PRETORIA (Reuters) – South Africa’s central bank kept its benchmark repo rate unchanged at 7 percent on Thursday in line with market consensus, but warned that risks to the inflationary outlook had increased.

Delivering the last scheduled rate decision for the year, the central bank Governor Lesetja Kganyago said food price inflation was expected to moderate at a slower pace than what the bank had previously forecast.

The bank has kept the benchmark rate on hold at its last four meetings. It has raised the rate by a cumulative 200 basis since early 2014 in a bid to rein in inflation.

The rand pared losses against the dollar after the central bank left the repo rate unchanged, and traded at 14.1800 at 1352 GMT compared with 14.2375 before Kganyago’s speech.

He said the moderately higher risks to the inflation outlook required continued vigilance.

“The MPC (Monetary Policy Committee) remains concerned that the inflation trajectory is uncomfortably close to the upper end of the target range,” Kganyago told a news conference.

“While the committee retains the view that we may be close to the end of the hiking cycle, there may be a reassessment of this position should upside risks transpire.”

The bank forecasts for inflation in 2016 remained unchanged from September’s meeting at 6.4 percent, he said.

It forecast consumer prices peaking at 6.6 percent in the fourth quarter before moderating in the second half of 2017 due to improved weather conditions.

The bank also kept its growth forecast’s unchanged, anticipating GDP at 0.4 percent in 2016 and 1.2 percent in 2017, the same as it’s last meeting in September, saying the low point of economic cycle had passed.

(Reporting by Mfuneko Toyana; Editing by James Macharia)

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CAPE TOWN (Reuters) – South Africa’s government has slowed its nuclear power expansion plans, according to a draft energy paper, although state energy utility Eskom said the country should stick to its original plan of bringing a new plant online by 2025.

South Africa has the continent’s only nuclear power station and is seeking to expand its nuclear, wind, solar and coal power capacity in the coming decades as electricity output barely meets demand.

A draft blueprint of the government’s Integrated Resource Plan (IRP) said it now aimed to increase nuclear power output by just 1,359 megawatts (MW) by 2037, compared with a previous target of adding 9,600 MW of new nuclear power by 2030.

Under the new IRP, nuclear power output would rise more rapidly by 20,385 MW between 2037 and 2050.

The government cited additional generation capacity, lower demand forecasts and changes in technology costs among the reasons for scaling-back.

Eskom , which will procure, own and operate new nuclear plants, said it will still request proposals this year from companies looking to build plants given long lead times of around a decade when building reactors.

Energy analysts have said the 9,600 MW plan was ambitious on timescale and unnecessary, while opponents of President Jacob Zuma raised concerns about a lack of transparency in deals which could cost in the region of $80 billion.

Several meetings between Zuma and Russian President Vladimir Putin over the last two years led to speculation that Russian state-run nuclear firm Rosatom had secured the deal before the launch of the public tender. South Africa’s government and Rosatom denied this.

The new electricity-focused IRP includes plans to add a further 37,400 MW of wind and 17,600 MW of solar power by 2050.

“If I was an investor or project developer in the nuclear space, I would not pick up a pen before the IRP is finalised next year to submit any request for proposals, specifically considering the dark cloud hanging over the nuclear programme with alleged corrupt relationships,” said Johan Muller, programme manager for energy and environment at Frost & Sullivan consultancy.

The previous head of Eskom, Brian Molefe resigned after being implicated in a report by the anti-graft watchdog on allegations of influence peddling that has tarnished state-owned companies as well as Zuma himself.

The government’s nuclear programme also faces public opposition. South African Faith Communities Environment Institute (SAFCEI) and Earthlife Africa Johannesburg are in court next month in a bid to overturn the nuclear build programme.

($1 = 14.0847 rand)

(Reporting by Wendell Roelf; Writing by Joe Brock; Editing by Ed Stoddard and Alexandra Hudson)

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By Alexis Akwagyiram and Chijioke Ohuocha

LAGOS (Reuters) – Nigeria’s recession deepened in the third quarter and oil production fell, the National Bureau of Statistics (NBS) said on Monday, as a dollar shortage kept Africa’s biggest economy in a stranglehold.

Gross domestic product contracted by 2.24 percent year-on-year, the NBS said. That was even worse than the 2.06 decline in the second quarter, when Nigeria fell into recession for the first time in 25 years.

