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Drought plunges Kariba Dam hydropower to record lows

Comments (0) Africa, Business, Featured

kariba dam

Power shortages in Zambia and Zimbabwe undermine their struggling economies.

Drought has brought record-low water levels at the Kariba Dam on the Zambia-Zimbabwe border, forcing significant power cutbacks and rationing.

The crisis at the world’s largest man-made reservoir threatens to further weaken the growth outlook for the two countries at a time when they face falling commodity prices. The struggling mining industry has been particularly hard hit.

The reservoir fell to 11 percent of capacity in late January before rising slightly to 12 percent this month after dam authorities cut hydropower production to 25 percent of capacity. A year ago, the dam, which is fed by the Zambezi River, was at more than 50 percent capacity but drought and heavier than expected water usage resulted in the decline.

Power shortage could last years

While authorities may avoid a shutdown of the hydropower production, power shortages are expected to last for years. According to the World Bank, the power deficit could last at least until 2018 and possibly until 2020.

Henry Kapata, spokesman for Zambia’s state power utililty said power blackouts were averaging eight hours a day or more when imports were limited.

Kapata said the power deficit totaled 630 megawatts in January. The utility’s goal is to reduce the deficit to less than 160 megawatts by August, he said.

Mining industry suffers

Kariba Dam

The power cuts have dealt a significant blow to a mining industry that was already in trouble.

Zambian mining interests in August agreed to cut hydropower consumption by 30 percent as the problems became evident last summer. In Zimbabwe, mines and other major users were ordered to cut their consumption by 25 percent in October.

As a result of cutbacks and global price declines, mining growth has stalled.

In Zambia, where mining accounts for 80 percent of exports, production of copper, also was expected to decline this year. Two major mining companies suspended operations and cut thousands of jobs following the decline in copper prices and thousands of jobs were lost.

Effective January 1st, the government increased power tariffs by 25 percent in an attempt to encourage mining companies to invest in power generation.

In Zimbabwe, where minerals account for 55 percent of all exports, production fell slightly in 2015, according to the Chamber of Mines of Zimbabwe. The total value of mineral shipments declined steadily between 2012 and 2015 from $2.2 billion to $1.8 billion because of low output and declining prices globally.

Finance Minister Patrick Chinamasa has said the power crisis has become an obstacle to economic growth in Zimbabwe and the government is putting a priority on power projects.

“We regard power generation as our number one priority to move the country toward an economic recovery,” Chinamasa told the Parliament in December.

Engineers see risk of dam collapse

Even as the drought eases, a larger crisis looms for the Kariba Dam. Engineering experts have been warning for years that the dam wall is in danger of collapse.

The low water level reduces the pressure temporarily, but “the bigger picture of the state of Kariba dam is critical,” said Kay Darbourn, author of an extensive 2015 report on the dam.

Darbourn said factors including high rainfall that will feed water inflows locally and from other regions as well as potential earthquake activity, “could all contribute to the likelihood of failure of the Kariba Dam.”

The report, “Impact of failure of the Kariba Dam,” (pdf) said 2014-2017 was a crucial period of danger for the dam, while a project to repair it will not be completed until 2025.

Bedrock at the foot of the dam erodes

The dam was built in 1959 on a seemingly solid bed of basalt. However, torrents from the spillway have eroded the bedrock at the foot of the dam and a large crater now undermines the base of the dam wall.

Engineers have warned for years that the dam, which is 128 meters tall and 579 meters wide, will collapse and the floodwaters will breach Mozambique’s Cahora Bassa Dam, knocking out about 40 percent of southern Africa’s hydroelectric supply.

An estimated 3.5 million lives would be at risk in Zambia and Zimbabwe as well as further downstream in Malawi and Mozambique.

Fears were heightened in January when an earthquake measuring 4.6 on the Richter scale struck less than 60 kilometers away from the dam. The dam has withstood quakes as high as 5.5. Authorities are assessing whether the quake caused additional damage to the dam.

