05 Apr

Africa Signs Free-Trade Deal to Replace Existing Agreements

African leaders signed accords setting up a continental free-trade area that’s expected to boost commerce within the 55-member African Union and eventually supplant a patchwork of existing agreements.

More than 40 nations signed the African Continental Free Trade Area agreement, or AfCFTA, which commits governments to removing tariffs on 90 percent of goods and phasing in the rest in future. The agreements will still require ratification by the individual governments and will only come into force when ratified by at least 22 countries.

“The promise of free trade and free movement is prosperity for all Africans, because we are prioritizing the production of value-added goods and services that are Made in Africa,” Rwandan President Paul Kagame said before the leaders began signing the agreements. “The advantages we gain by creating one African market will also benefit our trading partners around the world.”

Intra-Africa trade stands at about 16 percent of the continent’s total, compared with 19 percent in Latin America and 51 percent in Asia, according to the AU. The agreement could increase this by half for Africa, the United Nations Economic Commission for Africa estimates.

Read more at Bloomberg.com

05 Apr

Trump’s Trade War Could Hit South African Rand Through Oil Price

The path ahead looks challenging for South Africa’s rand, if oil prices are anything to go by.

Concern that U.S. President Donald Trump’s measures will trigger a trade war may hamper global growth and weaken demand for oil, according to Mehul Daya, a strategist at Nedbank in Johannesburg.

“Oil leads the rand,” Daya said. “Sixty percent of the movement in the rand can be explained by changes in the oil price since 1990.”

Talk of tit-for-tat tariffs has already hit the rand and other South African assets. The currency led emerging-market losses Wednesday and was down 0.8 percent to 11.9065 per U.S. dollar as of 2:43 p.m. in Johannesburg. The yield on rand-denominated bonds due December 2026 jumped seven basis points to 8.09 percent. Johannesburg’s equity benchmark tumbled 2.3 percent as escalating tensions between the U.S. and China dragged emerging markets lower.

“It’s all due to those trade wars and a lot of uncertainty,” said Marius Grobler, a trader at Unum Capital. “Investors are seeing a lot of fear on the market.”

Since 2016, oil has recovered from about $28 to $68 a barrel. That’s supported the rand, strengthening it to below 12 per dollar from more than 16, according to Nedbank.


Read the full article at Bloomberg Markets

 

04 Apr

S.Africa mulling privatisation in Ramaphosa reform drive

South Africa will consider partially privatising struggling state-owned companies as part of wide-ranging reforms set in motion by President Cyril Ramaphosa since he came to power last month, the head of the National Treasury said on Saturday.

Dondo Mogajane said South Africa was at the end of a credit downgrade cycle after Moody’s held its investment-grade rating and raised its outlook on Friday, partly because of Ramaphosa’s plan to reform state companies.

“For me, I see it as the end,” Mogajane told Reuters in an interview.

“Moody’s are saying there are things we can do and these are the things we will be focused on,” he added, highlighting plans to stabilise debt, revamp state firms and boost growth in sectors such as agriculture and tourism.

A downgrade to a “junk” rating by Moody’s would have seen South Africa removed from Citi’s World Government Bond Index, and could have triggered up to 100 billion rand ($9 billion) in asset sales by foreign investors.

Investors have cheered Ramaphosa’s arrival and his choice of respected ministers in key roles, including former finance minister Pravin Gordhan as minister of public enterprises.

Gordhan is tasked with turning around state companies that have plunged public finances into crisis in recent years, including heavily indebted power utility Eskom and South African Airways (SAA), which is on the brink of bankruptcy.

“Why not?” Mogajane said when asked if it was possible parts of government-owned companies could be sold.

“There have to be new ways of looking at these things. Are we talking privatisation? Are we talking equity partnership? Let’s give an opportunity for new ministers to unpack what it means.”

Mogajane gave as theoretical examples the sale of 49 percent of SAA and of attracting private investors by splitting up the generation, transmission and distribution sections of Eskom, one the world’s biggest power utilities.

His comments are likely to go down badly with powerful trade unions, sections of the ruling African National Congress (ANC) and the Economic Freedom Fighters, a disruptive red-beret-wearing opposition party.

Read more at Reuters.com

01 Feb

Nigeria’s Corn Output Expected to Fall 7% on Pests, Rising Imports

Nigeria’s corn output for the 2017-18 season will probably decline by as much as 750,000 metric tons due to the impact of pests and increased imports, the producers’ association said.

Africa’s most-populous country is estimated to produce 10 million tons of corn in the current season, 7 percent less than 10.75 million tons in the 2016-17 season, Tunji Adenola, president of the Maize Association of Nigeria, said in a Jan. 30 phone interview from the southwest city of Ibadan.

“Apart from imports, which is the major challenge to corn production in Nigeria, the two-year-old armyworm attacks ravaging farms has discouraged farmers from producing,” Adenola said. Those unable to compete with imported corn, which is cheaper, are being compelled to switch to other crops, he added.

Nigeria is Africa’s biggest corn producer after South Africa, whose 2017-18 output is estimated at 12 million tons, according to the U.S. Department of Agriculture’s Foreign Agricultural Service.

