Finance Archives - African Financial & Economic Data

06 Apr

The resurgence of Sudan: From zero to…

Sudan has for long been the skunk in Africa. The International Criminal Court issued two arrest warrants against its president, Omar Al-Bashir: five counts of crimes against humanity, two counts of war crimes and three counts of genocide. Sudan was also involved, for all practical purposes, in a civil war in Darfur. In 2011, South Sudan voted to secede from Sudan. This was an economic disaster for Sudan as the rich oil fields were in South Sudan. The country has long been struggling, given amongst others, the economic sanctions the USA imposed against it.

According to Trading Economics, Sudan has the sixth-largest GDP in Africa, in spite of US and EU sanctions and embargoes. It has a population of approximately 40 million people. While it has a somewhat subdued GDP growth rate of only 3.5% (relative to some of its neighbours), what is worrying is its inflation rate of 52.4%. It also has an unemployment rate of 13.3%. Its balance of trade is close to negative US$1bn in January 2018.

This article addresses the very recent past of the developments regarding a perceived renewal of interest in Sudan as an investment destination. It will be addressed against the backdrop of the interest shown by China and the USA.

Sudan and the USA
The United States recently lifted a number of sanctions on Sudan, motivated by the perception that Sudan had begun addressing concerns about terrorism and human rights abuses against civilians in its Darfur region. The lifting of sanctions rescinds measures imposed in 1997 related to terrorism concerns and other steps put in place in 2006 in connection with the conflict in Darfur. The sanctions were temporarily eased in January just before President Barack Obama left office, with his administration citing the same progress the Trump administration noted. In July 2017, President Trump extended the review for three months, angering the Sudanese, who stopped some lower-level meetings with USA officials in retaliation, but maintained contacts between senior officials (Morello, 2017).

Lifting the sanctions and ending an economic embargo came after the Trump administration removed Sudan from the list of countries whose citizens are subject to travel restrictions. Other sanctions, however, are still in place for the time being, including those against individuals with arrest warrants related to atrocities committed during the conflict in Darfur. Sudan is also still on the list of state sponsors of terrorism (Morello, 2017).

Read more at How We Made It in Africa

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.

Rand Cracks 12 per Dollar First Time Since ’15 as Optimism Grows

South Africa’s rand traded below 12 per dollar on Wednesday for the first time since May 2015, extending a rally sparked by an improving domestic political environment and supported by global risk-on sentiment and the greenback’s retreat.

The currency advanced as much as 0.9 percent to 11.9265 per dollar, and traded 0.7 percent stronger at 11.9462 by 11:52 a.m. in Johannesburg. That brings gains in the past three months to 15 percent, the most out of 31 major currencies tracked by Bloomberg.

The yield on rand-denominated government bonds due December 2026 fell four basis points to 8.32 percent, the lowest since March.

The election of Cyril Ramaphosa as head of the ruling African National Congress in December, setting him on a path to take over from President Jacob Zuma, has fueled optimism South Africa may avert further credit-rating downgrades as the new leadership takes steps to root out corruption and stimulate the ailing economy. Inflows into the nation’s stocks market are running at record levels.

“Investors are loving us at the moment,” said Phillip Pearce, a trader at TreasuryOne Ltd. in Johannesburg. “The dollar is taking a pounding and global markets are still on the hunt for yield. There’s not a lot of risk going now. South Africa seems like a good bet.”

The rand could appreciate to as low as 11.50 per dollar if Zuma is removed from office, Pearce said. The probability of the rand reaching that level this quarter rose to 49 percent on Wednesday, from 19 percent a month ago, according to Bloomberg’s forecast model based on prices of options to buy or sell the currency.

‘Better Space’

South Africa is in a “much better space” now than when previous credit-rating actions took place, and can avert further downgrades this year as lawmakers assert their authority to hold the executive to account, South Africa’s central-bank governor, Lesetja Kganyago, said on Wednesday.

To read the full article, click here.

22 Jan

Zimbabwe President Seeks to Woo Lenders by Paying Loan Arrears

Zimbabwe is committed to repaying arrears to external lenders so that it can resume support programs with institutions such as the International Monetary Fund and end years of isolation from global capital markets, said the country’s president.

Emmerson Mnangagwa, the 75-year-old who took over as leader of the southern African country in November after the military pressured Robert Mugabe into resigning, said one of his priorities is reintegrating his country into the global financial system.

The economy has halved in size since 2000, credit lines from most lenders have been withdrawn and infrastructure has crumbled.

Zimbabwe owes about $9 billion to lenders such as the World Bank and African Development Bank and has fallen behind in payments, with arrears recently amounting to about $1.8 billion.

If his bid to revive the economy is to succeed, Mnangagwa will need access to billions of dollars of support.