Munyaradzi Munodawafa, spokesperson for the Zambezi River Authority (ZRA), manager of the dam, said Zambia and Zimbabwe had raised about nearly all of the $300 million needed to fix the structure. Work was expected to start early in 2016.

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John Lewis to open in Dubai as retail surges in the UAE

Comments (0) Business, Featured, Middle East

john lewis

UK-based department store John Lewis is set to launch in Dubai as the UAE becomes a top global market for retailers

Taking the middle class favorite across the globe, UK-based department store John Lewis has announced plans to open shop in the Middle East with the launch of a home department in Dubai. Scheduled to open in spring 2017, the shop-in-shop will take prime position in the new flagship Robinsons Department Store in the Dubai Festival City Mall, both owned by UAE-based conglomerate the Al-Futtaim Group. The 15,000 square feet shop will be John Lewis’s largest outlet oversees, and will stock a range of own-brand furniture, cookware, textiles, glassware, and bedroom, bathroom, living, and gifting assortments.

The agreement extends the current partnership between the Al-Futtaim Group’s Robinsons Department Store and John Lewis in Singapore. As part of the announcement, the duo also confirmed the opening of a 630 square feet John Lewis shop-in-shop in the Kuala Lumpur Robinsons store in Malaysia. Both new outlets will be designed by John Lewis’s in-house team.

Andy Street, John Lewis’s managing director, comments: “We’re delighted to be working with Robinsons again on two new ventures. The success of our existing international shop-in-shops has given us the confidence to open in the Middle East and increase both the scale of the space and product assortment. This is an exciting time for Al Futtaim’s Dubai Festival City Mall and we’re pleased that John Lewis will be a part of the next phase of its redevelopment.”

Building a stable home market

The announcement follows a failed Middle Eastern expansion attempt by John Lewis in 2011. Again working with the Al-Futtaim Group, plans had been drawn up to open several stores across the region, including in Dubai and Egypt. But at the time, much of the British high street was struggling, and so John Lewis pulled out, commenting that a focus on the home market was the first priority.

Now the employee-owned John Lewis operates 46 shops across the UK, of which 32 are department stores. And it is performing well relative to the market, posting particularly strong results for the important Black Friday, Christmas, and post-Christmas trading period with total sales of $1.38 billion (£951 million). Its viral “Man on the Moon” ad also triggered a 5.1% jump in online sales year-on-year. Although the company has warned that 2015 profits will be down, it has blamed this on higher pension charges, and on the whole, John Lewis is in good health.

John Lewis has also been busy building a portfolio of overseas stores, including 14 shop-in-shops across Singapore and the Philippines, seven in South Korea, and a further seven shop-in-shops set to launch in De Bijenkorf department stores across the Netherlands.

Booming retail market in the Middle East

But emerging markets are playing an increasingly important role. Reportedly about 70% of the world’s growth is likely to come from emerging markets in the coming years. With a rising population, a growing middle class, and rapid urbanization, the Middle East is a particularly attractive and largely untapped burgeoning market.

According to an Arcadis index ranking of 50 international markets, the UAE is the eighth most attractive market globally for retailers, with the UAE ranked first in the region thanks to strong infrastructure and ease of operation. Dubai is at the center of that market, with the second largest number of global brands after London, rising local purchasing power, a wealthy expatriate community, and a thriving tourism sector with plenty of foreign luxury consumers. Currently Dubai alone commands around 30% of the Middle East luxury market.

Modern retail concepts, including the Dubai Mall which claims around 50% of Dubai’s luxury purchases and hosted a record 54 million visitors during the annual Dubai Shopping Festival, also provide ideal conditions for growth. Developments capitalizing on the successful Expo 2020 bid and new mall openings are also expected to reinforce Dubai’s position at the center of a Middle Eastern retail in the coming years.

