Election spells more economic trouble for South Africa

Comments (0) Africa, Economy, Politics


South Africa has reclaimed its spot as Africa’s largest economy, but fallout from recent elections threatens to exacerbate the country’s economic difficulties.

Frustration with the nation’s struggling economy prompted many voters in Aug. 3 municipal elections to turn away from the African National Congress (ANC), the storied party of Nelson Mandela which has led the country since the end of apartheid more than two decades go.

In the face of high unemployment and slow growth, voters in several major cities, including Pretoria and Johannesburg, turned to the Economic Freedom Fighters party on the left or the Democratic Alliance on the right.

Those parties, far apart on economic and other policies, have nevertheless  informally agreed to band together in order to shut out the ANC. EFF leader Julius Malema rebuffed ANC overtures to form a coalition in Johannesburg, calling the party “corrupt to the core.”

ANC loses support in cities

In elections that are widely seen as a vote on the performance of the national government, the ANC received 54 percent of the vote, compared to 62 percent just two years earlier.

However, the party saw steeper declines in the nation’s urban areas, where middle class voters rejected ANC appeals based on the historic role of the party. For example, in Johannesburg, South Africa’s largest city, the ANC received only 44 percent of the vote, while only 41 percent of voters in the capital of Pretoria favored the ANC. Even in Nelson Mandela Bay metro area, which is mostly black, voters elected a white commercial farmer, Athol Trollip, as mayor.

The party went into the election with considerable baggage, including a sluggish economy and a spate of corruption scandals in the administration of President Jacob Zuma.

Last spring, a South African  court rebuked Zuma, saying that he violated the constitution when he used millions in government funds for improvements at his home in rural , They included a swimming pool, visitor center, and an amphitheater, which he said were necessary for his security. The court ordered Zuma to pay more than $16 million back to the state.

Economy reels under Zuma

Zuma sent South Africa’s economy into a tailspin last December after he abruptly fired a respected finance minister and then was forced to sack an inexperienced replacement only four days later amid protests.

The value of the rand plummeted but a measure of order returned with the appointment of a third finance minister, Pravin Gordhan.

At the same time, the nation’s economy has not rebounded from the 2007-08 financial crisis, and experts predict little growth in the coming years.

The South African Reserve Bank has forecast that the country will record no  growth this year and less than 2 percent annually in 2017, 2018 and 2019.

The nation’s unemployment rate tops 25 percent and it is more than double that among young people.

Major reforms needed

Experts suggest major economic reforms will be required to fuel the growth the country needs and to avoid cuts in government spending and a credit downgrade.

“South Africa’s public purse has come under pressure. At the same time the country faces the danger of a credit risk downgrade by international credit rating agencies,” said Jannie Rossouw, head of the School of Economic & Business Sciences at the University of Witwatersrand.

Rossouw said the government might have to give away some state-owned enterprises, such as South African Airways, that are unprofitable and a drain on tax coffers.  South African should also cut bureaucratic red tape to stimulate economic activity.

However, Rossouw said he did not see a way forward for reform in the near term unless the anti-Zuma faction within the ANC can take control from the president’s faction.

At the same time, he said, planning and implementation of reforms could be slowed by the fact that a growing number of municipalities have coalition governments, some of which are unfriendly to the ANC.

Currency values drive economic rankings

Meanwhile, South Africa’s hold on the title of Africa’s largest economy may be tenuous.

The country reclaimed the top spot this summer after trailing Nigeria and Egypt.

However, the ranking is based primarily on the gross national product as measured by the value of a nation’s currency against the U.S. dollar. The increase in the dollar value of the South African rand outpaced that of the two other countries even though the nation’s GDP decreased to $312.8 billion in 2015, according to World Bank data.

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Egypt’s GASC receives offers from seven suppliers at wheat tender

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

ABU DHABI/CAIRO (Reuters) – Egypt’s state grain buyer, the General Authority for Supply Commodities (GASC), received offers from seven suppliers on Friday for its wheat tender, Cairo-based traders said.

