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Ugandan shilling stronger, helped low dollar demand, tight liquidity

Comments (0) Africa, Economy, Latest Updates from Reuters

KAMPALA (Reuters) – The Ugandan shilling was slightly firmer on Monday due to subdued dollar demand and tight liquidity in the money markets, traders said.

At 0905 GMT, commercial banks quoted the shilling at 3,668/3,678, stronger than Thursday’s close of 3,675/3,685. Markets were closed on Friday for a national holiday.

“Some players in the interbank are cutting back their (dollar) positions because there’s no demand,” said Ali Abbas, trader at Crane Bank.

“I have also seen some banks doing conversions to get shillings because there’s a bit of (shilling) scarcity.”

The local currency has lost 25 percent against the greenback so far this year and its steep depreciation has prompted the central bank to increase its key lending rate to try provide support and stem price pressures.

The rate now stands at 16 percent after being raised by a total of 500 basis points so far this year.

The central bank is due to make its next announcement on the rate on Thursday and most analysts expect a hike to help curb surging inflationary pressures.

Uganda’s inflation shot up to 7.2 percent year-on-year in September from 4.8 percent in August.

Bank of Africa said in a market note it expected some demand from energy companies, which could give the shilling some depreciation bias, though it will likely remain below 3,700.

(Reporting by Elias Biryabarema; Editing by George Obulutsa and Tom Heneghan, Reuters)

 

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Botswana’s mining production index down 7.6% in Q2 y/y

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GABORONE (Reuters) – Botswana’s mining production index fell to 98.5 in the second quarter of 2015, a year-on-year contraction of 7.6 percent, triggered by a slowdown in the diamond and copper mining sectors, its statistics office said on Wednesday.

Diamond production, exports of which contribute 30 percent to the GDP of the southern African nation, decreased by 5.4 percent in the second quarter of 2015 compared to a 1.5 percent contraction in the same period in 2014.

“This decline is mainly attributable to the weakening demand for diamonds in the global market,” Statistics Botswana said in a statement.

Copper production decreased by 69.7 percent year-on-year, the agency said.

 

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Ivory Coast begins construction of Abidjan port upgrades

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ABIDJAN (Reuters) – Ivory Coast began construction on Tuesday of a four-year, 560 billion CFA franc ($962 million) project to build a second container terminal and widen the canal leading to its main port in the commercial capital Abidjan.

Among the busiest in sub-Saharan Africa, the port serves Ivory Coast, French-speaking West Africa’s largest economy and the world’s top cocoa producer, and is also a gateway for landlocked nations to the north.

China Harbour Engineering Co Ltd was awarded the construction contracts for both projects with the bulk of the cost covered by a loan from China’s Eximbank.

Construction of the new container terminal, which will be managed by consortium led by France’s Bollore, will last 48 months and cost 409 billion euros ($461 billion).

It is expected to allow Abidjan to increase container traffic from 1.2 million TEU to 3 million TEU by 2020.

The upgrades to the canal linking the port to the Atlantic Ocean will be completed in 36 months at a cost of 151 billion CFA francs.

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Sibanye raises platinum gamble with Aquarius deal

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JOHANNESBURG (Reuters) – South Africa’s Sibanye Gold has offered $294 million to buy Aquarius Platinum, making its second big bet on a platinum sector hammered by falling prices and rising costs.

The deal, announced on Tuesday, would put South Africa’s third-largest gold producer by value into the global top five producers of platinum group metals with annual output of more than a million ounces.

It is the second big deal in the sector for Sibanye, which bought the labour-intensive and costly Rustenburg operations of Anglo American Platinum last month.

Sibanye, a spin-off of Gold Fields, is capitalising on a platinum sector shake-up following an unprecedented five-month strike last year and weakening platinum prices that have hit profitability and raised costs in much of the industry.

Under the terms of the deal, Sibanye offered 19.5 U.S. cents, or 2.66 rand, per Aquarius share, a 56 percent and 60.3 percent premium to Monday’s closing prices in Johannesburg and London respectively. The offer values Aquarius at $294 million.

