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African Currencies in Decline

15 October 2015 Comments (0) Africa, Business, Featured

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As currencies across the African continent fall against the dollar, the International Monetary Fund stated that the financial sector should brace itself for additional volatility. The IMF warned Wednesday in a semiannual assessment of risks to the global financial system, that the fallout from the end of “easy-money policies” by central banks could decelerate global economic expansion, reveal inflated asset prices, and further strain overextended lenders. Several factors contribute to the decline, including a trend by international investors to abandon emerging markets.

MSCI’s primary emerging equity fell 1.4 percent, declining to a one-month low, and Asian shares with the exception of Japan lost 1.6 percent. China led with a 2.75 percent rout on stocks. India, among the best equity performers this past year, realized its lowest daily fund outflow as of Wednesday. Resultant currency declines included record lows in several countries, including South Africa’s rand, Zambia’s kwacha, Uganda’s shilling, Tanzania’s shilling and Ghana’s cedi. The zloty and forint also fell sharply against the rising euro. China, by far the leading investor in African frontier markets, led this trend due to predicted increases in US interest rates which have yet to materialize.

Symptoms of global decline observed in more volatile emerging markets


Neil Shearing, head of emerging markets research at Capital Economics, stated that, “It is a bit of a bloodbath in equity markets. There are several things going on … the rise in oil prices, inflation expectations. Bond yields globally, including in emerging markets, have gone up and equity markets have come off the boil.” In some countries economic indexes are below the crisis levels set in 2008. Symptoms of global decline have been first observed in more volatile emerging markets.

China’s influence cannot be exaggerated. China’s decelerating growth struck fear among investors in emerging markets, from South Africa all the way to Malaysia. Equal with the fortunes of the world’s second-largest economic force, China’s financial grumbling reaches into pockets around the globe. Following an Asian recession and market meltdown, the Beijing government supported its own economy and stock market with a liquidity injection, but emerging market currencies cannot rely on such support. As a result, African markets now feel the domino effect.

Compliance failure could further jeopardize economic stability

African governments are taking stopgap measures to stem collapses. Nigeria, Africa’s top economy, froze its foreign exchange market, but this had the repercussion that it’s Naira was excluded from the influential JP Morgan bond index. The new currency crisis is increasing government debts as well, which reduces ability to comply with debt forgiveness specifications. Compliance failure could further jeopardize economic stability in many countries. Bond issues reveal yet another hedging mechanism already in play.

Bonds, commodities, and currencies are all near 16 year low figures. Stephen Bailey-Smith of Standard Bank Group Ltd. said, “Everyone’s putting on a helmet and just hoping to get through the day. African Eurobonds have been hit harder than average because they’re perceived as being more commodity-dependent.” Kenya’s shilling dropped 0.3 percent to 103.7 per dollar, the lowest closing since October 2011. And finance ministers claim that selling dollars on the currency market to compensate is not effective because speculators will quickly respond. African markets may have an opportunity to rally if the US Federal Reserve holds interest rates steady. Without a specific catalyst, African currency markets may be headed for a very long decline.

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South Africa boosts power output after maintenance

15 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa added 1,286 megawatts (MW) to its national grid on Thursday when two generating units were brought back online following an extensive “overhaul”, power utility Eskom said.

Eskom said electricity supplies would continue to be tight as it carried out other plant maintenance.

South Africa, the continent’s most developed economy, suffered almost daily power outages earlier this year as ageing power plants struggled to meet demand. South Africa’s national generating capacity is around 42,000 MW.

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South Africa’s Mediclinic agrees deal for Al Noor Hospitals

14 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – South Africa’s Mediclinic Intl agreed to buy United Arab Emirates’ Al Noor Hospitals Group, gaining the upper hand on rival NMC Health in a tussle for expansion in the fast growing Gulf region.

But NMC Health, already a major player in the UAE, vowed to fight on, saying on Wednesday it remained committed to a tie-up with Al Noor.

Shares in Al Noor jumped 19 percent to 1,185 pence, above the 1,160 pence value of Mediclinic’s agreed offer and valuing the company’s equity at 1.38 billion pounds ($2.12 billion), as investors anticipated a battle for the group.

Mediclinic’s Chief Executive Danie Meintjes, who will remain CEO after the deal, said the combined group would be the largest private healthcare provider by revenue in the “highly attractive growth market of the UAE”.

Mediclinic, which has more than 50 hospitals in South Africa and Namibia, also has a presence in the UAE. Combining the two companies will create an operator with around 20 percent of the private beds in the region, analysts said.

It will also be the biggest player in Switzerland, the third largest in South Africa, and will have a 29.9 percent stake in Britain’s Spire Healthcare Group.

The deal, structured as a reverse takeover of Al Noor by Mediclinic, will create a London-listed group with a turnover exceeding $4 billion operating 73 hospitals and 35 clinics.

NMC Health, which is also listed in London, said it had made an informal cash-and-shares offer to buy Al Noor on Oct. 9, days after Al Noor and Mediclinic said they were in talks.

Al Noor Chief Executive Ronald Lavater said there was a “compelling strategic fit” with Mediclinic, and together they could expand coverage and service delivery in the region.

He said the board had considered the NMC Health proposal and had concluded it was “inferior both on the value and on the deal certainty”.

The tie-up with Mediclinic is backed by the two major shareholders in Al Noor, Sheikh Mohammed Bin Butti Al Hamed and Kassem Alom, who combined hold 34.3 percent, the companies said.

NMC, however, was undeterred. “This confirms our belief in the competitiveness of our initial possible offer and that the combination of NMC and Al Noor has the strongest strategic and financial rationale for all stakeholders,” it said.

