South Africa’s Q1 business confidence rises 11 points to 45

Comments (0) Actualites, Africa, Business, Economy, Leaders, Politics

(Reuters) – South Africa’s business confidence rose in the first quarter by 11 points in a sign that the country’s economy is picking up pace, a survey showed on Wednesday.

The Rand Merchant Bank (RMB) business confidence index compiled by the Bureau for Economic Research rose to 45 points in the first quarter from 34 points in the fourth quarter but remained below the 50-mark separating the net positive and negative territories.

“First quarter confidence jump is driven more by the expectation that the recent (mainly) market-friendly political development will boost activity levels in future than an immediate improvement in the real economy,” chief economist at RMB Ettienne Le Roux said.

Business confidence was dented by policy uncertainty under the leadership of Jacob Zuma but economists say President Cyril Ramaphosa’s election as leader of the ruling African National Congress in December, and as president last month, has raised expectations that the country will make economic reforms.

South Africa’s economy grew more than expected at the end of last year as agriculture and trade recovered, data showed last Tuesday, boosting its chances of avoiding a potentially debilitating credit ratings downgrade.

Earlier in the month, The South African Chamber of Commerce and Industry’s (SACCI) monthly business confidence index (BCI) fell to 98.9 in February from 99.7 in January as exports, imports and retail sales fell.

“It goes without saying that the current uncertainty around land reform needs to be resolved as quickly as possible. If allowed to linger, the latest rise in the RMB/BER BCI (Business Confidence Index) could easily fizzle out with little or even no enduring positive impact on business capital expenditure and the economy at large,” Le Roux added.


(Reporting by Rahul B and Justin George Varghese in Bengaluru; Editing by Matthew Mpoke Bigg)

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Shell, Eni preempt any U.S. probe over Nigeria with filings

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LONDON (Reuters) – Oil giants Royal Dutch Shell and Eni have voluntarily filed to U.S. authorities internal probes into how they acquired a giant field in Nigeria as the companies seek to fight corruption allegations in Europe and Africa.

The filings, to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), do not mean U.S. authorities are investigating Shell or Eni.  The move shows the companies are trying to preempt questions from the United States as they face one of the oil industry’s biggest-ever graft trials in Italy, to begin in May in Milan, a pending trial in Nigeria and an investigation in the Netherlands.

The case revolves around the purchase of a huge block off oil-rich Nigeria, known as OPL 245, which holds an estimated 9 billion barrels in reserves.

Italian prosecutors allege that bribes were paid in an effort to secure rights to the block in 2011. A number of top executives from both companies – including Eni Chief Executive Claudio Descalzi and former Shell Foundation Chairman Malcolm Brinded – will face trial.

Under Italian law a company can be held responsible if it is deemed to have failed to prevent, or attempt to prevent, a crime by an employee that benefited the company.

Both companies’ shares are traded on U.S. stock exchanges, putting their foreign dealings in the scope of U.S. authorities.

Shell and Eni, on behalf of subsidiaries, in 2010 entered deferred prosecution agreements with the DOJ over separate Nigerian corruption allegations.

Those pacts dismissed charges after a certain period in exchange for fines and an agreement to fulfil a number of requirements. They concluded in 2013 and 2012, respectively.

“A company’s disclosure of alleged foreign corruption to both the SEC and the DOJ in the U.S. typically means the company believed U.S. authorities needed to be made aware of this, and both agencies have the authority to prosecute under the (Foreign Corrupt Practices Act, or FCPA),” said Pablo Quiñones, executive director of the New York University School of Law program on corporate compliance and enforcement.

Quiñones previously worked as chief of strategy, policy and training at the DOJ’s criminal fraud section, a role that included helping to develop FCPA enforcement policy.

The SEC and the DOJ declined to comment on the company disclosures or whether they were looking into any allegations surrounding the block.

Eni noted its disclosure in an SEC filing, in which it said “no evidence of wrongdoing on Eni side were detected”. Shell has said publicly that it submitted the investigation to U.S. authorities and to Britain’s Serious Fraud Office.

Shell and Eni deny any wrongdoing. They say their payments for the block, a total of $1.3 billion, were transparent, legal and went directly into an escrow account controlled by the Nigerian government.

The companies and legal experts say the trial will last more than a year, with potential appeals stretching several years beyond that.