Aquarius’ shares in Johannesburg soared 40 percent at one point to 2.48 rand, slightly below the offer price, and was 34 percent higher at 1230 GMT.

The stock was up 37 percent in London. Shares in Sibanye advanced over 10 percent to 19.74 rand.

The offer is backed by Aquarius’ board but requires shareholder approval.

In Aquarius, Sibanye would be taking on two low cost and mechanised mines in South Africa and Zimbabwe, which together holds the world’s largest platinum reserves.

For Aquarius, the deal would allow its shareholders to exit the industry whose gloomy outlook was compounded late last month by disclosures Volkswagen AG falsified U.S. vehicle emission tests. Platinum was trading at $916.75 an ounce on Tuesday, having hit a near seven-year low of $888 on Friday.

 

SHAKING THINGS UP

“Everybody is saying prices cannot stay this low forever. Sibanye is shaking things up in the sector, they are taking advantage where everybody is saying there is value but nobody is doing anything about it,” said Richard Hart, an analyst at Arqaam Capital.

Sibanye Chief Executive Neal Froneman said he saw no job cuts on the horizon at his new asset. Lay-offs are politically-sensitive in South Africa, where unions say up to 22,000 mining jobs are current on the line and the unemployment rate is over 25 percent.

There are about 1,500 employees at Aquarius’ Mimosa mine in Zimbabwe and 8,500 at the Kroondal operation in South Africa, where the hardline Association of Mineworkers and Construction recently ousted arch rival the National Union of Mineworkers as the dominant union in the shafts.

Froneman said “we remain on the lookout” for assets but he did not expect to acquire anything else in the short term with a focus now on “bedding the new acquisitions down.”

Asked specifically if he wanted to snap up any assets from rival Harmony Gold, which is battling to stay profitable, Froneman said he was not interested.

He also said the company remained committed to its policy of paying a steady dividend of between 25 and 35 percent of normalised earnings.

Sibanye’s gold assets are older mines that generate good cash flow even at current prices and because of their age do not need huge investments, freeing money for shareholders.

The group’s production profile will now be about 60 percent gold and 40 percent platinum.

HSBC, which was the financial advisor to Sibanye, agreed to arrange a $300 million acquisition funding package.

($1 = 13.6725 rand)

(By Ed Stoddard, Reuters)

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Sudan expects to hit record gold production in 2015

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DUBAI (Reuters) – Sudan said it expects to produce 80 tonnes of gold in 2015, its minister of minerals said on Tuesday, topping last year’s record-high production in the war-torn African nation.

“In the first three quarters of the year we produced about 72 tonnes so we are on track for our target of producing 80 tonnes for 2015,” Sudan’s Minister of Minerals Osheik Mohamed Taher told a mining conference in Dubai.

Gold mining is an important part of government efforts to keep the economy afloat after losing three quarters of its oil production — the main source of state revenue and dollars needed to pay for imports — when South Sudan split off in 2011.

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Oando aims to pick up Nigerian assets from embattled majors

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LONDON (Reuters) – Nigerian-based oil producer Oando wants to double its oil output by 2019, targeting assets likely to be shed by majors hit by the crude price drop.

Chief Executive Wale Tinubu told Reuters in an interview on Monday the retreat among the world’s major producers from the onshore Nigerian oil industry would likely leave a lot of assets on the market.

“When you compare the size of the resource base (the majors) have in Africa vis-à-vis the rest of the world, it’s clear that they will have to do Nigerian divestments and we are the natural buyer of choice,” he said.

Oando, which produces some 50,000 barrels of oil a day, already bought ConocoPhillips’ Nigerian assets for $1.5 billion in July last year, with a view to meeting its target of hitting 100,000 bpd by 2019.

“We are driven, we are keen and we are on the lookout for opportunities and we are confident of securing opportunities towards increasing our reserve base and our production,” he said.

