, which has over the years been seen as underperforming due to the relatively low number of accounts for a country of 45 million.

Previously, high cost of credit was cited as a major impediment to the growth of the mortgage market, alongside high cost of property and incidental costs that include stamp duty, legal and valuation fees.

READ: Ten-fold rise in prices in 15yrs deepens housing crisis, says World Bank

Last year, however, the signing of the rate cap law resulted in the average interest rate charged on mortgages falling to 13.46 per cent, from 18.7 per cent in 2015.

Borrowers were also keen on a fixed rate mortgage following the rate law as they looked to lock in the benefit it offers, should there be a revision down the road.

“About 62.1 per cent of mortgage loans were on variable interest rates basis compared to 89.3 per cent in 2015. There seems to have been more uptake of fixed rate mortgages by home owners after the introduction of interest capping law,” said CBK.

In Summary

The number of active mortgage accounts fell by 373 or 1.5 per cent to 24,085 at the end of December.
This is a significant reversal from where it stood in the previous period when the number of loan accounts grew at a compounded annual rate of 12.9 per cent between 2006 and 2015.
Kenya had 7,275 mortgage accounts in 2006, which steadily grew to 24,458 in 2015.
Banks refused to lend to mortgage borrowers even as demand rose as more Kenyans sought to take advantage of the lower lending rates to buy homes.

source from Nation

29 Aug

Kwale titanium miner rebounds to Sh1.71bn full-year profit

Base Resources has rebounded to full-year profit of Sh1.71 billion (AU$21 million) for the period ended June 30 from $20.9 million (Sh1.70 billion) loss a year earlier, the Kwale-based miner announced on Monday.

The Australia-owned large-scale mining firm attributed the performance to increased sales volumes, rise in commodity prices and cost management measures.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 81 per cent to AU$109.7 million (Sh8.94 billion) from A$60.6 million (Sh4.94 billion) the year before.

The firm said sales revenue from the Kwale mine exports rose 28 per cent to AU$215 million (Sh17.53 billion) from AU$169 million (Sh13.78 billion) in June 2016, hitting a new record since it made first shipments in February 2014.

READ: Future starts to look up for titanium firm as prices soar

Ilmenite volumes rose by a marginal 4.4 per cent to 501,676 tonnes, rutile increased to 91,991 tonnes from 85,536 tonnes, while shipments of zircon climbed to 34,566 tonnes from 33,062 tonnes last year.

The company said it also sold 9,501 tonnes of low grade zircon, volumes which it did not ship last year. The minerals were sold at an average price of AU$338 per tonne (Sh27,560), a 19.86 per cent jump, it says.

In Summary

Base Resources attributed the performance to increased sales volumes, rise in commodity prices and cost management measures

source from Nation

29 Aug

StanChart sets aside Sh10bn for unsecured loans

Standard Chartered Bank Kenya #ticker:SCBK has allocated Sh10 billion to be issued as unsecured personal loans by mid-October, signalling a renewed risk appetite by the lender.

The lender’s plan runs against increased conservatism in the banking industry whose aggregate lending to the private sector slowed down to 2.4 per cent in the 12 months to April.

Lenders have blamed the credit squeeze to the inability to price risk in the wake of interest rate controls, with implementation of greater prudential accounting standards from next year further deterring risk taking.

StanChart says it has done its homework in terms of risk appraisal, giving it the confidence to issue up to Sh7 million to each borrower in the 45-day period running up to October 11.

“In the past one year there was a remarkable slowdown in lending to the retail segment as we adjusted to the rate-cap regime,” StanChart’s CEO Lamin Manjang said in a statement.

“During the period we have put in a lot of work in segmenting our customers and identifying their credit needs.”

Borrowers will enjoy a one-month repayment holiday before the bank effects loan deductions. The offer is available to salaried individuals and can be repaid over a period of up to six years.

A customer borrowing the maximum Sh7 million over the six-year period will incur a total cost of credit of Sh3.57 million according to www.cost-of-credit.com, a website created by the Kenya Bankers Association (KBA) to improve transparency in the lending market.

The cost includes monthly repayments of Sh144,240 and one-off charges amounting to Sh192,500. StanChart says it expects most of the loans will fund purchases of real estate and cars.

StanChart expanded its loan book at a relatively slower pace of 6.4 per cent to Sh116.8 billion in the first quarter ended March when it ramped up its purchase of government debt by 40.1 per cent to Sh96.2 billion.

In Summary

StanChart has allocated Sh10 billion to be issued as unsecured personal loans by mid-October.
The plan runs against increased conservatism in the banking industry whose aggregate lending to the private sector slowed down to 2.4 per cent in the 12 months to April.
StanChart says it has done its homework in terms of risk appraisal, giving it the confidence to issue up to Sh7 million to each borrower.

source from Nation

29 Aug

Nigerian Investor Sets Up $135 Million Commodities Exchange

A Nigerian startup is developing a new agricultural commodities exchange in Africa’s most populous country to take advantage of the government’s efforts to boost farming output to reduce reliance on oil.

The exchange, Integrated Produce City Ltd., will be located near the southern city of Benin, about 300 kilometers (186 miles) east of Lagos, Nigeria’s commercial hub, a site accessible to nearby growers of cocoa, palm oil, rubber and cassava, Chief Executive Officer Pat Utomi said in an interview.

“The concept of a wholesale-produce market is to enable the farmer to fully dispose of his produce, instead of today where he loses 80 percent of his output” that rots before it can reach the market, Utomi said on Aug. 18 in the capital, Abuja.

Nigeria is boosting investment in agriculture to increase exports and cut food imports that cost it $3.2 billion in 2015, according to the National Bureau of Statistics. The economy of Africa’s biggest oil producer has been hit hard by lower output and prices of crude, which accounts for more than 90 percent of foreign income and two thirds of government revenue.

Export Hub

Integrated Produce City will have storage facilities, including refrigerated warehouses, and host processing plants on its 100-hectare (247-acre) site in Edo state’s Ugbokun village when it starts operating by the end of 2018, Utomi said. “It will be an export hub for produce,” where exporters will have access to large quantities stored in one place rather than sending agents to individual farmers to collect small amounts, he said.

The company has put up 20 percent of the required $135 million and is in talks with lenders and investors from South Africa, China and Australia for additional capital, Utomi said, declining to name them. Integrated Produce City signed an agreement with KPMG LLP’s Nigerian unit on Monday to help it raise more capital, Vitus Akudinobi, a spokesman for the new exchange, said.

Cocoa, palm produce, cashew nuts and rubber are among the products to be traded on the exchange. Others are fresh fruit and vegetables, grains and tubers such as cassava and yams. Local manufacturing companies will be able to buy agricultural goods at the exchange, he said.

Chocolate Factories

“Among the factories we’re trying to attract are chocolate makers,” he said. “The entire cocoa value chain will be represented.”

The exchange aims to provide services to six states in southern Nigeria, Utomi said.

A likely rival is Abuja-based Afex Commodities Exchange Ltd., which started providing warehousing and trading services in four of Nigeria’s 36 states in 2013. Integrated Produce City plans to offer daily auctions as well as an industrial park for manufacturers.

Nigeria is Africa’s fourth-largest cocoa producer and the seventh worldwide with a 2015-2016 output of 190,000 metric tons, according to the International Cocoa Organization.

In addition to cocoa, other major exported products during the last quarter of 2016 were sesame seed, frozen shrimps, soy beans, cashew nuts and crude palm kernel, figures from the statistics agency showed.

(A previous version of this story was corrected to remove reference to the first commodities exchange in lead.)

via Bloomberg