South Africa could delay carbon tax implementation beyond 2016

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CAPE TOWN (Reuters) – South Africa will publish a draft carbon tax bill for further comment next week, keeping the door open to delay its controversial implementation for the second time beyond 2016, Finance Minister Nhlanhla Nene said on Wednesday.

The carbon tax, part of government efforts to reduce harmful emissions in Africa’s worst polluter, was postponed two years ago to 2016 after alarming industry it would further erode profits amid a global commodities slump and higher electricity tariffs.

“On any tax proposals we take the trouble of engaging with industry before we can implement,” Nene told reporters ahead of tabling his three-year budget outlook.

“So whether it will be implemented in 2016 as we announced or later, will depend on discussions we are having,” he said.

Former Finance Minister Pravin Gordhan in 2014 delayed the introduction of a carbon tax by one year to 2016, tweaking its policies to better protect industry from a proposed tax price of 120 rand per ton of carbon equivalent.

The postponement was welcomed by mining and other carbon-intensive companies, such as steel giant ArcelorMittal and petrochemical group Sasol, who have said the new tax will erode profits against a backdrop of rising electricity tariffs and sluggish economic growth.

The tax, expected to be phased in over time, was due to start on Jan 1, 2015 and is one of several green initiatives, including greater vehicles emission taxes South Africa wants to implement to reduce its carbon footprint.

Should the new carbon tax bill, which was approved by cabinet, be sent for public comment, it is unlikely that it would be made law before Nene’s budget policy speech in February, given that the legislative process at parliament was winding down already.

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South Africa to borrow $4.5 billion from international markets – Treasury

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CAPE TOWN (Reuters) – South Africa will borrow $4.5 billion from international markets over the medium term with government debt set to rise to nearly 2.4 trillion rand by 2018/19, the National Treasury said on Wednesday.

New bond issuance for 2015/16 would rise to 175 billion rand, marginally up from the 173 billion rand estimated in February.

Treasury said borrowing requirement would rise over the next three years, with borrowing for 2015/16 fiscal year revised to 176.3 billion rand forecast in February’s main budget before gradually rising to reach 186.1 billion rand in 2017/18.

Treasury said it would focus on mitigating the risk of sharp increases in loan repayments, and would continue its program of switching short-dated bonds in exchange for longer-dated ones.

“Further rand depreciation and higher inflation would push up the level of debt and debt-service costs,” Treasury said.

The rand has lost over 13 percent in value against the dollar in 2015 as combination of weak domestic factors and slowing growth globally, particularly in China, have seen the unit tumble to all-time lows.

Minister Nhlanhla Nene said the rise in government debt over the next three years would amount to 600 billion rand, while stabilizing as a percentage of GDP to 49.4 percent in 2018/19.


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Morocco subsidy spending to fall to $1.6 billion in 2016

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RABAT (Reuters) – The Moroccan government plans to spend 15.5 billion dirhams ($1.61 billion) on subsidies, down from 23 billion dirhams budgeted for this year, the 2016 draft national budget seen by Reuters showed.

The kingdom expects subsidies of only 14 billion dirham in 2015 – down from budgeted 23 billion – thanks to lower energy prices.

Morocco started to repair its public finances three years ago after huge deficits in 2012 when the government spent billions to calm Arab Spring-like protests.

Morocco has done more than most North African countries to make painful changes required by international lenders to curb deficits, such as ending fuel subsidies and freezing public sector hiring. The government still controls the prices of wheat, sugar and cooking gas.

In another move to step up with the subsidy reform, the government is planning to fully liberalize gasoline and diesel prices on December 1.

The government has said gross domestic product (GDP) would grow by 3 percent in 2016, down from an estimated 5 percent in 2015.

The forecast is more ambitious than that of Morocco’s planning agency, which had said the economy would grow by 2.6 percent in 2016 as agricultural output fell from an exceptional 2015.

Agriculture accounts for more than 15 percent of the economy, with this year’s cereal harvest hitting a record 11 million tonnes.

The budget deficit is expected to come in at 3.5 percent of GDP in 2016, down from 4.3 percent in 2015, while inflation is seen at 1.7 percent, according to government estimates.


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Sudan applies for OPEC membership

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MOSCOW (Reuters) – Sudan has applied to become an OPEC member, the country’s oil and gas minister Mohamed Zayed Awad was quoted as saying by RIA news agency.

“We have already applied and are waiting for a decision,” he said without elaborating.

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Ugandan coffee exports jump 38% in September

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KAMPALA (Reuters) – Uganda’s coffee exports in September rose 37.7 percent year on year as good prices encouraged farmers to sell, the Uganda Coffee Development Authority (UCDA) said.