“The risk for companies is of a prolonged period of exposure to open court allegations from a state prosecutor of impropriety,” Anthony Goldman of Nigeria-focused PM Consulting said. “That will be painful and damaging.”

The Milan prosecutor charges that roughly $1 billion of the payments were funnelled to a Nigerian company called Malabu Oil and Gas, which had a disputed claim on the block, and former oil minister Dan Etete, who British and U.S. courts have said controlled Malabu. Reuters has been unable to reach Etete or Malabu for comment.

Shell has since said it knew some of the money would go to Malabu to settle its claim, though its own due diligence could not confirm who controlled the company. Eni said it never dealt with Etete or knew he controlled the company, but that the government promised to settle all other claims on the block as part of their deal.

“If the evidence ultimately proves that improper payments were made by Malabu or others to then current government officials in exchange for improper conduct relating to the 2011 settlement of the long standing legal disputes, it is Shell’s position that none of those payments were made with its knowledge, authorisation or on its behalf,” Shell said in a statement.



The proceedings have also brought together investigators in several countries, with authorities in Nigeria and the Netherlands sending information to Milan.

A Dutch anti-fraud team in 2016 raided Shell offices as part of the investigation, and a Dutch law firm has asked prosecutors to consider launching a criminal case in the Netherlands.

“I’m not aware of many cases where this many jurisdictions have been at work for so long helping each other out. The amount of cooperation is very unusual,” said Aaron Sayne of the Natural Resource Governance Institute, a non-profit group that advises countries on how to manage oil, gas and mineral resources.

A case by Nigeria’s financial watchdog, the Economic and Financial Crimes Commission, against defendants including the former attorney general, ex-ministers of justice and oil and various senior managers, current and former, from Shell and Eni, will continue in June.

There has also been at least one effort to take away the asset. Experts say it is worth billions, and Shell has spent millions developing it. Eni intends to make a final investment decision this year on developing the block and said in corporate filings that the asset has a book value of 1.2 billion euros ($1.5 billion).

The Italian court does not have the ability to rescind rights to the block, and Nigerian oil minister Emmanuel Ibe Kachikwu has said the companies should continue to develop it.

But in a lawsuit filed by the Nigerian government against JPMorgan in London for the U.S. bank’s role in transferring money from the deal, it called the agreement that facilitated Shell and Eni’s purchase “unlawful and void”.

A JPMorgan spokeswoman previously said the firm “considers the allegations made in the claim to be unsubstantiated and without merit”.

Additionally, a Nigerian court last year briefly ordered the seizure of the block.

That decision was later overturned, and Shell and Eni say they are not worried about losing the asset. But the ruling and the language in the government’s suit against JPMorgan underscore the risk.

“It’s a nice, stable asset that could produce a lot of oil for a long time,” Sayne said.

($1 = 0.8127 euros)


(Reporting by Libby George; Additional reporting by Stephen Jewkes and Emilio Parodi in Milan and Ron Bousso in London; Editing by Dale Hudson)

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Spotify enters into the South African market

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JOHANNESBURG (Reuters) – Global music streaming provider Spotify launched its services in South Africa on Tuesday, marking its entry into Africa, where there is a rapid uptake of smartphones and improving telecommunications infrastructure.

The Swedish company, launched in 2008 and available in more than 60 countries, is the biggest music streaming company in the world and counts services from Apple Inc, Inc and Alphabet Inc’s Google Play as its main rivals.

The South Africa launch comes as Spotify prepares for a direct listing of its shares on the New York Stock Exchange, which will allow investors and employees to sell shares without the company raising new capital or hiring Wall Street banks to underwrite the issue.

“We believe South Africa is a wonderful country to start in,” Spotify Managing Director in Middle East and Africa Claudius Boller told Reuters on the sidelines of the launch.

“We looked at the technology landscape, we looked at the maturity and actually South Africa is seen globally as a very important music market.”

Spotify also has aspirations to branch out into the rest of Africa, Boller said, without committing to timelines or geographies.

An increase in connectivity across South Africa, helped by higher investment in infrastructure, as well as a growing uptake in credit cards and bank accounts has drawn global video and music streaming providers.

