September 2017 - African Financial & Economic Data

29 Sep

Meet TymeDigital, the new kid on the Africa bank block

HARARE – There is a new bank in South Africa. TymeDigital by Commonwealth Bank SA, said yesterday (Thursday) it had been issued with an operating licence by the South African Reserve Bank (SARB).

This was the first licence issued to a new bank by the SARB since 1999.

Sandile Shabalala, the chief executive at TymeDigital by Commonwealth Bank SA, said the granting of the licence signalled the end of a journey that began two years ago.

“This is a key milestone in our plans to launch a full-service digital bank and disrupt banking in South Africa,” said Shabalala.
The bank aims to open up the banking sector to Africans who are not considered wealthy, offer technology product that talks directly to customers and integrate banking into the lifestyles of its clients.

“We will offer South Africans the ability to open accounts and transact securely, within minutes. Through our innovative technology and financial education we aim to get more people using banking services to enhance their lives and increase economic participation,” Shabalala said.

The bank is scheduled to launch a service digital bank in June next year.

Commonwealth Banks SA is 88 percent owned by the Commonwealth Bank of Australia and is 10 percent owned by African Rainbow Capital, the JSE listed investment company that was launched by mining magnate Patrice Motsepe.

It has also planned to establish a foundation that aims to provide financial education to young people and women entrepreneurs.

“Supporting technology, which can be used to provide access to financial services is one of the ways we plan to broaden and deepen financial inclusion in South Africa and other emerging markets,” Motsepe said in a statement.

Commonwealth Banks SA operates Money Transfer, in partnership with Pick n Pay and Boxer stores which already has 200 000 customers. The bank said it had penned a ten-year strategic partnership with Pick n Pay.

29 Sep

Moody’s says South Africa credit rating well placed

South Africa’s credit rating is well placed at the lowest investment grade, but rising foreign ownership of the government’s local-currency bonds is a risk, a senior analyst at Moody’s ratings agency said.

Two of the three large international ratings agencies – S&P Global and Fitch – downgraded South Africa’s foreign-currency rating to speculative grade, or “junk” status, this year after the economy slowed and an abrupt Cabinet reshuffle in March.

Moody’s downgraded South Africa to “Baa3”, one notch above junk, in June and has the continent’s most industrialised economy on a negative outlook.

The ratings downgrades have put pressure on South African asset prices and could increase its borrowing costs.

“We think currently South Africa is well placed at Baa3 with a negative outlook. We had a rating action fairly recently in June,” Zuzana Brixiova, a Moody’s vice president, told Reuters at an investor conference in London.

However, she said that since the June downgrade she had observed a larger-than-expected shortfall in South African government revenues and an increase in foreign financing of government borrowing in rand to around 40 percent.

“To some extent the risk of a ‘sudden stop’ has increased,” she said, referring to the risk that an abrupt change in investor sentiment could result in a sharp reduction in capital flows into South Africa.

Among other concerns, Brixiova cited weak economic growth in South Africa and pressure on institutions, which she said “were being constantly tested”.

She said that whoever the ruling ANC party chooses as its next leader at a major conference in December, Moody’s “would wait and follow what this really means for the policy direction”.

South Africa was earlier dropped from one of the widely used global bond indices, and it risks being excluded from a larger index run by U.S. bank Citi if both Moody’s and S&P cut the country’s local-currency rating to junk.

29 Sep

Multinationals are realising the business benefit of presence in Africa

According to a report from Jack Hammer, a leading executive search business in South Africa, businesses are increasingly investing directly into the markets they wish to enter, no longer using South Africa as a base for their continental operations.

“From the briefs we are receiving, it is clear that global companies expanding into Africa no longer favour South Africa as the obvious port of entry,” said Debbie Goodman-Bhyat, CEO of Jack Hammer.

“Companies are now looking for country managers, executive leadership teams and sales offices based elsewhere on the continent in large part because they are starting to realise the value of having a physical presence.”

This is largely down to local organisations and businesses becoming increasingly unwilling to work with those who are offering little back to the local economy whilst piggybacking off the markets.

However, companies themselves are also seeing the potential that Africa has to offer, with over 50 distinct African markets to work with.