The lowest offer was $177.70 a tonne free-on-board (FOB), for two cargoes each of 60,000 tonnes of Russian wheat, the traders said.

Results for the tender, seeking shipment from Sept. 26 to Oct. 5, were due later on Friday.

An eighth supplier, Venus, was disqualified at the technical stage for not having the correct documents and was prevented from submitting an offer, traders said.

This is GASC’s first attempt to purchase wheat after Egypt’s Minister of Supply Khaled Hanafi resigned on Thursday, the most senior-level fallout from an investigation into whether millions of dollars intended for subsidising farmers were used to purchase domestic wheat that only existed on paper.

Egypt’s supply ministry, which also oversees GASC, is in charge of a massive food subsidy programme.

Trade minister Tarek Kabil has been put in charge until a new minister is appointed.

Traders said the following offers were made in dollars per tonne FOB:

*Union: two cargoes each of 60,000 tonnes of Russian wheat at $177.70

*Nidera: 55,000 tonnes of Russian wheat at $179.70 a tonne

*Alegrow: 60,000 tonnes of Russian wheat at $180.88

*Ameropa: two cargoes each of 60,000 tonnes of Romanian wheat at $180.11

*Daewoo: 60,000 tonnes of Russian wheat at $178.60

*Louis Dreyfus: 60,000 tonnes of Ukraine wheat at $179.94

*ADM: 60,000 tonnes of Romanian wheat at $208.89



(Reporting by Maha El Dahan and Eric Knecht; Additional reporting by Valerie Parent in Paris; Editing by Jason Neely and Susan Fenton)


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How institutional obstacles can derail innovative start-ups

Comments (0) Economy, Technology


While it is officially Africa’s biggest economy, the Nigerian nation is struggling. Talk of a recession has darkened the horizon for over a year. The slump of global oil prices have been a hammer blow to the country, while terrorism and oil refinery problems have worsened the situation. Nigeria is currently beholden to oil for 70% of its revenues; it must rebalance its economy to unbind itself from market volatility. The country realises this, and is making an effort to diversify its revenue sources. Many are starting to look toward innovative start-ups to take the country in a new direction.

Big tech potential in Nigeria, Konga leads the way

The conditions in Nigeria are rife for daring tech start-ups to create new solutions and drive growth. Unlike other regions on the continent, Nigeria has high rates of mobile penetration with approximately 75% percent of its 175 million people using mobile phones and data services, making it the largest mobile market in Africa. However, this market is currently woefully underexploited. According to a 2013 report by consultancy firm Mckinsey, only 1.5% of the country’s $500 billion economy took place online. This void presents a glaring opportunity for tech start-ups to create revolutionary new services.

Konga, is one such start-up that seized the initiative. Launched in 21012 Konga was an early pioneer in Nigeria’s tech space, offering online retail services. Today the company is thriving, offering a range of original solutions, which have connected all manner of suppliers and manufacturers to consumers across the country. Other innovators are also following Konga’s lead, carving out their own niche in Nigeria. However for every success, many start-ups struggle to overcome barriers in their way.

Unusual obstacles: reluctance and electricity

The issues facing start-ups vary. Some are complicated whilst some are frustratingly mundane. One simple yet formidable roadblock that start-ups face is the availability of electricity. For a new business trying to carve its own niche in the ecommerce space, a reliable energy supply is essential. However, when energy supply is unreliable, as it often is in Nigeria, a start-up has to generate its own power and purchase alternative fuel sources in order to consistently operate. Ultimately, this can lead to greatly increased costs which squeeze margins, snuffing the life out of promising but cash strapped start-up ventures.

On the whole, Nigerians are still very wary about parting with their money over the internet, for fear of their capital or financial information being stolen. This paranoia is not entirely without merit, as Nigeria is a hotspot for online scamming and phishing schemes. In order to accommodate these fears, some successful start-ups such as Konga and Jumia have built cash-only payment methods into their business. Konga has also recently created a payment system called KongaPay whereby money is held securely until orders are delivered. Despite these efforts reticence remains. While some start-ups have survived, this reluctance has certainly deterred some consumers from using new services, reducing the customer base that new start-ups rely on for growth. Tech firms must realize they need to foster a safe and reliable online payment environment, and convince the masses to use it.