Most of Nigeria’s corn is consumed locally as a staple, in feed for livestock and raw material in the food industry. The West African nation saw corn imports jump 33 percent in the 2016-17 season to reach 400,000 tons, according to the USDA.

President Muhammadu Buhari’s government aims to boost farming output and reduce the economy’s dependence on oil, which contributes two-thirds of government revenue in the country of more than 180 million people.

Source: https://www.bloomberg.com/news/articles/2018-01-31/nigeria-s-corn-output-seen-falling-7-on-pests-rising-imports

02 Jan

From Angola to Zimbabwe: Guide to Key Africa Markets in 2018

For bond investors, Africa was a happy hunting ground last year. Its local-currency and dollar securities easily outperformed those of emerging markets overall as investors piled into a continent offering high yields and starting to recover from the commodity bust of three years ago.

Africa Outperformed

African bonds returned more than the emerging-market average last year but risks abound, among them policy tightening in advanced economies, local and global politics, weakening currencies and another fall in oil prices. And then there is credit risk.

Mozambique and Republic of Congo missed Eurobond payments in 2017, while countries including Cameroon and Zambia agreed or began talks on bailouts with the International Monetary Fund. And since Namibia and South Africa were downgraded to junk, the continent has been left without any investment-grade foreign-currency issuers.

Christine Lagarde, for one, thinks Africa’s debt problems “could very well” worsen in 2018 as the dollar appreciates and the U.S. raises interest rates, according to an interview with Quartz magazine in December. The IMF’s managing director said yield-hungry bond investors “were so eager to lend that I don’t think they were very serious about assessing the risks.”

Africa’s debt is already less attractive on a relative basis. U.S. 10-year yields rose to their highest in nine months two weeks ago, which narrowed African dollar-spreads to 352 basis points, around the lowest in three years, according to Standard Bank Group Ltd.

Read the full article here: From Angola to Zimbabwe: Guide to Key Africa Markets in 2018

 

 

28 Dec

Rand Extends Comeback as Traders Anticipate Ramaphosa Presidency

It’s taken South Africa’s rand exactly nine months — and a new ruling-party leader — to claw back the losses it suffered after President Jacob Zuma unexpectedly fired Finance Minister Pravin Gordhan in March.

The rand gained as much as 1.8 percent on Wednesday to 12.2889, erasing its losses since Gordhan’s dismissal and the highest since July 2015. Gordhan’s dismissal sent the currency plunging 11 percent in two weeks and sparked a credit-rating downgrade to junk.

The rand has rallied more than 6 percent since Cyril Ramaphosa, who has pledged to revive the struggling economy and stamp out corruption, was elected leader of the African National Congress on Dec. 18. That set the billionaire businessman on a path to take over from Zuma as the country’s president. Investors are betting that may happen sooner than 2019, when his term expires, according to Legal & General Investment Management Ltd.

“The market is positively surprised by the increasing amount of support that Mr. Ramaphosa is rallying behind him,” Simon Quijano-Evans, an emerging-market strategist at Legal & General, said by email. “He is likely to continue doing so, increasing speculation about another no-confidence motion in the presidency in 2018.”

Members of the ANC’s newly elected executive committee will meet Zuma to advise him to step down in favor of Ramaphosa, Johannesburg’s City Press reported on Dec. 24, citing unidentified people. Ramaphosa beat Nkosazana Dlamini-Zuma, who was backed by the president, to the top ANC position in a closely contested vote.

Flows into South African stocks and bonds have soared since the vote. Foreigners bought a net 6.4 billion rand ($516 million) of debt and 13.4 billion rand of equities in the week ending Dec. 22, according to JSE Ltd. data.

Source: https://www.bloomberg.com/news/articles/2017-12-27/rand-extends-comeback-as-traders-warm-to-ramaphosa-presidency

23 Nov

Mnangagwa’s Task: Rebuild Zimbabwe’s Economy From the Ground Up

When Emmerson Mnangagwa takes over from Robert Mugabe as Zimbabwe’s president on Friday, he’ll inherit an economic wasteland that will take years and a complete reversal of some of the government’s signature policies to set right.

Among Mnangagwa’s key challenges will be to revive an agricultural industry that collapsed following the Mugabe-sanctioned seizure of mostly white-owned commercial farms starting in 2000, unlock investment in the mining industry by clarifying so-called indigenization laws that force companies to sell or transfer 51 percent stakes to black Zimbabweans and reestablish international credit lines.

“The quicker policy credibility is established, the more foreign capital starts flowing,” said Hasnain Malik, head of equity research at Exotix Capital in Dubai. “Many of the ingredients of a great frontier market are in place in Zimbabwe. While there is much to be done on the government wage bill, recapitalization of the economy and the banking system, the starting point for investor expectations is very low.”

Mnangagwa’s ascension to the presidency follows the 93-year-old Mugabe’s decision to quit Tuesday under threat of impeachment from his own party. While the former intelligence chief has been part of Mugabe’s inner circle ever since he took power when white-minority rule ended in 1980, he and his faction within the ruling Zimbabwe African National Union-Patriotic Front have signaled that they plan to run the country’s finances differently.