“There are limitations to engaging with Bretton Woods institutions — the limitations are as a result of our arrears with those institutions but they are giving positive indications that they would want to accommodate us,” he said in an interview in his office in the capital, Harare, last week.

“We shall recommit ourselves to paying our debts, our arrears. I believe that they will embrace us in the same manner they are embracing other countries.”

Re-engaging with international lenders would be a first step for the Zimbabwean government, which is also considering a debut international bond sale so that it can invest in infrastructure.

“If this succeeds, we would really need a substantial injection into our economy, in particular into the productive economy,” he said.

“Basically a capital injection into capital projects. Infrastructure development is what we want: dams, roads.”

Still, the Zimbabwean leader demonstrated little appetite for cutting costs in the manner that the IMF and other lenders have urged.

The country’s more than 500,000-strong civil service accounts for about 90 percent of budget expenditure, crowding out investment in much-needed projects such as restoring the capital’s water supply and fixing its roads.

To read the full article, click here.

19 Jan

South Africa Holds Rate as Rand, Inflation Risks Persist

The South African Reserve Bank kept its benchmark lending rate unchanged for a third consecutive meeting as the risks of a credit-rating downgrade persist, muddying the outlook for the rand and inflation.

The central bank’s Monetary Policy Committee maintained the repurchase rate at 6.75 percent Thursday, in line with the estimates by all but seven of the 20 economists surveyed by Bloomberg.

The bank cut the rate for the first time in five years in July to support an economy that entered its second recession in almost a decade in the first quarter of 2017 and has struggled to mount a strong recovery.

Inflation has been inside the target band for eight months and the rand — among the world’s most-volatile currencies — has strengthened since the ruling party elected Deputy President Cyril Ramaphosa as its new leader in December, spurring hope that policy uncertainty and political turbulence will dissipate.

“We do see an improved inflation and growth outlook thanks to a stronger performance in the currency but a lot of risk factors still exist, both on the political front as well as on the credit-ratings front,” said Jeffrey Schultz, BNP Paribas’s senior economist.

S&P Global Ratings and Fitch Ratings Ltd. cut the country’s debt to junk in 2017, and a reduction of rand bonds by Moody’s Investors Service could trigger an exclusion of the country’s rand debt from Citigroup Inc.’s World Government Bond Index.

The effect of this on rand bond yields “could be significant, but the extent to which a universal downgrade is already priced in remains unclear,” Governor Lesetja Kganyago told reporters in the capital, Pretoria. The government’s challenge is to “find ways to finance the deficit in a growth-positive manner, and at the same time convey a credible commitment to structural reforms.”

The bank expects inflation to remain within the target band of 3 percent to 6 percent until at least the end of 2019, reaching a low of 4.4 percent in the first quarter of this year.

To read the full article, click here.

12 Jan

South African Steinhoff Unit Mulls Early Redemption of Bonds

Steinhoff International Holdings NV said one of its South African units is considering an early redemption of all notes in issue as the global retailer struggles to stay afloat amid an accounting scandal.

Steinhoff Services Ltd.’s redemption of securities issued under a 15 billion-rand ($1.2 billion) bond program will require pricing supplements to be amended and restated, the Frankfurt- and Johannesburg-listed company said in a statement after the market closed on Thursday. The necessary approvals will have to be obtained, Steinhoff said, without giving more detail.

The parent company’s woes began on Dec. 5 when it said it had uncovered accounting irregularities and that Chief Executive Officer Markus Jooste was resigning. Thereafter its bond yields spiked and its share price lost most of its value. Banks started to withdraw lines of credit and regulators from South Africa to Europe began to investigate. The stock fell 3.7 percent to 6.50 rand as of 9:36 a.m. in Johannesburg, extending its decline this week to 26 percent.

To raise liquidity the retailer has started parting with some assets it built up in a two-decade acquisition drive. French retailer Carrefour on Thursday said it acquired a 17 percent stake in Showroomprive from Steinhoff’s Conforama for 79 million euros ($95 million), while last week Steinhoff’s Austrian unit, Leiner Immobilien, sold its flagship store in Vienna for 60 million euros. Other measures to shore up finances include Steinhoff selling its Gulfstream 550 jet, while Jooste has been auctioning his racehorses.

With Steinhoff also having issued debt internationally, the European Central Banksaid earlier this week it had disposed of the company’s securities after they were downgraded to junk.

Pending Lawsuits

Steinhoff Services, the vehicle the retailer uses to sell listed bonds on the Johannesburg Stock Exchange, has 12 notes in issue, according to data compiled by Bloomberg. Those securities amount to a total of 7.6 billion rand in debt. More than half of those sales took place last year with Steinhoff Services having sold 4.83 billion rand of bonds in 2017. It has three notes valued at a total of 1.4 billion rand maturing in 2018.

