Monthly Archives: April 2018

30 Apr

Ethiopia Mulls Fertilizer Plant Tender as Army Deal Reviewed

Ethiopia’s government may cancel a contract for a fertilizer plant awarded to its military-industrial conglomerate and offer it to international tender, the Public Enterprises Ministry said.

The possible revision of the contract is the latest sign that Ethiopia’s new prime minister is fulfilling a pledge to purge “favoritism” toward the security forces.

The state awarded the Yayu project in Ethiopia’s restive Oromia region to state-owned Metals & Engineering Corp six years ago, but since then less than half the work on the complex has been completed, ministry spokesman Wondefrash Assefa said.

“It may be that we will cancel the agreement and we will continue with another contractor, but the decision is not reached at this time,” he said by phone Friday from the capital, Addis Ababa. “It may be that others will participate including foreign companies.”

Prime Minister Abiy Ahmed came to office April 2, succeeding Hailemariam Desalegn, who quit as prime minister in February after failing to end protests in the Amhara and Oromia regions that began in 2015 amid demands for greater economic inclusivity.

Abiy has vowed to ensure more even wealth distribution by reducing “favoritism” toward the security forces.

Office Cherifien des Phosphates, a Morocco-based fertilizer producer, may be among companies that could be considered to take over the project, Wondefrash said. OCP has an interest “to produce fertilizer but we’ve not reached a conclusion on this issue,” he said.

Craig Atherfold, a spokesman for OCP, said he passed a request for comment to a colleague.

Metec is run by the Ethiopian military, one of Africa’s largest armies, and has been involved in projects including the $6.4 billion Grand Ethiopian Renaissance Dam and a series of sugar developments.

Officers connected with the rebel movement that overthrew Ethiopia’s junta in 1991 have dominated senior government positions for the past quarter century.

To read the full article, click here.

30 Apr

Congo’s Katumbi to Return Home When Vote Certain to Go Ahead

Democratic Republic of Congo presidential hopeful Moise Katumbi said he’ll return from exile once he’s convinced long-delayed presidential elections are going to take place.

The 53-year-old former governor of Congo’s copper-rich Katanga province would be the likeliest candidate to replace President Joseph Kabila if he’s allowed to compete in elections scheduled for December, according to a poll published last month.

“The election time isn’t clear yet,” Katumbi said in an interview at a conference in the Rwandan capital, Kigali. “When it becomes clear, I will definitely go back.”

Congo, which hasn’t had a peaceful transfer of power since independence in 1960, was supposed to hold elections in November 2016. The electoral commission postponed the vote, citing financial and logistical constraints.

Opposition leaders have long accused Kabila, head of state since 2001, of delaying the vote in order to retain power and change the constitution. “Our constitution is very clear,” Katumbi said. “He has no right to run.”

Security forces have killed more than 300 people in nationwide anti-government protests since January 2015 in the run up to and following the end of Kabila’s second mandate, according to New York-based Human Rights Watch.

Elections are now scheduled for Dec. 23. Last week, a spokesman for Kabila’s ruling coalition said “no other solution is possible” than elections happening this year.

Katumbi has been in self-imposed exiled since May 2016, soon after he split with Kabila and announced an intention to succeed his former ally. A month later he was convicted in absentia for illegally selling a property, while two other investigations remain open — including allegations he violated Congo’s ban on dual citizenship.

 A month later he was convicted in absentia for illegally selling a property, while two other investigations remain open — including allegations he violated Congo’s ban on dual citizenship.

Katumbi denies the allegations and says the “fake, bogus” actions are politically motivated.

To read the full article, click here.

27 Apr

From Defaults to Poor Data, Cocoa Audit Shows Top Grower’s Woes

Ivory Coast’s cocoa regulator failed to prevent a crisis that sent prices plummeting last season, according to an audit of the world’s top producer by KPMG LLP.

Offering a rare glimpse into the workings of an opaque industry, KPMG shows how flaws in the West African nation’s sales system had a “catalyst effect” on the industry’s woes, according to a copy of the audit commissioned by the government and obtained by Bloomberg.

The crisis cost the country at least 185 billion CFA Francs ($333 million) in lost income, KPMG said. While reforms of the sector in 2012 were supposed to protect cocoa farmers from global swings, the last annual season that ended in September showed producers remained vulnerable.

Prices started tumbling amid forecasts for an oversupply, triggering a wave of defaults by local exporters which couldn’t fulfil their contracts because they had bet on higher prices.

A slow response from Ivory Coast deepened the rout and resulted in farmer pay being cut by more than a third.