But with religion tied so closely to both society and business, the Middle Eastern market does also come with risks. Dano-Swedish brand Arla Foods (owner of Lurpak, Puck, and Arla) is a good example. In the early 2000s it was a major player in the Arab world, dominating the Middle Eastern markets for butter, cheese, and cream. But in 2005, and again in 2008, the publication of cartoons unflatteringly depicting Islam’s prophet in Danish newspapers led to boycotts of Danish goods, and sales plummeted. Arla Foods has never quite recovered.

Good chances of success

This partnership between John Lewis and Al Futtaim has a good chance of success. John Lewis has a strong reputation, voted the retailer with the best reputation in Europe, the Middle East, and Africa in a survey by the Reputation Institute (2013 and 2014). This will make it attractive to the Middle Eastern market. And Al Futtaim has the expertise and knowledge of the local culture. As Paul Delaoutre, President of Al Futtaim Retail, comments: “Al Futtaim’s solid regional retail infrastructure, know-how and reputation seamlessly blend with John Lewis’s global appeal as a renowned retailer in a long-awaited exclusive partnership designed to offer discerning UAE consumers even more choice and options.”

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A commuter rail network for Jeddah

Comments (1) Business, Featured, Middle East

jeddah metro

Saudi officials hope the network, to begin operation in 2020, will ease congestion in the nation’s second largest city.

An extensive rail network, a critical piece of a plan to reduce severe traffic congestion in Saudi Arabia’s commercial capital, is expected to begin operation in 2020.

The $12 billion Jeddah network will have four lines – a Blue Line with 19 stations, including the airport, a Green Line with 12 stations, a Red Line with 24 stations, and an Orange Line with 30 stations.

In all, the network will comprise about 150 kilometers of track and will include construction of a road-rail suspension bridge over Obhur Creek. The network will connect to the Haramain high-speed rail station for travel outside the city.

Jeddah, a port city on the Red Sea, is Saudi Arabia’s second largest city after the capital, Riyadh. Jeddah also is a gateway to the holy sites of Mecca and Medina.

Traffic congestion plagues city

The train network is the central element of a larger plan by Saudi officials to ease major automobile traffic congestion in the city of 3.4 million people by 2030.

Traffic in the city has been described as “nightmarish,” and commuters are plagued with poor road design, lack of traffic officers, and drivers who do not follow traffic rules.

One goal for the Jeddah transportation plan is to increase from 12 percent to 50 percent the city population living within a 10-minute walk of public transportation.

Osama Abdouh, executive director of the government-backed Jeddah Metro Company, which is managing the project, said the project will “provide the best and most suitable types and choices for public transportation” for Jeddah residents and visitors.

At the same time, it will reduce traffic congestion and pollution in the city, Abdouh said.

Traffic in Jeddah

Traffic in Jeddah

Bus network, tram and ferries also planned

The Jeddah Public Transit Program also envisions a bus network, cycle networks and marine ferries along with a tramway on the Corniche coastal resort area.

The Saudi Council of Ministers approved the $12 billion transportation plan for Jeddah in 2013. Abdouh said the exact cost is to be determined as plans firm up.

Several contractors are already at work developing plans and designs.

The British architecture firm Foster + Partners was awarded a contract to develop the architecture for the master plan. Aeocom Tecnology Corp., based in the United States, is providing support for the planning and design phase, while a French company, Systra, is providing the engineering designs.

Bids to be sought

Later this year, the Jeddah Metro Company will seek bids a variety of contractors to supply trains and equipment, communications, passenger information, fare collection and train control systems, automatic train supervision, an operations center and depot buildings as well as mechanical, electrical, ventilation, cooling and plumbing systems.

Abdouh said the project expects to ask for bids for many aspects of the project in the second quarter of 2016, once the designs are completed.

The project is also in the process of acquiring approximately 150 pieces of property needed to develop the network in Jeddah.

The Saudi capital, Riyadh, is also getting a rail system. A six-line network with 178 kilometers of track and 85 stations is expected to be completed in 2018.

The projects are going ahead despite economic struggles in Saudi Arabia. Tumbling global oil prices have forced the Saudi government to dip into reserves.

The 2016 budget cuts government spending by nearly 14 percent from 2015 levels, but the country is still expected to have a budget shortfall of 13 percent of gross domestic product this year.