UCDA said the East African country shipped a total of 286,322 60-kg bags last month, up from 207,923 bags exported in September 2014.

Uganda exported 3.46 million bags in the 2014/15 (Oct-Sept) crop year, down slightly from 3.5 million the previous year, the regulator said.

“Farm gate coffee prices improved in line with the global prices,” UCDA said, without providing details.

Coffee is Uganda’s leading commodity export and its single biggest source of hard currency.

UCDA said shipments in the 2014/15 crop year earned the country $410 million, up from $394 million the previous year.

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Mali to miss cotton crop target due to late rains: CMDT

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BAMAKO (Reuters) – Mali will miss this year’s cotton production target of 650,000 tonnes as late rains in the Sahel region have struck the start of the harvest, the head of the state-owned CMDT cotton company said on Monday.

Kalfa Sanogo said the heavy rains were damaging stocks of picked fibre and cotton still in the fields. The cotton harvest began last week in the West African country, which ranks as Africa’s second-largest producer behind Burkina Faso.

Mali had targeted production of 650,000 tonnes of raw cotton for the 2015-2016 season, up from output of roughly 550,000 tonnes the previous year.

“We have a serious problem: the rains are continuing at a time when they should stop,” Sanogo told Reuters. “The forecast of 650,000 tonnes will be revised down.”

He declined to provide a revised forecast for national production.

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South Africa’s Woolworths says strike won’t affect operations

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JOHANNESBURG (Reuters) – Workers at a distribution centre for South African retailer Woolworths are on strike over pay, the company said on Monday but the high-end grocery and clothing seller said the strike would not affect operations.

“We can confirm that the National Union of Food Beverage Wine Spirits and Allied Workers at our Midrand Distribution Centre have embarked on protected strike action,” the firm said.

“Business continuity plans are in place for continued operations and our customers should not experience any disruption in the supply of goods to stores.”

The union was demanding wage increases of 110-130 percent for its members, Woolworths said.

Shares in Woolworths were flat at 102.28 rand by 1316 GMT compared with a 0.8 percent fall in the general retailers index.

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Value of coffee sold at Kenyan auction falls 18% in 2014/15

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NAIROBI (Reuters) – The value of coffee sold at Kenya’s auctions fell 18 percent to $142.5 million in the crop year to September, hit by lower volumes, the head of the Nairobi Coffee Exchange (NCE) said on Monday.

The east African nation, whose high-quality beans are sought by roasters to blend with beans from other producers, exports much of its coffee through the exchange and the rest is sold by growers directly to foreign buyers.

The NCE sold coffee worth $174.1 million in the 2013/14 season that runs between October and September.

“Drought conditions early in the year affected crop especially in the central Kenya growing areas and that has reflected in the overall performance,” Daniel Mbithi, the chief executive of the NCE told Reuters.

Officials said 568,766 60-kg bags were sold during the period, down from 671,438 the previous year. The average price at the exchange also dropped to $205.02 per 50-kg bag from $212.70 the previous year.

East African coffee is normally packed in 60-kg bags, but the prices are quoted for quantities of 50 kg.

Coffee exports were at one time Kenya’s leading foreign exchange earner but have slipped to under 50,000 tonnes in recent years from a record level of 130,000 tonnes in 1987/88.

Many smallholder coffee farmers, disillusioned with poor earnings, switched to other crops or sold land for real estate in recent years.

The area of coffee plantations in Kenya has fallen to 109,000 hectares from the average of 150,000 hectares in 1980s and 1990s, the regulator, the Coffee Directorate, has said.


(Editing by Duncan Miriri and Mark Potter, Reuters)


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Kenyan shilling strengthens ahead of bond auction

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NAIROBI (Reuters) – The Kenyan shilling strengthened on Monday, with the local currency supported by dollar inflows to be used for purchase of Kenya’s high-yielding government debt.

At 0715 GMT, commercial banks posted the shilling at 102.25/35 to the dollar, from Friday’s close of 102.40/102.50.

The currency, down about 14 percent against the dollar this year, was receiving support from inflows ahead of an Oct. 21 auction of an amortized one-year Treasury bond, and more broadly from its weekly Treasury bills auctions, said a trader at one Nairobi-based commercial bank.

“We have seen dollar inflows from foreign buyers coming in for the bond,” the trader said. “And, later in the week, as long as the T-bills continue to be this high, the shilling will continue to gain.”

In recent weeks traders have reported growing dollar inflows from foreign investors who have been attracted by interest rates on government Treasury bills of more than 20 percent, far above what Kenya usually pays for short-term debt.