KPMG and Yves Brahima Kone, head of the regulator known as Le Conseil du Cafe-Cacao, declined to comment.

These are the report’s main findings and recommendations:

1. Defaults

After prices reached a six-year high in July 2016, local shippers who speculated on further gains were caught wrong-footed.

The audit showed 32 exporters defaulted on 222,302 metric tons of cocoa, about a fifth of sales usually made ahead of the start of the season. Smaller exporters from groups known as Pmex and Coopex accounted for 68 percent of the unfulfilled contracts.

The defaults forced Ivory Coast to reauction beans, putting further pressure on prices. The CCC allowed some defaulting companies to continue making purchases, raising the risk for the current season, KPMG said.

The biggest defaulters during last season were Nocoacy with contracts for 35,975 tons, Saf Cacao with 15,000 tons and 2CICS SA with 14,900 tons, according to the report. Saf Cacao had also defaulted on 7,425 tons in the 2015-16 harvest, it said.

To read the full article, click here.

26 Apr

Investec Money Manager Upbeat on Growth in South Africa

South Africa’s economy is under new management, and Investec’s Chris Freund is among equities investors who are expecting growth to surprise to the upside.

President Cyril Ramaphosa, in office since February, is spurring optimism among stock traders who are already noting changes in Africa’s most industrialized market.

The new leader has set a goal of attracting $100 billion in investment, overhauled his cabinet and installed new boards at troubled state-owned companies.

“People are going to be surprised how South African growth rates are revised upwards,” Freund, the Cape Town-based South African multi-asset head for Investec Asset Management Ltd., which oversees about $140 billion for clients globally, said in an interview. “We are bulls on South Africa’s economy.”

Freund is not alone. Morgan Stanley upgraded South African equities to overweight on Wednesday and said its forecasts for economic growth are above consensus for this year and next.

Business confidence is recovering and political risk has fallen since Ramaphosa replaced Jacob Zuma as president, with private investment and household consumption heading higher.

On top of that, valuations are attractive: stocks traded on the Johannesburg exchange are at their cheapest since February 2010 on a price-to-earnings basis, Morgan Stanley said.

The improving confidence and economic outlook are conditions Freund is looking to make the most of for the 23 billion-rand ($1.8 billion) Discovery Invest Balanced Fund, the flagship mutual fund he helps manage for Discovery Invest, a division of Discovery Ltd., owner of South Africa’s largest medical-insurance administrator.

“We think that equity markets around the world are mildly expensive, but the more important thing is that the growth cycle is still with us, and so it’s time to try and make clients money,” Freund said.

South African stocks make up 45 percent of the Balanced Fund, with Naspers Ltd. its biggest holding at 3.5 percent. The fund has returned 7.7 percent in the past year, better than the 5.1 percent achieved by its peers, data compiled by Bloomberg show.

To read the full article, click here.

26 Apr

State Firms’ Debt May Threaten Financial Stability, Central Bank Says

The inability of South African state-owned companies to roll over debt could threaten the nation’s financial stability and ultimately result in more credit-rating downgrades, according to the central bank.

Governance issues at state companies, rising contingent liabilities and inadequate liquidity could add pressure to government finances through the increased use of guarantees, the Reserve Bank said in its six-monthly Financial Stability Review released in Pretoria on Wednesday.

“Financial stability centers around the ability of state-owned enterprises to roll over debt and achieve financial consolidation,” the central bank said. “Should state-owned enterprises fail to roll over debt, the government would be liable and might not be able to honor such debt.”

Ratings companies have flagged state firms’ finances as a concern in recent years. While Moody’s Investors Service kept the nation’s credit rating at investment grade and changed the outlook to stable from negative last month, it warned if risks at these companies materialize and increase the government’s debt burden, it could lead to downgrades.

Government guarantees to state companies are at more than 450 billion rand ($36 billion), according to data from the National Treasury. The state’s exposure to this increased to 64.5 percent in the past fiscal year from 54.4 percent as companies drew on the guarantees.

Power utility Eskom Holdings SOC Ltd. is the single biggest recipient of guarantees at 221 billion rand, followed by the Road Accident Fund at 189 billion rand, the central bank said. South African Airways said Tuesday it needs 5 billion rand from the government to cover immediate costs and warned it may struggle to make debt repayments due next year.

The rand, which has declined 0.5 percent versus the U.S. dollar this year, was little changed on Thursday morning at 12.4435 per dollar.