Investment is needed, although so is caution

New accelerator programs sponsored by large foreign entities are helping more start-ups get off the ground, especially in the Fintech space. However, Nigerian banks aren’t traditionally interested in providing loans to risky start-up ventures, and encourage start-ups to attract private equity investors instead. Fortunately, foreign private equity is really starting to pick up in Africa, with more and more investors willing to take a punt on a good idea. Regrettably, these investors sometimes undervalue Nigerian enterprises, and strong-arm inexperienced Nigerians into unfavorable deals.

Other issues such as the countries poor logistics system can bring woe to start-ups who rely on delivering a physical product. Sometimes the lack of skills in critical areas such as accounting and marketing can kill a promising tech business before it can get above ground. In other instances, eager entrepreneurs try to make an idea that has worked elsewhere work in Nigeria; without analysis and adaptation this often leads to the graveyard.

A veritable gauntlet of obstacles faces Nigerian start-ups. However, those that have survived are serving as a shining example to those that wish to follow. Success is more likely if a fledgling firm is aware of the pitfalls ahead, provided they have a great idea; a solid business plan and the business acumen to make it all come together.

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Morocco and the AU: A Game of Thrones?

Comments (0) Africa, Economy, Politics

African Union

After 30 years on the outside, Morocco is seeking a return to the African Union body that it dramatically left in 1984. As of 2002 this body is called the African Union, previously known as The Organization of African Unity (OAU). Some see this move as long overdue while critics see it as an insidious maneuver to further Moroccan agendas. The controversial and complex situation revolves around Morocco’s disputed ownership of the Western Sahara in North-West Africa. Much has changed since Morocco’s departure, including the AU itself.

The ghosts of the past are not easily dispelled. Regional entities remain untrusting towards Morocco after the nation claimed ownership of the Western Sahara region in the wake of the Spanish withdrawal in 1975. Critics condemned the action as an illegal annexation and an opportunistic land-grab: the region contains vast phosphate resources, abundant fisheries and large untapped oil potential. Morocco however believes that the Western Sahara has always been part of Greater Morocco’s true borders. This annexation for them was merely a return of the Sahara to the “motherland”, and not an aggressive power play. The Western Sahara’s partially recognized ruling body, the SADR (Sahrawi Arab Democratic Republic), severely contest these historical claims to ownership.

History of Morocco’s relationship with the AU

When the independence of the Western Sahara was recognized by the OAU, Morocco immediately exited the union and has been on the outside ever since. So the question is: what has changed? In recent years Morocco has been fostering closer relations with its regional neighbors. This may just be the next step in the process of strengthening their African ties, with a desire to become a key economic and political player in the continent. “For a long time our friends have been asking us to return to them so that Morocco can take up its natural place within its institutional family,” King Mohammed VI said in a speech to African leaders. Morocco claims the motives are entirely separate from its stance on the Western Sahara, and wishes to rejoin solely from an economic standpoint.

A more cynical reasoning is that after many years of diminished regional influence due to its absence from the AU, Morocco will be in a stronger position to undermine the legitimacy of the Western Sahara once inside the organization. An official from the AU speaking with anonymity said, “The AU general secretariat is concerned that Morocco wants to return in order to argue the SADR issue from within the AU.”

Will their stubbornness keep them from rejoining?

Morocco is unlikely to concede any significant points over their occupation of the Western Sahara. Some commentators feel that it is likely that they will continue some form of hostilities towards the SADR whether inside or outside the AU. The rest of the union needs to carefully consider whether it can better manage the outcome of disagreement with Morocco inside, or outside the union. Morocco’s return to the organization will undoubtedly cause conflicts. The nations of the AU and beyond are already taking sides. Despite Egypt and Tunisia’s links to Morocco via their common cultural identity and geographic locations, they have not issued statements or official comments supporting Morocco’s potential re-entry. Mona Omar, an assistant to the Egyptian foreign minister said, “Egypt is committed to taking neutral positions when it comes to Algeria and Morocco.”