To read the full article, click here.

11 Jan

Africa: How Africa Can Ride On the Cryptocurrency Wave

ANALYSIS

Nairobi — Cryptocurrency to most people and institutions in Africa is a very big, and daunting word. Like all new technologies, the concept of digital currencies remains an abstract idea to a lot of people, ushering in change and attempts to alter the status quo.

But the truth is change happens, whether we are ready or not. Those who take advantage of the change wave, stand to benefit as early adopters.

The opportunity to once again take charge of our own destiny has been presented to us as Africans. The question now is not about cryptocurrency, the question is what are we going to do to harness the full power of this opportunity?

In the beginning of trade in Africa, we travelled across lands, and water to trade amongst ourselves. The farmers from the west had cocoa; the nomads from the north had camels and other resources. Each measured the value of their goods or service and agreed on the exchange. “Trade by batter was born”

Then gold came, and other valuable resources so people started using this as a form of trading, then we had promissory notes, which were convertible based on the value of gold, or silver the issuer of the gold had in their vault. All these evolved into what we now call money today, and the unit of that money we derive from either the dollar, euro, pound even yen at the minute.

Cryptocurrency has landed at our doorstep and it’s a scary thought. Let me first define cryptocurrency.

Cryptocurrency is defined as a digital asset designed to work as a medium of exchange, using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.

To read the full article, click here.

08 Jan

Angola Is Said to Plan Currency Sale Tuesday as It Ends Peg

Angola’s central bank will hold an auction on Tuesday to sell foreign currency to commercial banks, its first since saying it will abandon a dollar peg, according to three people familiar with knowledge of the matter.

The kwanza will probably be allowed to depreciate at the auction as the central bank shifts to a trading band, the people said, asking not to be identified because they aren’t authorized to speak publicly on the matter. About $100 million of foreign currency will be offered at the auction, one person added.

Angola, Africa’s second-largest oil producer, will join a long list of commodity exporters — from Russia to Egypt, Kazakhstan, Nigeria and Uzbekistan — that have floated or devalued currencies in a bid to end crippling shortages of foreign exchange and revive economic growth. The kwanza has been fixed at 166 against the dollar since April 2016, but trades at 430 per dollar in the black market.

The currency’s exchange rate will be determined at the auctions, the central bank said in a statement on its website on Jan. 4. A spokeswoman for the regulator said she had no information about Tuesday’s sale.

“There will be an exchange-rate adjustment with the kwanza losing about 15 percent of its value against the dollar,” said Tiago Dionisio, a Lisbon-based analyst for Eaglestone Advisory SA. “Once that adjustment happens, I expect the kwanza to trade between 190-210 per dollar in the foreseeable future.”

Dwindling Reserves

Central bank Governor Jose Massano said last week that the country’s dwindling foreign-exchange reserves triggered the end of a peg that “does not reflect the truth.” Reserves dipped to $14.2 billion in November from $15.4 billion in October, and are down from $20 billion at the start of 2017, according to the central bank.

To read the full article, click here.

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

Oil Trades Above $59 as Libyan Output Falls After Pipeline Blast

Oil traded above $59 a barrel as crude production in Libya fell below 1 million barrels a day after a pipeline explosion Tuesday.

Futures were little changed in New York after slipping for the first time in more than a week Wednesday. While the halt at the pipeline that carries crude to Libya’s biggest export terminal will keep output below the cap it agreed to last month, it is said to need about a week for repairs.

Meanwhile, the American Petroleum Institute was said to report U.S. inventories dropped last week. Government data is also forecast to show stockpiles declined.

Oil is heading for a second yearly advance as the Organization of Petroleum Exporting Countries and its partners including Russia extended supply curbs through the end of 2018. The disruption in the North African nation lifted prices to the highest level in more than two years on Tuesday, offsetting the impact from the return of a major U.K. North Sea pipeline after a shutdown.

“Oil’s rally on the pipeline explosion in Libya may be short-lived as it’s been reported that the repair may not take too much time,” Kim Yumi, a Seoul-based market strategist at Kiwoom Securities Co., said by phone. “We will continue to see prices easing and then being elevated again because while falling stockpiles support prices, rising U.S. production will restrain any increase.”

West Texas Intermediate for February delivery was at $59.82 a barrel on the New York Mercantile Exchange, up 18 cents, at 8:37 a.m. in London. Total volume traded was about 35 percent below the 100-day average. The contract dropped 33 cents to $59.64 Wednesday.

Brent for February settlement, which expires Thursday, added 20 cents to $66.64 a barrel on the London-based ICE Futures Europe exchange after falling 0.9 percent Wednesday. The global benchmark crude traded at a premium of $6.83 to WTI. The more-active March contract was 21 cents higher at $66.20.

To read the full article, click here.