Change is desperately needed. The economy is half the size it was in 2000, and has slipped from being one of the 10 biggest in sub-Saharan Africa to number 20. Formal jobs outside the government are virtually non-existent, there are chronic cash shortages and roads and other public infrastructure have crumbled. Many of the best-educated Zimbabweans have moved to neighboring South Africa and the U.K., leaving the country with limited expertise to rebuild.

Read more: Mnangagwa’s Task: Rebuild Zimbabwe’s Economy From the Ground Up

20 Nov

Nigerian Economic Growth Quickens to 1.4% in Third Quarter

Nigeria’s economic growth accelerated in the third quarter as oil output increased. The gross domestic product of Africa’s largest crude producer expanded 1.4 percent in the three months through September from a year earlier, compared with a revised 0.72 percent in the second quarter, the Abuja-based National Bureau of Statistics said Monday in an emailed report. The median of 13 economists’ estimates in a Bloomberg survey was for 1.5 percent growth.

The economy contracted 1.6 percent in 2016, the worst annual slump in 25 years. The International Monetary Fund forecasts GDP growth of 0.8 percent this year and 1.9 percent in 2018 as output of oil, Nigeria’s biggest export, increases and as more foreign currency becomes available for factory imports.

Oil production increased to 2.03 million barrels a day in the third quarter from a revised 1.87 barrels a day, the statistics office said. The crude sector contributed 10.04 percent to real GDP, according to the NBS.

President Muhammadu Buhari asked lawmakers to approve a 16 percent increase in spending to 8.6 trillion naira ($23.9 billion) for 2018. Buhari wants to invest about one third of the budget in roads, rail, ports and power to boost the economy.

Read more: Nigerian Economic Growth Quickens to 1.4% in Third Quarter

 

15 Nov

Kenya’s Economy Could Face a Bleak 2018

Kenya is facing an economic storm in 2018 in the aftermath of two disputed elections. Saddled with the triple threat of austerity measures to pay for those votes, slowing credit growth and new accounting rules for banks, Kenya now risks missing the government’s forecast for 6 percent economic growth next year, according to lenders including Nairobi-based Stanbic Bank Kenya Ltd. Investec Bank Ltd. strategist Chris Becker says expansion could slow to as little as 1 percent.

“With growing headwinds, there is no longer any room for complacency,” said Ronak Gopaldas, an independent analyst, formerly at FirstRand Ltd.’s investment banking unit in Johannesburg. The new administration should “refocus its attention to the economy, which has been on the back-burner for the better part of the year,” he said.
The country’s Treasury has already cut this year’s growth target to 5 percent from 5.9 percent as the protracted election furor damped investment and a drought curbed farm output.
Now key indicators for East Africa’s largest economy, the regional hub for multinationals including IBM Corp. and Toyota Motor Corp., are flashing warnings signs, with the latest Purchasing Managers’ Index, a measure of private-sector activity, falling to a record low and bank loans growing the slowest in more than a decade.

After a court annulled an Aug. 8 election, Kenya held a rerun of the vote on Oct. 26, that was boycotted by the main opposition coalition. President Uhuru Kenyatta’s Jubilee Party also won the second ballot, which is now being challenged in the Supreme Court.

The nation’s 2.6 trillion-shilling ($25.1 billion) budget was amended to include “austerity measures” for the current fiscal year to accommodate unplanned expenditures such as the rerun of the election, Treasury Secretary Henry Rotich said in September. The Treasury has revised its 2017-18 budget deficit forecast to 8.5 percent of gross domestic product from 6.8 percent. The government recorded a 9.2 percent shortfall in year through June 2017.

Read more: Kenya’s Economy Could Face a Bleak 2018

13 Nov

African Economic Growth Rides on Wireless Rails

A telecommunications boom is lifting an industry and a continent.

In Kenya, hundreds of thousands of people are rising out of poverty as mobile-money services turn subsistence farmers into business people. A similar dynamic drives Ethiopia, the fastest-growing economy in Africa, where the gross domestic product is forecast to climb 8 percent in 2019. Borrowing costs in Ghana plummeted almost 2.5 percentage points during the past 12 months amid an unprecedented gain in GDP that’s been led by the growth of the telecom industry.

From the Atlantic to the Indian Ocean, hand-held phones are letting people become their own ATMs, increasing economic activity by enabling payments for food, travel, school and business. Wireless communication is driving economic growth in sub-Saharan Africa much as the railroad did in the 19th-century U.S., accounting for almost a tenth of global mobile subscribers and a growth rate that’s beating the world.

The transformation is reflected in the more than 1,300 publicly-traded companies that make up corporate Africa. The value of communications firms increased during the past five years to 25 percent of the total market capitalization of African companies, up from 16 percent, according to data compiled by Bloomberg. Materials and energy, the natural-resources benchmarks that defined the region since its colonial days, diminished to a combined 18 percent from 27 percent during the same period.

Read more here: African Economic Growth Rides on Wireless Rails