Realistically, 30 years ago when Morocco left, the union was a far less influential and interventionist body. If it returns it will be to an entity that is far more prepared and capable to intercede in conflict. It will not sit back and watch Morocco bully the Western Sahara, even if it re-enters with no restrictions on its actions.

The African Union’s evolution

Today, the AU is a pan-African organization designed to promote peace and prosperity throughout the continent of Africa. It is quite different to the OAU in that it can and does intervene in conflict and is not just advisory in nature. Its Peace and Security Council can deploy military forces and initiate peacekeeping missions throughout Africa, while also suspending memberships if countries abandon democratic practices, excluding them from trade relations and intercontinental funds. This is particularly pertinent to the discussion, the AU will not play placid spectator to Morocco’s intimidation. Morocco will be required to make some concessions to its diplomatic relations if it wants to play a central role within the African Union.

The circumstances surrounding Morocco’s departure remain unchanged, so critics have questioned Morocco’s timing and motives. The dispute over the Western Sahara is unresolved, causing tension throughout the whole of North Africa. For all parties to be duly satisfied it will take delicate diplomacy and Morocco would undoubtedly need to meet certain stipulations laid out by the union. Both parties have made it clear that they will not be compromising on their standpoint on the SADR; whether this will be a sticking point over Morocco’s membership, remains to be seen.


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Kenya finalises agreement for development of crude oil pipeline

Comments (0) Africa, Business, Economy

NAIROBI (Reuters) – Kenya has finalised an agreement with oil explorer Tullow Oil and its partners Africa Oil and A.P. Moller-Maersk for the development of a crude oil pipeline, as it bids to become an oil exporter, the president’s office said.

Tullow and Africa Oil first struck oil in the Lokichar Basin in the country’s northwest in 2012. The recoverable reserves are an estimated 750 million barrels of crude.

The two firms were 50-50 partners in blocks 10 BB and 13T where the discoveries were made. Africa Oil has since sold a 25 percent stake in those blocks to A.P. Moller-Maersk.

A statement from President Uhuru Kenyatta’s office quoted Energy and Petroleum Minister Charles Keter as saying the three partners and the government had finalised the pipeline’s development plan.

“He said the Government and its upstream partners, Tullow Oil, Africa Oil and Maersk Companies, have concluded a Joint Development Agreement (JDA) for the development of the pipeline,” the statement said.

In April, Keter said the pipeline – to run 891 km between Lokichar and Lamu on Kenya’s coast – would cost $2.1 billion and should be completed by 2021.

The government and the companies are pushing to start small scale crude oil production in 2017, at about 2,000 barrels per day to be initially transported by road.

“We have started and we are not moving back. We want to be at the top of the pile. So, we have set a path and by 2019, Kenya is going to be a major oil producer and exporter,” Kenyatta said.

The statement said Tullow Oil had confirmed it would start production in March 2017 and quoted Paul McDade, its chief operating officer, as saying the company would be ready to start exports in June next year.

Neighbouring Uganda is also looking to build a pipeline to export its oil. Though it initially favoured a route though Kenya, Kampala has decided to build its pipeline through Tanzania instead.


(Reporting by George Obulutsa; Editing by Aaron Maasho and Mark Potter)


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South African assets sink after police summon finance minister

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

By Joe Brock and Mfuneko Toyana

JOHANNESBURG (Reuters) – South African assets slumped on Wednesday after an elite police unit summoned Finance Minister Pravin Gordhan over an investigation into a suspected rogue spy unit in the tax service, fuelling speculation that there was a plot to oust him.

Gordhan and other former officials at the South African Revenue Service (SARS) must report to the Hawks on Thursday morning in relation to contravention of surveillance regulations, a source close to the matter told Reuters.

The announcement added to investors’ worries about leadership at the finance ministry as Africa’s most developed economy teeters on the edge of recession and credit rating agencies consider downgrading it to “junk” status by year-end.

Shadow finance minister David Maynier urged authorities not to take any more formal steps against Gordhan.