Source: https://www.bloomberg.com/news/articles/2018-04-25/state-firms-debt-may-threaten-financial-stability-sarb-says

24 Apr

Wages Impasse Puts South African President Ramaphosa in a Bind

A standoff between South Africa’s government and unions representing its 1.3 million workers over pay puts President Cyril Ramaphosa in a jam.

While his administration has pledged to stick to its deficit targets and expenditure ceilings — a tall order if it buckles to demands for increases of as much as 12 percent — he can ill afford to alienate the unions ahead of next year’s elections or risk strikes that would curb growth.

He’s also indebted to the unions for backing his campaign to win control of the ruling party last year, a victory that set the stage for him to replace Jacob Zuma.

“He is in a Catch-22,” Sethulego Matebesi, a political analyst at the University of the Free State in the central city of Bloemfontein, said by phone. “The unions are not going to buy into the argument that the government can’t afford the increases they want.”

The wage talks have already dragged on for more than seven months. The eight unions that represent teachers, nurses and other state workers have warned they won’t tolerate the government’s “delaying tactics” much longer.

“There is an inadequate offer on the table,” the Congress of South African Trade Unions, the country’s largest labor group, said in a statement. “We caution government against creating an environment that will force workers to consider withdrawing their labor and embark on what will be a calamitous strike.”

Civil servants last staged a strike in 2010 that dragged on for three weeks before they were awarded 7.5 percent raises. Three-year settlements were reached in 2012 and 2015 that increased wages by 7 percent in the first year and inflation plus 1 percentage point for the next two years. South Africa’s inflation rate fell to a seven-year low of 3.8 percent in March.

While wage talks were due to resume on Tuesday, the government requested a delay until May 3, saying it needed more time to consult. The current pay deal expired at the end of March and any increases will be backdated.

To read the full article, click here.

24 Apr

Buhari Healthy And Will ‘Easily’ Win Nigeria Vote, Minister Says

Nigerian President Muhammadu Buhari is healthy and his policies will “easily” win him re-election in the vote planned for February, Information Minister Lai Mohammed said.

“He is very strong and well,” Mohammed said in an interview on Sunday. “I have never lost sleep over the re-election. Buhari will easily win.”

Buhari, 75, announced this month that he’s seeking re-election, putting an end to speculation on his plans after he spent a total of five months in the U.K last year for treatment of an undisclosed ailment.

That, as well as continuing attacks by Islamist militant group Boko Haram, herdsmen-farmer clashes, the economic slump in 2016, and an anti-corruption crusade critics have called partisan prompted some politicians such as former President Olusegun Obasanjo to urge him not to run again.

Buhari must also rebuild the coalition of the ruling All Progressives Congress that brought him to power in 2015, after some defections to a similarly fractured opposition People’s Democratic Party. He defeated the PDP by tapping into public anger over its record for corruption and mismanagement while governing Nigeria since the end of military rule in 1999.

While the PDP hasn’t announced its candidate for the elections, a likely contender is Atiku Abubakar, a former vice president who defected from Buhari’s party last year. The 71-year-old lost to Buhari in the APC primaries but supported him as the candidate in 2015.

Buhari’s government points to some progress against Boko Haram militants, such as breaking their grip on territory. Still, attacks continue almost daily.

The government is using diplomatic means to convince Boko Haram to cease hostilities that may involve an amnesty for fighters of the group whose nine-year-old insurgency has claimed the lives of millions of people and threatened the northeast with famine.

“We are using third parties, including foreign parties, through back channels,” Mohammed said. “But the challenge is that there are many factions.”

To read the full article, click here.

23 Apr

South Africa to Appeal Ruling on Black Ownership of Mines

South Africa has sought leave to appeal a court judgment earlier this month over a crucial black-ownership principle in the country’s Mining Charter, the nation’s mining lobby said.

The Chamber of Mines has been notified that Mineral Resources Minister Gwede Mantashe and the Department of Mineral Resources filed the application, it said in a statement Monday.

The High Court in Pretoria on April 4 ruled that the first two versions of the country’s charter didn’t require producers to top up black-shareholding levels in perpetuity if they previously met the minimum 26 percent requirement.

“The chamber is currently reviewing the specified grounds of appeal, although the DMR’s appeal appears to center on the majority judges obiter dictum comments about the legality of the 2010 charter and the enforceability of the charters,” the lobby group said.

The development is another volley in a longstanding legal battle to clarify the charter rules. The case was revived last year by the chamber, which sought a declaratory order on the so-called “once empowered, always empowered” principle.