Its music streaming market is dominated by players such as Apple Music, Google Play, France’s Deezer and Simfy Africa, with only a few local operators such as mobile phone operator’s MTN and Cell C with MTN Music+ and Black.

Internet and entertainment firm Naspers also recently launched music streaming platform Joox, from China’s Tencent, in which it holds a 33 percent stake.

In its filing to list its shares, Spotify said its operating loss widened to 378 million euros ($465.32 million) in 2017 from 349 million euros.

($1 = 0.8123 euros)


(Reporting by Nqobile Dludla; editing by Jason Neely and Pritha Sarkar)


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Ivory Coast to reduce cocoa output over next two years

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ABIDJAN (Reuters) – Ivory Coast’s Coffee and Cocoa Council (CCC) will suspend programmes for the 2018-19 season that boost cocoa output, it said on Friday, aiming to reduce production in the face of global oversupply.

The marketing board plans to halt distribution of higher-grade seeds and plants by chocolate makers, including Mars and Nestle, that develop hybrid species that they pass on to farmers to increase yields.

Those programmes helped to increase output in the world’s top grower to record highs last year but added to a supply glut that has depressed prices worldwide.

“Given the increase in global cocoa supply and falling prices since 2016/17, the CCC has decided to carry out a census of the coffee and cocoa orchards,” the CCC said in a statement. It did not say when the census would begin.

“Pending the finalisation of this census, we inform you of our decision to temporarily suspend any distribution of improved plant material, seeds, cuttings, etc, from the 18/19 season.”

Output in Ivory Coast has risen from 1.6 million tonnes 10 years ago to 2 million tonnes in the 2016-17 season because of higher yields, but global demand has failed to meet supply. The CCC expects production for the 2017-18 season to slip to 1.9 million tonnes, partly because of bad weather.

High-level sources at the CCC said the organisation wants to try to reduce output to between 1.7 million tonnes and 1.8 million tonnes over the next two years, affecting exporters and chocolate makers that also include Ferrero, Cargill, Olam, Cemoi and Cocoa Barry.

“Our goal is to control our production because these last 10 years, it is these programmes initiated by chocolatiers … that increased our production from 1.6 million to 2 million (tonnes),” a CCC source said.

Separately, the CCC has begun a three-year programme to uproot 300,000 hectares of cocoa infected by swollen shoot since January. The CCC source said that 25,000 hectares have been cleared already, which will also help to reduce growing capacity in the coming years.


(Reporting Ange Aboa; Writing by Edward McAllister; Editing by Jason Neely and David Goodman)

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South Africa’s RCL Foods expands in pet food to beat drought

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RANDFONTEIN, South Africa (Reuters) – South Africa’s RCL Foods has completed a 123 million rand ($10 million) expansion at its pet food plant to help reduce its exposure to a poultry business hit by drought and cheap imports.

Food companies in South Africa have been struggling with an El Niño-induced drought that drove up the price of ingredients such as maize, while poultry farmers have also faced competition from Brazil, the European Union and the United States.

RCL is aiming to tap into the country’s 5 billion rand ($418 million) a year pet food industry, which is less exposed to individual commodities, as part of a strategy to diversify, CEO Miles Dally said at a plant visit late on Thursday.

“Ideally we would like less impact from things like drought and dumping,” he said.

“Our vision has always been clear, to create a major food business,” he added, referring to the pet food division.

RCL’s expansion in Randfontein, west of Johannesburg, will boost its pet food production to 12,000 tonnes per month from 7,000 tonnes.

The company, which saw first-half profit plunge 54 percent last year, this week reported an increase for the first six months of its current financial year, boosted by a decline in input costs and higher chicken prices.

The firm cited lower poultry imports, which were reduced in part by an outbreak of bird flu in Europe.

RCL’s pet food business, which has annual revenue of around 1 billion rand, aims to grow by as much as 20 percent per year, Dally said, adding the firm would look for acquisitions to bolster the business.

The company currently produces over 20 brands including Rainbow chicken products, Nola mayonnaise, Yum Yum peanut butter, Bobtail dog food and Selati sugar products.

RCL cut 1,350 jobs and reduced production by 50 percent at its Hammersdale factory in the KwaZulu-Natal province in November 2016 as the chicken imports and drought took a toll.