“Although South Africa certainly has its challenges, this move away from the country as the gateway to Africa is not purely because of push factors, but rather the pull factors of other African countries,” Goodman-Bhyat continues.

“There is an ongoing influx of businesses from Lebanon, Israel the USA and so forth. While they still see South Africa as a solid market, they don’t necessarily view it as the only option when investing infrastructure and resources.”

Other countries are offering better opportunities in terms of growth than South Africa, such as the Morroccan financial sector, something that has attracted the interest of a number of big name firms.

Jack Hammer reports that as many as 36 multinationals have representatives on the continent outside of South Africa, including a recent move from Volvo in setting up a truck-manufacturing plant in Mombasa.

[Via] Multinationals are realising the benefit of presence in Africa

29 Sep

ESSENCE Festival: A Meeting of Africa’s Best Business Minds

Apartheid South Africa presented a host of barriers that prevented many Black South Africans from entering the business economy as meaningful players and not simply as semi-skilled laborers.

Access to capital and business resources was simply a myth for millions of Black people. But cut to post-Apartheid 2017, and the question still remains: How much has changed?

The answer is, a lot has changed.

The overall growth of Black-owned small-to-medium businesses in South Africa has catapulted in the past 20 years, with success stories offering motivation and hope for those that come after them. These success stories and the challenges of being a Black, and female, business owner were at the forefront of the Durban Business Fair duing the 2017 ESSENCE Festival in Durban, South Africa.
Panelists speak during the Durban Business Fair at the 2017 ESSENCE Festival Durban in South Africa.
A running theme of the conference centered around the topic of how business owners and venture capitalists, as well as the government, offer moments of motivation both to each other and new entrants to the market. Panelists shared stories of their humble beginnings, trials and tribulations and general anecdotal offerings of how perseverance and hard work will always inevitably lead to abundant success.

Zeph Ndlovu, general manager of the Transnet Port Terminals governmental transport agency, spoke encouragingly about the role that his organization was playing in injecting an impressive R380 billion (about $28 billion) into a large-scale developmental infrastructure.

Ndlovu shared how in his 16-year tenure, Transnet has empowered previously disenfranchised communities with a further focus on female-owned businesses.

Vivian Reddy, a local businessman, shared how he had built an empire up from just R500 (approx. $35 dollars) in his pocket and a pickup truck. Reddy started a humble electrician service that has now morphed into Edison Power, South Africa’s largest Black-owned power company.

29 Sep

We are witnessing the birth of an African digital economy

“And this is just the beginning,” says Wari CEO.

To what extent is your platform an African solution to a uniquely African situation?

We started Wari in 2008, convinced that Africa has a very specific role to play in the global digital sector. This was because Africa’s economic structure and culture lends itself perfectly to an ‘uberisation’ of employment and the economy as a whole – where people are all entrepreneurs. Even while working within another structure, they’re also working on their own behalf.

The world of work in Africa seems to be fertile ground for developing new digital services and new features that are having such an impact around the globe. We designed a platform that would allow us to approach this economic structure with a truly African standpoint, setting up a full range of services that would meet people’s needs.

This idea has been the bedrock of Wari and the reason for its success: it meets a need that people have. We decided to launch our activity in Africa initially because the conditions were perfect for it, but our vision was to also offer services globally, to everyone in the whole world.

How would you describe the services you provide – banking or telecoms?
Basically, each of us has our own business: banks offer financial services, and operators offer telecoms services to their customers. Wari is somewhere between the two, with the role of aggregator – bringing together and organising information from various sources.

We created a standardised service platform, bringing everyone together into a single ecosystem where each player has their own place to set up. This means we can offer the advantages of a completely neutral platform that helps to create jobs.

Let’s take Senegal as an example – although of course we have a presence in more than 60 countries in Africa and beyond – we’ve already created more than 18,000 jobs in that country alone. We have more than 500,000 hotspots, either directly or through out partners.

28 Sep

Businesses: East Africa is a Rising Hub – Jad Abbas, The Abraaj Group

East Africa: being local is key. Simply put, it helps us to identify great businesses, work in partnership with investee companies, and manage risks. That philosophy has always been core to the investment thesis across each of the markets we work in and Africa is no exception.