Al Noor was advised by Rothschild, Goldman Sachs and Jefferies, while Morgan Stanley and Rand Merchant Bank worked for Mediclinic.

(By Paul Sandle, Reuters)

 

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Burundi’s inflation eases to 4.1% year-on-year in September

13 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Burundi’s inflation rate dipped to 4.1 percent year-on-year in September from 4.2 percent a month earlier, helped by better production of some crops which slowed food price rises in local markets, official data showed on Tuesday.

The tiny central African coffee producer nation is facing one of its worst political crises after President Pierre Nkurunziza was re-elected in July for a disputed a third term.

Nkurunziza’s opponents said running again broke a peace pact that ended more than a decade of civil war in 2005. The country endured months of protests and violence and tens of thousands of people fled unrest that included an attempted coup in May.

As a result, Burundi’s economic output is expected to shrink by 7.2 percent this year after growing 4.7 percent in 2014, the International Monetary Fund said in its report on world economic output for October.

Burundi’s Institute of Economic Studies and Statistics (ISTEEBU) said inflation was under control between August and September due to a fall in the price of beans and rice, the most consumed food in a nation of nearly 10 million people.

Food price inflation slowed to 3.8 percent in the year to September from 4.6 percent in August, ISTEEBU said.

Economic analysts fear Burundi’s economic situation could worsen if the crisis persists and if more donors cut aid.

Some major donors such Belgium have already cut aid, in condemnation of the violence and human rights violations committed since April.

The European Union, which funds about half the annual budget of Burundi, is also considering whether to limit its aid, diplomats say, but is wary of hurting the general population.

It has imposed individual sanctions on security officials close to Nkurunziza who were implicated in the violence.

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Kenya’s KenGen says full-year pretax profit more than doubles

13 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s main electricity generator KenGen said on Monday its pretax profit for the full year to June rose 109 percent to 8.69 billion shillings ($84 million), helped by higher electricity sales.

KenGen, which is 70 percent state-owned, said in a statement its performance was boosted by increased generation from geothermal and wind power.

“Profit before tax increased … propelled by capacity growth, improved performance and tax credit from capital allowances enjoyed by the company following the commissioning of 280 MW geothermal plants, well heads and Ngong Wind,” it said.

It said electricity revenue jumped to 25.6 billion shillings from 17.4 billion the year before.

Earnings per share rose to 5.24 shillings from 1.29 shillings during the year to June 2014 and it said it would pay a dividend of 0.65 shillings per share, up from 0.40 shillings previously.

Operating costs rose to 8.41 billion shillings from 7.02 billion due to operating and maintaining new plants.

KenGen said in July it planned to add another 450 megawatts (MW) to the grid from wind and geothermal in the next three years at a cost of at least $710 million. [ID:nL8N0ZN29V]

Kenya, which depends heavily on renewables such as geothermal and hydro power, aims to expand installed capacity to about 6,700 MW by 2017, from about 2,500 MW now. It also aims to halve bills from between $0.17 and $0.18 per kWh within three to four years.

 

(Reporting by George Obulutsa; Editing by David Holmes, Reuters)

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Dow Chemical seeks to triple Africa revenue in five years

12 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters, US

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NAIROBI (Reuters) – Dow Chemical Co plans to triple its revenue from sub-Saharan Africa in the next five years and is investing in offices, local staff and manufacturing plants on the continent to meet that target, its head of the region said.

The company sees opportunities in agriculture, where it supplies crop protection chemicals, infrastructure, where it offers water treatment chemicals, as well as in mining and manufacturing.

“We expect to triple our revenue from Africa over the next five years. That is our objective and we are on track to do that,” Ross McLean, president for sub-Saharan Africa, told Reuters in an interview in Nairobi, without saying what revenue the company already achieves there.

“Dow is absolutely betting on Africa’s growth,”

Dow, whose group sales reached $12.9 billion in the second quarter, has opened hub offices in Kenya, to serve East Africa, and another in Ghana, serving West Africa. It is also opening offices in Ethiopia, Nigeria and Angola, as well as in other markets.

“Most multi-nationals, that are driving a growth strategy in Africa, are starting from a very low base, and currently they may be at 1 or 2 percent of the global revenue of the company,” he said, putting Dow’s revenue breakdown in line with that level.

Dow is also investing in a production plant in Egypt, and another in Saudi Arabia, where it has partnered with Saudi Aramco, in order to be consistent with supply of its products to African markets, McLean said.

He said challenges the company faced included weaker currencies in the region, and declines in prices of commodities and oil.

The World Bank cut its 2015 growth forecast for the region last week to 3.7 percent, the slowest since 2009.

McLean said that did not affect Dow Chemical’s ambitions.

“We are here for the long term and we are not scared by the bumps in the road. Africa is a place where you have to be pretty resilient and determined,” he said.

(By Duncan Miriri, Reuters)

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Ivory Coast begins construction of Abidjan port upgrades

7 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

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

6 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

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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Egypt awards four offshore oil and gas exploration licences

6 October 2015 Comments (0) Business, Latest Updates from Reuters

CAIRO (Reuters) – Egypt has awarded four new licences to explore for oil and gas off its Mediterranean coast, weeks after ENI’s giant Zohr gas find piqued fresh international interest in the area.

Egypt’s state gas company EGAS said in a statement it had awarded one licence to Britain’s BP and one to Italy’s Edison. A consortium involving BP and ENI’s Egyptian subsidiary had also picked up a bloc as had another consortium involving ENI, BP and France’s Total.

ENI announced in late August that it had discovered the largest known gas field in the Mediterranean off the Egyptian coast, predicting that the find could help meet the country’s energy needs for decades to come.

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Sudan expects to hit record gold production in 2015

6 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

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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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