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Mauritius eyes Africa as pressure mounts on offshore business

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EBENE, Mauritius (Reuters) – Mauritius beats Singapore as the world’s top route for foreign investment to India and is a hub for thousands of firms managing half a trillion dollars in assets.

But there are only a sprinkling of office blocks in Ebene Cybercity, the heart of the tiny Indian Ocean island’s financial services industry, and the area only livens up at the weekend when a band plays in a bar of the district’s only luxury hotel.

Such limited activity is evidence that Mauritius is a “tax haven” for companies which generate no real business on the island yet use it to benefit from tax avoidance treaties with Asia and Africa, critics say.

“Mauritius is playing the tax competition game and they are playing it very well,” said Nadia Harrison, tax policy expert at ActionAid. “The result is that they are reducing the amount of tax that can be collected from the poorest countries.”

Concerned about the impact of tax havens, world powers are tightening the noose on multinationals seeking tax advantages and India wants changes to its tax treaty with Mauritius, forcing the island’s new government to re-examine its business model and focus elsewhere.

There is debate in the new government, which took office in December, about whether Mauritius was ever a tax haven but there is general agreement that the economy needs to shift focus to make sure firms invest locally and to prepare for any loss of business from India.

“My message for the offshore sector here is: they have to move from a tax haven to a typical transparent financial sector. This is what is happening now,” Finance Minister Seetanah Lutchmeenaraidoo told Reuters.

He wants the financial services industry to deepen investments in Africa to help lift sluggish growth in Mauritius and make it a high-income state by 2020.

“Singapore is to southeast Asia, what Dubai is to the Middle East, and what Mauritius will be vis-à-vis Africa,” Lutchmeenaraidoo said.



New rules agreed by ministers from the Group of 20 industrialised nations this month to stop companies moving profits to low tax centres and “treaty shopping” for tax benefits combined with changes to India’s tax treaty are increasing the pressure on Mauritius.

“We know it is going to have a decisive impact on the future of offshore financial services worldwide,” said a former minister and now a fund manager, adding that the government was being driven “into a corner” by India.

India has pushed Mauritius into talks to change to its Double Taxation Avoidance Agreement. Signed in 1983, Mauritius took off as an investment route when India opened its economy in the 1990s.

A Global Business Company 1 (GBC1), the title for “offshore” firms, pays zero capital gains tax in Mauritius, instead of as much as 40 percent in India on some short-term investments.

Such benefits made Mauritius the source for 24 percent of the $24.7 billion of foreign direct investment (FDI) in India in fiscal 2014/15, Reserve Bank of India figures show, making it the largest source of FDI.

New Delhi says much of those funds are not really foreign investment but Indians routing money through Mauritius, a practice known as “round-tripping”.

Changes being discussed to the tax treaty would limit the appeal of Mauritius. If a company still chose to be based there, then it would be required, for example, to spend at least 1.5 million Mauritius rupees ($42,700) a year on the island before enjoying treaty benefits.

Mauritius has little choice but to negotiate with India, which could revoke the treaty altogether, like Indonesia a decade ago. This would be damaging for the financial services business which accounts for 10 percent of the island’s $13 billion gross domestic product. Of the more than 10,000 GBC1 firms, about 60 percent focus on India, officials say.

India also plans to implement a domestic law in 2017, known as the General Anti-Avoidance Rule (GAAR), that could supersede the treaty’s tax benefits in some instances.

“It hangs like a sword of Damocles,” said the former minister, adding that Mauritius needed several more years to refocus. “We need breathing space.”



The changes in India are driving the island’s pivot to Africa. Almost 60 percent of GBC1 firms registered in the past three years focus on Africa, benefiting from more than a dozen double taxation avoidance treaties on the continent.

Critics say Mauritius is simply becoming a “tax haven” for Africa instead of India, a charge the government denies.

“We need to be able to reassure our friends in Africa that that is not our aim, to siphon money,” said Deputy Prime Minister and Tourism Minister Charles Gaëtan Xavier-Luc Duval. “Our aim is to contribute towards investment into Africa.”

To do so, the government has held talks with insurance firms, such as Axa and Prudential, on using Mauritius as a regional headquarters. An investment vehicle is being set up with Ghana for technology, poultry, sugar and other projects, with Mauritius firms and money involved.

But African governments should be cautious about tax pacts, ActionAid’s Harrison said.

“In the past there have been these sweeping assumptions that tax treaties will always be good for investment,” she said. “We are just encouraging countries, and particularly developing countries, not to take that for granted.”

(By Edmund Blair, Reuters)

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