With a two decade history in the continent and investment in more than 80 businesses, this is a region that we know extremely well. I have lived in both East and West Africa and worked on deals across sectors including Mouka, a leading mattress manufacturer in Nigeria. Two fundamentals are clear: Firstly, the continent is not, and cannot, be treated as a monolith. Secondly, local, national and regional nuances are critical to success and our track record in Africa is proof of Abraaj’s ability to create value for its partner companies.

This July, we announced our latest investment in Sub-Saharan Africa through the acquisition of Java House Group (Java House), the largest casual dining chain in East Africa with 60 outlets in Kenya, Rwanda and Uganda. As a member of the East Africa investment team that worked on the acquisition of this truly iconic asset, I believe the transaction was timely and targeted, especially when considering the underlying dynamics of the sector in East Africa, but also across Sub-Saharan Africa.

Enabling Environments

At a time when the ‘Africa Rising’ narrative seems to be in question, our focus as long-term investors in the continent remains resolute. Why do I say that?

If you look at the African Great Lakes area, the economic growth we expect to see over the next decade, combined with compelling individual investment opportunities makes it an exciting time to be active in this market. And it is not just Abraaj that believes in this opportunity. The Africa Private Equity and Venture Capital Association (AVCA), a leading Pan African investment body which promotes and enables investment in the continent, likewise foresees a shift of investment activity to East Africa and a maturing secondary market in the years ahead.

Read more: East Africa: A Rising Hub

28 Sep

Africa: sustainable forest ecosystems will help boost its economies

Africa: humanity has long appreciated forests for the energy, food and medicine they provide, and as a source of wood products for construction and other purposes. But the role of forests in supporting agriculture, preserving biodiversity, protecting water supplies, creating jobs, increasing domestic GDP and moderating the impact of climate change are less well-understood.

It is an industry often crucial to the well-being of people in large parts of Africa. Angola, for example, has a total forest area of 60 million hectares, representing 20% of its total land area including a rich variety of flora and fauna. This is combined with relatively stable governance as well as various measures the government has implemented to improve Angola’s forest ecosystem such as creating ties between the Ministry of Agriculture and the Ministry of Planning, the Ministry of Industry, and the Ministry of Water and Energy. The country’s exotic plantation area is small (0.2% of forest area) but with significant potential for the economy.

Located in the Planalto region of Angola, Quantum Global Group, through its US$250m Timber Fund, has acquired 18 land concessions leased from the government of Angola. The objective is to manage and rehabilitate the old Angolan Government eucalyptus pulpwood plantations, with an aim to build an integrated forest industry in the provinces of Huambo, Benguela, Huila and Bie to develop the country’s forest ecosystem.

Natural resources have a large role to play in Africa, specifically the timber industry due to its enormous potential. Through the Timber Fund, we have opted to plant carefully selected eucalyptus species, given its many uses and reputation as one of the best options for curbing deforestation of natural woodland in Africa.
Eucalyptus is not only sustainable but also plays a driving role in the supply of raw materials for the manufacturing industry, whilst presenting tremendous benefits for local communities. The sale of wood will be used for both national and regional exports, including residential and other basic needs.

Read more: Developing sustainable forest ecosystems in Africa will help boost its economies

27 Sep

Mobile financial services in Africa: Winning the battle for the customer

Africa is the global leader in mobile money, which has become an important component of Africa’s financial services landscape.

Mobile network operators (MNOs) have dominated mobile money services in Africa for the past decade. More recently, fintechs have established a solid footing in the market, and a number of banks are beginning to compete aggressively for the mobile banking customer. While some banks have chosen to “go it alone”, others are forming partnerships in hopes of reaching the market faster. This article outlines five paths banks can take to retain ground in the battle for the mobile customer in Africa.

Africa is the global leader in mobile money

Mobile financial services (MFS) span the full spectrum of financial services, from payments and current accounts, to savings, loans, investments, and insurance. Mobile money, which enables customers to send, receive, and store money using their mobile phone, is a subset of MFS that is provided mainly by telco companies. The underlying funds are typically held by a bank in a dedicated stored value account or a linked current account.