($1 = 11.9204 rand)


(By Tanisha Heiberg; Editing by James Macharia and Mark Potter)

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Barclays Africa lifts profit, looks to Nigeria for growth

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By Ed Stoddard

(Reuters) – Barclays Africa Group, South Africa’s No.2 lender by market value, plans to extend its reach throughout the continent, it said on Thursday after posting annual profit up nearly 4 percent.

Chief Executive Maria Ramos said the bank, which is changing its name back to South African brand Absa after its split from former parent Barclays, aims to enter Nigeria as it seeks to lift its share of the African market to 12 percent from 6 percent over the medium term.

Finance Director Jason Quinn told Reuters that Nigeria has been in its sights for some time.

“We would have to think carefully about how and when to enter the Nigerian market and that is what we are going to start doing,” he said.

“We have to decide how we enter, whether we acquire or build.”

The bank had earlier reported normalised diluted headline earnings per share — the primary measure of profit in South Africa, stripping out one-off items — up 3.9 pct at 1,837.7 cents for the year to Dec. 31, helped by a 20 percent drop in credit impairments.

Net interest income, a gauge of lending profitability, rose by 1 percent to 42.32 billion rand ($3.56 billion), while its net interest margin was unchanged at 4.95 percent.

Growth in the United States was the positive surprise in the second half, even as Europe, Japan and China grew at or above consensus expectations, the bank said.

This more than made up for slow economic expansion in its main markets, which account for about 80 percent of group income.

Barclays Africa and its rivals have struggled to increase lending as slowing economic growth in many African markets tempers demand from corporate clients while retail clients in its home South African market feel the squeeze from rising interest rates.

However, confidence in its domestic market has been buoyed by the Cyril Ramaphosa’s elevation to the South African presidency last month, pledging to revitalise the economy.

Barclays Africa said it expects growth in loans and deposits to improve in 2018 and forecast stronger loan growth from the rest of Africa. It also forecast stronger loan growth in corporate and investment banking in South Africa.

($1 = 11.9025 rand)

(Additional reporting by Tiisetso Motsoeneng in Johannesburg and Esha Vaish in Bengaluru; Editing by Stephen Coates and David Goodman)


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South Africa’s rand at 2-week low as global headwinds, Fed jitters kick-in

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JOHANNESBURG (Reuters) – South Africa’s rand slipped to its lowest in two weeks on Thursday, succumbing to month end demand for dollars by local firms as the increasing chances of higher interest rates in the United States lured bulls back into long-dollar positions.

At 0640 GMT the rand was 0.4 percent weaker at 11.8350 per dollar, its softest level since February 14, compared to an overnight close of 11.7875.

It was the first time in more than two weeks the rand closed above technical support around 11.80, after weakening for three consecutive sessions, prompting some technical selling as well as portfolio rebalancing by corporates offloading excess rands.

Analysts said the “Ramaphosa effect”, named for the rise in investor confidence and rally in local assets after new president Cyril Ramaphosa took over as chief of the ruling African National Congress (ANC) in December, was now giving way to global headwinds.

“With the cabinet reshuffle out of the way, our local assets will continue to reprice in line with the global macro environment,” said fixed income trader at Rand Merchant Bank Gordon Kerr in a note.

The dollar index remained near 5-week highs early on Thursday, still drawing support after the Federal Reserve’s new chief Jerome Powell struck an optimistic tone on the U.S. economy, raising bets of at least four rate hikes by the bank in 2018.

Stocks opened softer with the benchmark Top-40 index down 0.13 percent.

Bonds were also softer, with the yield on the benchmark paper due in 2026 up 4 basis points to 8.165 percent.


(Reporting by Mfuneko Toyana; Editing by Ed Stoddard)


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Angola oil production declines slightly in 2017, profits rise

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LUANDA (Reuters) – Oil production for Angola, Africa’s No. 2 crude producer, averaged 1.632 million barrels per day in 2017, down from 1.72 million barrels the previous year, the chairman of the state-run oil company Sonangol said on Wednesday.

Angola has been grappling with the effects of generally depressed oil prices on its government finances but is constrained from lifting production because it is committed to OPEC-mandated cuts.

Angola is a member of the Organization of the Petroleum Exporting Countries, and it must limit output in line with OPEC’s commitment to cut output by about 1.2 million barrels per day (bpd) as part of a deal with Russia and others.