“The arrest of the finance minister would shatter investor confidence, risk a sovereign ratings downgrade and be a disaster for the already fragile zero growth, zero jobs economy in South Africa,” the member of the opposition Democratic Alliance said in a statement.

The Treasury confirmed the Hawks had contacted Gordhan and that he was seeking legal advice, but declined to go into further details.

Gordhan is due to speak at a debate in Cape Town at 7 p.m. (1700 GMT). Hawks spokesman Hangwani Mulaudzi said it did not comment on ongoing investigations.

The rand extended losses after dropping 3 percent the previous session when the news about Gordhan emerged.

Bonds also slumped with the yield on benchmark 2026 issue rising 46 basis points to 8.935 percent. South Africa’s stock market banking index opened almost four percent down.



A Zuma-backed plan to build a fleet of nuclear power plants, at a cost of as much as $60 billion, has been a cause of tension with the Treasury for months and is likely adding to pressure on Gordhan’s position, analysts say.

Russian state-backed companies are the favourites to win the nuclear bid, industry sources say.

“This is all part of a plot to oust Gordhan,” political analyst Prince Mashele said. “Gordhan refuses to sign-off on the Russian nuclear deal.”

Gordhan has refused to be drawn publicly on whether he supports the nuclear project but has said South Africa will only enter agreements it can afford.

Presidency spokesman Bongani Majola did not respond to requests for comment.

Local media reports in May said Gordhan may face arrest on espionage charges for setting up the unit to spy on politicians including President Jacob Zuma.

Zuma has rejected allegations by opposition parties that he has failed to publicly back Gordhan, saying that the law should take its course.

Zuma spooked investors in December by replacing then finance minister Nhlanhla Nene with relatively unknown lawmaker David van Rooyen. After markets tumbled, Zuma demoted van Rooyen and appointed Gordhan, in his second stint in the job.

Nene’s refusal to sign-off on the nuclear deal contributed to his downfall, government sources said at the time.


(Additional reporting by Nqobile Dludla and Ed Stoddard; Editing by Andrew Heavens)


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South Africa and ArcelorMittal forge steel pricing agreement

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

CAPE TOWN (Reuters) – ArcelorMittal’s South African business and the country’s government have agreed a new pricing model aimed at bolstering the domestic steel sector and reviving the economy.

The company was fined a record 1.5 billion rand ($111 million) on Monday for setting prices at the level consumers would have to pay for imported steel, but Trade and Industry Minister Rob Davies told parliament on Tuesday that it had agreed on a mechanism that would provide transparent pricing based on domestic prices in a number of other countries.

The government of Africa’s most industrialised country formed a team six years ago to find ways to lower domestic steel prices after consumers complained that the European group’s South African subsidiary was charging high prices.

“This has been the concern that we’ve had for a long time, that the price of domestically produced steel has been supplied in the market on the basis of what the import parity price would be,” Davies said.

The local price for flat steel products will now be calculated through a formula using the weighted average of domestic prices in countries such as Germany, the United States and Japan, but excluding China and Russia, Davies said.

In future, when ArcelorMittal South Africa changes its flat steel prices, it will have to use a transparent mechanism based on the forecast basket prices of fabricated metal products, machinery and equipment, as well as vehicle and other transport equipment, Davies added.

“The basket aims to provide a fair price during boom and bust periods,” he said.

ArcelorMittal South Africa officials were not available to comment.

South Africa, which has the only primary steel mill in sub-Saharan Africa, imposed a 10 percent import tariff last year to protect an industry hurt by cheaper Chinese imports.

($1 = 13.4800 rand)


(Reporting by Wendell Roelf; Editing by James Macharia and David Goodman)


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South African rand hit by student protest outside presidential offices

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

JOHANNESBURG (Reuters) – South Africa’s rand touched a 3-1/2 week low against the dollar on Friday as investor sentiment soured over the two week long student protests over tuition fees that have hit universities countrywide.

By 1412 GMT the rand was trading 1.26 percent down at 13.5740, reversing earlier gains as a stronger dollar also weighed down the local currency.