The data came on the eve of an interest rate decision, with analysts expecting the central bank to hold benchmark rates at 14 percent. Inflation hit 18.3 percent in October, the highest in more than 11 years. [nL8N1DF1YL]

Prices have been pushed up by the dollar scarcity in a country dependent on imports, which has been exacerbated by currency restrictions imposed by the central bank last year in an effort to defend the naira. Oil sales are the OPEC member’s main source of dollars to fund imports.

“The ramp up in fiscal spending has been slower than anticipated, and the policy response in general remains weak,” said Cobus de Hart, economist at NKC Economists.

The NBS said oil production fell to 1.63 million barrels per day, down from 1.69 million in the second quarter.

“We were expecting a more shallow contraction,” Standard Chartered Africa chief economist Razia Khan said. “Much of it seems to have been driven by the outsized contraction in the oil sector once again, with much lower levels of oil production than we had expected.”

She said FX reforms were needed to “restore positive momentum” to Nigeria’s economy.

FARM GROWTH

NBS said the non-oil part of the economy grew by 0.03 percent in the third quarter, compared with negative growth in the first two, which was “largely driven” by 4.54 percent growth in the farming sector.

The president’s special adviser on the economy, Adeyemi Dipeolu, said the growth in agriculture, which the government wants to boost to reduce its reliance on oil sales, was a sign of “green shoots of economic recovery”.

A statement issued by the vice president’s office said the figures pointed to the success of President Muhammadu Buhari’s economic policies, despite the recession. It blamed the latter on a series of attacks by militants on oil and gas facilities in the southern Niger Delta since January.

Attacks have ramped up in the last few weeks following a lull that lasted a few months while militants and community leaders, who want a greater share of Nigeria’s energy wealth to go to the region, held talks with the government. Crude oil sales account for two-thirds of government revenue.

In October, the NBS said the economy was likely to shrink 1.3 percent in 2016, a sharp downward revision of its estimates at the beginning of the year, prompted by dramatic falls in the currency. The International Monetary Fund has predicted a contraction of 1.8 percent this year.

A senior Moody’s analyst told Reuters that Nigeria’s economy could expand by 2.5 percent next year if it could produce 2.2 million barrels of oil per day – the level at which the government made its budget calculations.

(Additional reporting by Oludare Mayowa; Editing by Mark Trevelyan)

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JOHANNESBURG (Reuters) – South Africa’s Pioneer Food, Astral Foods and Rhodes Food expect the severe drought and weak economic growth to weigh on their businesses in the 2017 financial year, the companies said on Monday after reporting results.

An El Nino weather pattern, which ended in May, triggered drought conditions across the southern African region that hit the staple, maize, and other crops and dented economic growth.

Africa’s most industrialised country is only expected to expand by 0.5 percent this year, down from a target of 0.9 percent the Treasury set in February.

Shares in Pioneer Food rose 1.73 percent to 164.78 rand, while Rhodes Food increased 1.82 percent to 28 rand by 0812 GMT.

Poultry producer Astral, which is weighing job cuts, fell 0.66 percent to 120.50 rand.

“The weakened state of consumer spending is unlikely to improve due to poor economic growth and higher unemployment which will continue to constrain an increase in the per capita consumption of poultry,” Astral said in a statement.

“High maize and feed prices will continue for at least the first half of 2017 on the back of the severe drought.”

Pioneer, which makes foods such as maize meal, pasta and juices, said that high maize prices and a reduced raisin crop “will impact performance in the first half of the new financial year.”

Rhodes, which reported a 50 percent rise in normalised diluted headline earnings per share to 126.5 cents for the year ended September, said the drought could hurt its production costs and volumes in the year ahead “if there is no improvement in climatic conditions.”

“A lot of them have done reasonably well within the context and the environment in which they find themselves in, however we need a better crop coming in this year for these guys to survive and for them to remain relatively competitive,” said Global Trader equities analyst Paul Chakaduka.

“The environment remains very uncertain for these food producers.”

The government expects the 2016 maize harvest to be 28 percent lower at 7.16 million tonnes, with an improved harvest in 2017 when rainfall is expected to increase.

Pioneer Food Group said adjusted operating profit increased by 6 percent to 2.3 billion rand ($159 million), while Rhodes Food gross profit increased by 43.9 percent to 1.2 billion rand.

Astral reported a 50.1 percent decline in operating profit to 549 million rand.

(Reporting by Nqobile Dludla; Editing by Joe Brock and Louise Heavens)

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