The price of oil has halved to below $50 a barrel over the last 12 months, as global supply has outstripped demand.

“We’re betting on an eventual oil price rise and we see the best time for securing those reserves as being now and not when the market rebounds,” Tinubu said.

Nigerian onshore oil projects have been plagued by industrial scale oil theft, security problems and oil spills, the latter having become a growing legal liability for major oil companies.

Nigeria is Africa’s largest oil producer and contributes some 2 million barrels a day to total world supply.

Shell has already sold some of its Nigerian oilfields and said last week it will focus its future investments there on natural gas. Its French peer Total agreed in March to sell a stake in an onshore oilfield to Nigeria’s Aiteo Eastern E&P.

Local oil producer Afren Plc, which went into administration in July, owns oilfields in Nigeria, but Tinubu said Oando was not considering them.

“We looked at it but we’re not really interested. It doesn’t satisfy our criteria we believe there are many better opportunities out there,” he said.

 

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Zimbabwe proposes 10% black empowerment tax

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HARARE (Reuters) – Zimbabwe plans to impose a 10 percent tax on foreign-owned firms to fund a black economic empowerment programme that is designed to bring the companies under local majority control, a minister was quoted as saying on Monday.

Some of the companies that could be affected by the new tax include the world’s top two platinum producers Anglo American Platinum and Impala Platinum Holdings, which both have operations in the southern African nation.

Under Zimbabwe’s Indigenisation and Economic Empowerment Act passed in 2008, the minister of youth and empowerment can, with the approval of the finance minister, levy a tax on any company to raise money to fund the black economic empowerment programme.

Youth and Empowerment Minister Patrick Zhuwao told the government’s Herald newspaper that he would propose a 10 percent levy on all foreign-owned firms that have not complied with the law, known locally as indigenisation.

The money raised would fund mostly rural community trusts to invest in businesses, said Zhuwao, adding that the government expected to raise $93 million annually.

“For us to be able to fund empowerment programmes in the long term, we are proposing the introduction of an empowerment levy and we are empowered by law to propose the levy,” Zhuwawo was quoted as saying by the newspaper.

Zhuwao, a nephew to President Robert Mugabe who was appointed to his job on Sept. 11, could not be reached to comment further.

Efforts to introduce the levy in 2012 failed after then finance minister Tendai Biti, from the opposition Movement for Democratic Change party, refused to sanction its implementation.

Zhuwawo’s comments come more than a month after the previous empowerment minister said the government was relaxing the law in a bid to attract foreign investment.

Zimbabwe’s economy is expected to grow by 1.5 percent this year, half the government’s initial forecast, after weak global commodity prices hit exports and a drought halved the staple maize crop harvest.

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Ghana delays Eurobond it expected to launch on Friday

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ACCRA (Reuters) – Ghana has postponed a Eurobond sale of up to $1.5 billion it had expected to launch on Friday amid a rise in borrowing costs for emerging market nations, a senior government official said.

Analysts said the delay, following roadshows in London and the United States, was probably a response to the prospect of having to pay higher yields after concerns about China’s economy and a possible U.S. rate rise roiled global markets.

Eurobonds issued by other commodity-exporting African countries have sold off sharply in recent weeks as metals prices have plunged.

Ghana’s planned issuance was mainly to refinance debt. The country is heeding an International Monetary Fund programme to stabilize its economy in the face of a fiscal crisis that includes a debt to GDP ratio around 70 percent.

Senior Ghanaian financial policymakers have concluded a roadshow in London and U.S. cities and are returning to Accra. Officials said the launch could still happen in the near future.

“What it means is that we are not closing the book (launching the Eurobond) today,” said the official, who declined to be named. “But we are still live in the market and could seal a deal anytime we deem fit.”

A finance ministry statement said Ghana continues to consider the bond issue subject to market conditions. Another senior official told Reuters there was significant interest in the bond but the yields were not attractive.