Sonagol chairman Carlos Saturnino also told a media briefing that the net profit for Sonangol, which regulates Angola’s oil sector, was $224 million in 2017 versus $81 million the previous year when oil prices were lower.

It was his first briefing since Angola President João Lourenço fired Isabel dos Santos, daughter of his presidential predecessor, from the helm of Sonangol.

Lourenço took power in September and is seeking to win credibility with international investors and shed Angola’s image as an opaque oil economy with rampant corruption.


(Reporting by Stephen Eisenhammer; Writing by Ed Stoddard; Editing by James Macharia)

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Gabon accuses France’s Veolia of polluting amid concession dispute

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LIBREVILLE (Reuters) – Gabon accused French environmental services group Veolia on Tuesday of widespread pollution at SEEG, the power and water utility it operates there, amid a growing dispute over the company’s concession.

Veolia, which has already threatened legal action after the government seized SEEG earlier this month and said it would cancel its concession, rejected the accusations.

Speaking to reporters in the capital Libreville, government spokesman Alain-Claude Bilie By Nze said an environmental inspection of power and water pumping stations discovered “nearly all” SEEG sites were contaminated by petroleum waste.

“This is a very serious situation since, at this stage, aside from the obvious environmental damage, no one knows the consequences this pollution could have had or could have on public health,” he said.

He said that on top of legal penalties of up to 500 million CFA francs ($946,110) for each polluted site, Gabon would force SEEG to shoulder the clean-up costs.

Responding to the accusations, Veolia stated that the water it distributed continued to conform to World Health Organization standards and Gabonese regulations.

“It is surprising that none of the inspections of the public authorities … ever highlighted environmental damage,” it said. “The SEEG is subject to regular audits by the Gabonese authorities, more than 10 in the last 10 years.”

Negotiations between the government and Veolia over the concession broke down in October, and authorities seized SEEG earlier this month, citing years of poor service quality.

Veolia in turn blamed the government for failing to live up to its investment obligations, and on Tuesday said the state owed SEEG over 29 billion CFA francs in consumption charges and unpaid value-added tax reimbursements.

Gabon spokesman Bilie by Nze said the government had called for an audit of its 13 billion CFA consumption bill.

He rejected accusations it had neglected SEEG and said the state had invested around 1 trillion CFA francs in the company, around three times more than Veolia.


($1 = 528.4800 CFA francs)


(Reporting by Gerauds Wilfried Obangome; Additional reporting by Laurence Frost in Paris; Writing by Joe Bavier; editing by David Evans)

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South Africa’s AECI sees growth in water treatment after drought hits continent

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JOHANNESBURG (Reuters) – South African chemicals group AECI could increase revenue from its desalination and water treatment business by up to 80 percent over the next five years after a severe drought hit Africa, its CEO said.

South Africa was declared a national disaster this month after drought afflicted Cape Town and other areas, and Kenya, Malawi, Mozbuambique and most of southern Africa have also experienced low rainfall.

AECI, which also makes explosives and announced a sharp rise in earnings on Tuesday, sees revenue growth coming from its subsidiary ImproChem, a water, air and energy management company.

“We have to manage our water a lot better as a continent and I think ImproChem can play a big role in that and that will boost sales on those opportunities,” Chief Executive Mark Dytor told Reuters in a phone interview.

Revenue from AECI’s water treatment unit rose 3 percent in 2017 to 1.409 billion rand ($121 million), Dytor said, and he expects them to rise by between 50 and 80 percent over the next five years.

Cape Town and other parts of South Africa suffering from drought have pledged to use desalination plants and underground water reserves and AECI has applied for government tenders for desalination projects in Cape Town.

Since the current drought in the Western Cape, ImproChem has sold some desalination plants in Cape Town to private sector operators, Dytor said.

“We have already sold five desalination plants, that’s into the private sector, they give from between 500,000 litres to 1 million litres a day of water that is treated from sea water,” he said.

AECI, which has business in Africa, Australia, Indonesia and South America, said its headline earnings per share rose 17 percent for 2017 to 959 cents, thanks to a global recovery in the resources sector.


($1 = 11.6680 rand)


(By Tanisha Heiberg;Editing by James Macharia and Susan Fenton)

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