Meanwhile, development of railways is surging in the Middle East and Northern Africa. One 2014 estimate said rail and metro that were under way or planned in the Middle East totaled more than $200 billion and would cover more than 36,000 kilometers.

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An Indian powerhouse in the Gulf

Comments (0) Featured, Leaders, Middle East

Yusuf Ali

Billionaire M.A. Yusuff Ali has built the global retail empire Lulu Group from his base in Abu Dhabi.

M.A. Yusuff Ali, who has built a global empire of supermarkets, shopping malls and grocery stores, will be at the top of just about any list of the most powerful Indians doing business in the Gulf.

The managing director of the retail giant Lulu Group, based in Abu Dhabi, started in a small, isolated office in a barren desert 40 years ago and went on to build an international powerhouse that employs more than 35,000 people in 31 countries, most of them in the Middle East and Africa.

With a net worth of $3.1 billion, the Kerala-born businessman is number 24 on Forbes’ list of India’s 100 Richest People. He’s repeatedly been named the most powerful Indian in the Gulf by publications including Arabian Business and DNA India.

More retail outlets to open

Lulu Group now operates 121 retail outlets that cover a total of 22.5 million square feet. In January, it opened an outlet in Dammam, Lulu’s sixth in Saudi Arabia, and another in Juffair, a suburb of Manama, its fifth in Bahrain.

Yusuff Ali also has announced plans to open more hypermarkets and malls in Saudi Arabia, Egypt, Bahrain and Malaysia.

The company, with annual revenue of $5.5 billion, is also venturing into the hospitality business, notably with the development of a hotel at the former Scotland Yard in London.

Lulu opened its first hypermarket in Dubai in 2000. The stores cater to multi-ethnic shoppers in the region with an international mix of both products and staff.

In addition to its retail chain, Lulu Group engages in manufacturing, import-export, and business services.

Scotland Yard will become a hotel

Yusuff Ali has recently gone into the hospitality business, making headlines last summer with a $171 million deal to develop the former Scotland Yard headquarters in London. The new hospitality arm of Lulu, Twenty14 Holdings, will open the Great Scotland Yard Hotel early in 2017.

It was his second London investment. In 2014, he purchased for $85 million a 10 percent interest in East India Company, the historic trading company that led British colonization of India in the 18th and 19th centuries.

Yusuff Ali started small, moving from India to Abu Dhabi to join the family business in 1973 and finding challenging conditions there.

“It was a very hard time initially. Abu Dhabi was all of two roads; none of the glitz and glamour that you associate UAE with today. The entire country was just coming terms with the discovery of oil,’’ he said.

Company employs 35,000

In all, Lulu employs more than 35,000 people from 37 different countries.

It has operations in the United Arab Emirates, Oman, Qatar, Kuwait, Saudi Arabia, Bahrain, Yemen, Egypt, Kenya, Benin, Tanzania, Senegal, Uganda, Nigeria, Ghana, Ivory Coast, South Africa, Mozambique, Cameroon, Togo, and Gambia as well as India, China, Hong Kong, Indonesia, Thailand, Vietnam, Malaysia, Brazil, Turkey and the United Kingdom.

Yusuff Ali is also active in business and charitable affairs in the Gulf and in India.

He cites as a matter of great pride that he is the first expatriate to be elected to the board of the Abu Dhabi Chamber of Commerce & Industry. In 2014, he was re-elected to the board for a third term.

He also has received the Padma Sri and Pravasi Bharatiya Award, the Indian government’s highest honor for a non-resident Indian, as well as the Asian Business Award for Best Business Leader and Arabian Business Award.

He has donated to a variety of charitable causes in both India and the Gulf. He also helped organize relief from the Gulf for multiple natural disasters in India, including the Lathur and Gujara earthquakes.