“The reason why the deal is not announced yet, I suspect, is that the government was surprised that the cost of funding was still elevated relative to their expectations,” said a London-based fund manager.

Investors were demanding a high premium despite a World Bank guarantee for the bond of $400 million and the government appeared to be considering cutting the bond to $1 billion or lower to get the desired pricing, the manager said.

The manager said Ghana wanted to pay a 9.5 percent yield for the bond, while a source involved in book running for the launch said the market was demanding closer to 11 percent.

Angola on Wednesday cancelled plans for a $1.5 billion Eurobond due to challenging economic conditions and has not set a new time frame for the issue.

GROWTH SLOWS SHARPLY

For years, Ghana had one of the strongest economies in sub-Saharan Africa thanks to exports of gold, cocoa and oil. But growth has slowed sharply in the last two years due to a fall in global commodity prices and economic instability.

The government forecasts GDP growth at 3.5 percent this year and is under pressure to boost the economy ahead of what is expected to be a tight election battle in 2016, when President John Mahama will run for a second term.

“The Eurobond is critical in helping to anchor stability in foreign exchange rates and for government to refinance existing Eurobond issues,” said Sampson Akligoh, managing director of InvestCorp investment bank, which is based in Ghana.

The cedis gained slightly on Friday against the dollar but a trader said sentiment could turn bearish next week if the bond was not launched, given the market expected inflows from it and a $1.8 billion cocoa loan.

The yield on Ghana’s outstanding 7.87 percent Eurobond due 2023 has surged to record highs above 11.3 percent, according to Tradeweb data.

The average yield premium investors demand to hold emerging sovereign dollar bonds over U.S Treasuries soared almost 100 basis points in the third quarter. It now stands at 470 bps, close to 6-1/2 year highs hit at the end of last month, according to JPMorgan’s EMBi Global index.

But the average premium demanded of African sovereigns rose by an even greater 160 basis points in the third quarter and stands at 520 bps over U.S. Treasuries on the EMBIG index, while Ghana’s premium has jumped by 200 bps in this period to 914 bps.

(By Matthew Mpoke Bigg and Kwasi Kpodo, Reuters)

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South Africa’s Brait sells Steinhoff stake for $1 bil to pay debt

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JOHANNESBURG (Reuters) – South African investment firm Brait SE sold its stake in Steinhoff International for about 16 billion rand ($1 billion) and will use most of the proceeds to pay off debt, it said Friday.

Brait, which earlier this year sold its stake in low-end retailer Pepkor to Steinhoff for a combination of cash and a minority stake in the furniture retailer, said it would up its stake in British supermarket chain Iceland Foods.

After netting 15 billion in cash from the sale of its Pepkor shares, Brait has been on a buying-spree, lapping up gym chain Virgin Active and Britain’s clothing retailer New Look.

But the Pepkor deal, one of the largest in South Africa, also left it with 200 million Steinhoff shares.

“Brait’s minority shareholding in Steinhoff was not aligned with the company’s strategy of acquiring majority stakes in sizeable unlisted companies,” the investment house said.

The company plans to use the bulk of the money to pay off 14.2 billion rand debt. Brait also said it would pay 172 million pounds ($262 million) to raise its stake to 57 percent from 19 percent in Iceland Foods.

Brait said it would fund the Iceland Foods transaction from the 350 million pounds raised in a convertible bond issue earlier this month.

($1 = 0.6567 pounds)

($1 = 13.8925 rand)

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World Bank approves $500 mil loan for Tunisia

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TUNIS (Reuters) – The World Bank has approved a $500 million loan for Tunisia to help finance economic reforms and face the consequences of two big militant attacks targeting its tourism industry.

The bank said on Friday the operation would aid restructuring of state banks and administration as a way to help economic growth.

The North African state has mostly completed its democratic transition since the 2011 uprising that ousted Zine El Abidine Ben Ali. But international lenders want to see more economic reforms to help reduce the deficit and high public spending.

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