The group has argued that companies can reach the black-ownership requirements by counting previous sales to black investors, even if those investors later sold their shares to whites or foreigners. The Department of Mineral Resources didn’t immediately return an email and call seeking comment.

South Africa has the world’s biggest reserves of platinum and manganese, and its mineral deposits also include gold, iron ore, coal, chrome and zinc. Anglo American Plc, Glencore Plc and South32 Ltd. are among companies operating in the country.

Malan Scholes Inc., a Johannesburg-based law firm, has made a separate application to declare current and previous charters unconstitutional because they lack definition and are inconsistent. The chamber opposes the view that the 2004 and 2010 charters are not valid and has agreed to join as a respondent to that application, it said.

Mantashe is holding talks with the industry, unions and mining communities on a new charter, a set of rules aimed at distributing the wealth of the industry more widely. Earlier this month, he said he’s confident that work on the charter will be concluded in May.

Source: https://www.bloomberg.com/news/articles/2018-04-23/south-africa-to-appeal-court-ruling-on-black-ownership-of-mines

23 Apr

Zuma Legacy Leaves South African Anti-Graft Panel With Huge Task

A South African judicial commission faces a daunting task in investigating allegations that members of the Gupta family and their allies connived with former President Jacob Zuma and his son Duduzane to loot billions of rand from state coffers.

Its success or failure will go a long way in determining whether South Africa can put behind it years of mismanagement and plunder during Zuma’s scandal-ridden administration that undermined investor confidence and stymied economic growth.

Zuma agreed to the inquiry after losing control of the ruling party and a lawsuit challenging a directive from the nation’s former graft ombudsman that spelled out its powers and appointment procedures.

Deputy Chief Justice Raymond Zondo and his panel of six senior staff members must probe an array of deals between state entities and private businesses, some of them set up to obscure the intended beneficiaries.

It will require wading through hundreds of thousands of documents and interviewing scores of witnesses, many of who may be reluctant to give evidence because they risk implicating themselves. Several key players, including the three Gupta brothers and Duduzane Zuma, have fled the country.

While the panel was given six months to complete its investigation into what’s become known in South Africa as “state capture,” Zondo has said that’s woefully inadequate and he’s requested an extension to its mandate. He hasn’t said when public hearings will begin. The commission’s findings could be used as the basis for criminal prosecutions by law enforcement agencies, which are also conducting several concurrent probes.

These are among the key controversies the commission will have to focus on:

Peddling of cabinet posts

Former Deputy Finance Minister Mcebisi Jonas and Vytjie Mentor, the ex-chairwoman of parliament’s public enterprises portfolio committee, alleged that the Guptas offered them ministerial posts in exchange for business concessions. Jonas said he was also offered a 600-million-rand ($50 million) bribe.

To read the full article, click here.

20 Apr

Firing of Striking Nurses Stokes Concern About Zimbabwe’s Democracy

The Zimbabwean government’s dismissal of thousands of striking nurses drew condemnation from labor unions and dimmed hopes that the removal of Robert Mugabe as president last year would usher in a new era of stability in the southern African nation.

The firings may hinder the drive by Emmerson Mnangagwa, who replaced Mugabe in November, to bolster confidence among the public and investors that he can re-establish the rule of law following four decades of Mugabe’s administration that showed scant regard for labor rights.

The decision to dismiss the nurses, who were demanding better pay and working conditions, was announced on Tuesday by Vice President Constantino Chiwenga, the former military commander who was instrumental in forcing Mugabe to resign.

“Such ill-advised actions that offer a repeat of past repression should be avoided,” said Gary van Staden, an analyst at NKC African Economics in Paarl, near Cape Town.

“It highlights the danger of military men assuming political power and failing to note the differences in problem-solving tactics appropriate when wearing a suit.”

While Zimbabwe’s 2013 constitution enables all employees other than those who serve in the security forces to strike, it says laws can limit the exercise of that right to maintain essential services.

Health Minister David Parirenyatwa told reporters Thursday that the dismissed nurses can reapply for their jobs and the government will hire others who are unemployed.

Chiwenga defended the decision to fire the nurses, saying they provide an essential service and refused to go back to work despite the government delivering on an agreement to allocate them a total of $17.1 million in additional pay.

Their actions were “deplorable and reprehensible” and may be politically motivated, he said in an emailed statement from Harare, the capital.

Lovemore Madhuku, a law lecturer at the University of Zimbabwe, said the law doesn’t allow summary dismissal, and the presidency has no power to fire nurses who are employed by the Health Service Board.

To read the full article, click here.