Just over half of the 282 mobile money services operating worldwide are located in sub-Saharan Africa, according to the GSMA. In Africa today, there are 100 million active mobile money accounts (used by one in 10 African adults). This far exceeds customer adoption in South Asia, the second-biggest region for mobile money in terms of market share, with 40 million active mobile money accounts (used by 2.6% of adults)(Exhibit 1).
Exhibit 1
Mobile money now extends far beyond Safaricom’s initial M-Pesa offering, which enabled consumers and small businesses – many of which had little or no access to a bank – to send and receive money quickly and securely across great distances. Today, mobile financial services have expanded to include a broad array of financial services, including credit, insurance, and cross-border remittances, and M-Pesa now accounts for less than a quarter of MFS users in Africa.

27 Sep

The challenges facing West Africa’s chocolate industry

West Africa, the world’s leading cocoa industry, is grappling with the aftermath of a disastrous 2016/17 cocoa season. Over the last year, international cocoa prices have collapsed by one third to ₤1,529 (US$2,077) by end-August 2017.

The drastic drop in prices reflects softening chocolate demand and a historically large cocoa crop from West Africa. The region is on track to produce an estimated crop of 3.44 million metric tonnes (MT), up 20% from the 2015/16 season. The impact of the cocoa price slump has been devastating. Cocoa farmers’ incomes were slashed, leading to panic in cocoa growing communities; government budgets were gutted with billions of dollars in losses from cocoa export earnings; and, child labour resurged on cocoa farms.

The price crash revealed, yet again, the inherent weakness of the region’s cocoa sector. Despite controlling over three fourths of the world’s supply, West Africa is a price taker, making it vulnerable to the volatility of commodity markets. Moreover, the region’s cocoa producers capture a tiny share of value in the cocoa value chain, estimated at 3% to 6%. Processors of semi-finished products (cocoa liquor, butter and powder) hardly fare better, capturing only 8% of the value. The lion’s share of value, 80%, is unlocked at the chocolate manufacturing and retail levels. In an effort to climb the cocoa value chain, and reduce exposure to volatile cocoa prices, the region’s cocoa producers – led by Côte d’Ivoire and Ghana, which together hold over two thirds of global supply – have focused their discourse on producing chocolate and confectionery for export.

However, West Africa, as the world’s dominant cocoa producer, is not ipso facto well-positioned to produce and export chocolate. While local chocolate producers have attracted attention in the press, they are unable to absorb even a tiny share of the region’s behemoth cocoa crop, owing to their niche production levels in the face of weak demand. Given that West Africa faces significant barriers to entry in making chocolate, the region should instead refocus its energies on further expansion in cocoa processing capacity.

27 Sep

Africa: How companies can benefit from industrial Internet solutions

The internet of things (IoT) – which refers to the connecting of any device with an on and off switch to the internet and/or to each other – has been a hot topic of late. But IoT doesn’t only have consumer applications; it can be used in industries such as manufacturing, logistics and agriculture to make businesses run smarter and faster.

To find out more how companies can take advantage of industrial IoT solutions, Jaco Maritz spoke to Greg Kinsey, vice president for industrial solutions and innovation at Hitachi Vantara, on the sidelines of the Hitachi NEXT 2017 conference recently held in Las Vegas. Here are slightly-edited excerpts from the conversation.

For those not familiar with the term, how would you define industrial IoT?

Industrial IoT is integrating and aggregating data from things that play a role in industrial processes. Some industries have a lot of IoT data already. An example is the automobile industry, which is one of the most automated and sophisticated industries today. But on the other end of the spectrum, you will find industrial activities with close to zero connected objects or connected things. So in those cases the challenge is to determine where to collect data from, and what can be done with that data to improve operations.

If you look at many factories today, they have many assets, but they are what we call dark assets – they are not connected to the internet. So the first stage is to connect a machine. One needs to establish what kind of sensors would be used to connect it and how data can be gathered from that machine. For instance, the physical characteristics of a machine – such as motion, vibration or temperature – can be measured.

In most African countries the manufacturing industry is focused on relatively low-value-added production. Is industrial IoT only relevant for high-tech manufacturing, or can it also be applied in areas such as agri-processing or clothing production?