“The student protests doesn’t reflect well to offshore investors and the fact that the government is already under pressure from a fiscal perspective and the situation adds to pressure going forward,” said Ricardo Da Camara, market analyst at ETM Analytics.

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12 African Countries In Top 20 Affordable Luxury Real Estate Markets

Comments (0) Africa, Economy, Featured

luxury africa real estate

According to a September study by the German real estate portal Lamudi, twelve African countries are among the Top 20 emerging markets where luxury real estate is most affordable. Ethiopia topped the ranking in a total of 32 emerging markets in the recent Lamudi results. Luxury real estate in Ethiopia now costs an average of 396.58 € per square meter. To put this in perspective, luxury Paris property such as the Place Vendôme, Tuileries, and Palais Royal real estate commands 13,000 € per square meter, according to This Paris Life. To extend the frame of reference, Global Property Guide reports an average cost of over 6,000 € per square meter for “affordable luxury” land throughout France. Amazingly, therefore affordable luxury real estate in France is roughly 15 times more expensive than luxury real estate in Ethiopia!

Out of phase with the Lamudi study, however, Global Property Guide reports that all land in Ethiopia is owned by the government of the country, and can only be leased. With continuing border disputes, and weak enforcement of property rights, it is not clear how investors can securely exploit this appealing valuation of real estate for commercial purposes in Ethiopia. And recent drops in currency values of many African countries already discourage investment. However, the broader picture is more appealing in some of the other countries featured in the Lamudi report.

Côte d’Ivoire’s real estate market has grown rapidly since 2011

Côte d’Ivoire is now in full economic takeoff following a political and military crisis. Luxury real estate here is at an average price of 427.65 € per square meter, according to the Lamudi classification, which was made on the basis of average prices gathered from several thousand real estate sales advertisements. After ten years of sluggish economic growth, Côte d’Ivoire’s construction industry now claims double-digit growth in the most recent three years, according to the Oxford Business Group. Côte d’Ivoire’s real estate market has grown rapidly since 2011. Private initiatives thrive and the market is seeing significant development. A number of unique sources contribute to these especially attractive property prices. Substantial support by international donors in Côte d’Ivoire has artificially subsidized the markets and the country is now open to global construction firms, and boasts diversified investment sources.

Tanzania took third place in the Lamudi ranking with prices at 486.03 € per square meter. With an average price of 850.54 € per square meter, Kenya claimed sixth place on the list, following Mexico and Colombia. These figures are meticulously mined by Lamudi, a portal launched in 2013. The clearinghouse is a global property portal focusing exclusively on emerging markets. The Lamudi platform is available in 34 countries in Asia, the Middle East, Africa and Latin America, and includes in excess of 900,000 real estate listings throughout its global network.

Nigeria, with a per square meter price of 856.29 €, was followed closely by Kenya, according to Lamudi. Meanwhile Tunisia at 885.52 € appeared in the ninth slot, just ahead of Ghana (1,035.75 €), and Morocco (1,144.25 €). Rounding out the African countries featured, Uganda (1,597.22 €) occupied 15th place, ahead of Algeria (1,766.53 €), while Angola (3,965.52 €) closed the top 20 list.

Marrakech a top investment choice

Target cities to watch in the emerging luxury real estate market include Marrakech, Morocco. Marrakech holds strong growth prospects, favorable political stability, and an enticing environment for foreigners. Marrakech was recently named by Financial Times property experts as a top investment choice for 2014.

Lamudi’s focus on raw price may not be a representation of true property values. While luxury real estate property values in Morocco may be nearly four times those of Ethiopia, both are relatively cheap on a global scale, especially with regard to developed countries. For this reason, other criteria such as governmental and economic stability, environmental quality, and effectiveness of law enforcement may be more important determining factors than the price of land when comparing the featured countries for the purpose of luxury real estate investment. Furthermore, the unpredictable political climate and economic instability in these areas guarantees that these prices will fluctuate dramatically in relatively short periods of time.

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Sudan applies for OPEC membership

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

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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