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Chinese President Xi Jinping Tours Middle East

Comments (1) Featured, Middle East, Politics

Xi Jinjpin Middle East

Chinese President Xi Jinping has completed a three-nation tour of the Middle East intended to strengthen political and economic ties with the region

Chinese President Xi Jinping has completed a three-nation tour of the Middle East, as the world’s second-largest economy seeks to strengthen economic and political ties with the region, and promote its status as a rising power to foreign and domestic audiences.

Energy deals in Saudi Arabia

President Xi’s first stop was Saudi Arabia, China’s biggest supplier of crude oil and its biggest trading partner in the MENA region. During the trip, Xi and King Salman bin Abdulaziz signed 14 agreements focused on energy, culture, and industrial cooperation, and pledged to build a comprehensive strategic partnership for better bilateral ties.

Xi also visited the King Abdullah Petroleum Studies and Research Center, a non-profit institution focused on research in energy economics, policy, technology, and the environment. And he attended the opening ceremony of the Aramco Sinopec Refining Company (Yasref), a joint venture between Saudi Aramco and China Petrochemical Corp (SINOPEC). This venture is China’s largest investment in the region, and looks set to continue to be so, as the two companies signed a framework agreement for strategic cooperation estimated to be worth between $1 billion and $1.5 billion.

Stimulating Egypt’s economy

After energy deals in Saudi Arabia, Xi then travelled to Egypt to meet with President Abdel Fattah el-Sisi, where the pair signed a five-year outlining document to advance their relationship. The Chinese president also announced his country’s intent to participate in key Egyptian projects, including the development of the Suez Canal Corridor and the construction of a new administrative ­capital.

Xi also announced a $1 billion financing agreement for Egypt’s central bank and a $700 million loan to the state-owned National Bank of Egypt, as he looks to support Egypt’s path to economic prosperity. In total, officials from the two countries signed 21 deals spanning development, electricity, transportation, and infrastructure. In a joint statement, President Xi said: “The total investments in these projects would be $15 billion. These projects will offer a new impetus to the economic development of Egypt”.

Increasing trade in Iran

Xi Jinping with Iranian President Rouhani

Xi Jinping with Iranian President Rouhani

Finally, Xi visited Iran; a display of even-handedness in the light of tensions between Iran and Saudi Arabia in recent weeks. The visit also landed just days after sanctions against Iran were lifted, following the UN’s announcement that the country had scaled back its nuclear program. China had been one of the six nations involved in negotiations.

Over recent years, China has been the top buyer of Iranian crude oil and Iran’s biggest trade partner, counting for more than a third of its foreign trade. The lifting of the sanctions will secure the future of that business relationship. Iranian officials confirmed that the country was preparing to raise oil production by 500,000 barrels per day. Iranian President Hassan Rouhani hopes to further boost this relationship, hailing a “new chapter” in relations with China and announcing that the two countries will be building stronger economic ties over the next decade. He comments: “We are happy that President Xi visited Iran after the lifting of sanctions. Iran and China have agreed to increase trade to $600 billion in the next 10 years,” he said. The two leaders also signed 17 agreements in areas including energy, trade, industry, environment, technology, politics, security, and cooperation on peaceful nuclear energy.

Showing China’s economic muscle

During his trip, Xi pledged $55 billion in loans and investments to the Middle East region as a whole, including $15 billion designated as special loans for industrial projects in the Middle East, $10 billion for commercial loans to boost cooperation in the energy sector, and another $10 billion as preferential loans. In this show of economic muscle, he also pledged $300 million to boost China-Arab law enforcement cooperation, and committed a final around $20 billion to setting up a common investment fund with Qatar and the United Arab Emirates. Xi also pledged HK$273.4 million in humanitarian aid for Syria, Jordan, Lebanon, Libya, and Yemen.

But while the tour undoubtedly had significant economic consequences, particularly at a time of economic difficulty and plummeting oil prices in the Middle East, it also seems to be part of a broader Chinese strategy intended to strengthen diplomatic ties with the region. During his trip to Egypt, President Xi delivered a speech outlining China’s new Middle East policy, which included making a commitment to building peace and development in the region, and supporting industrialization and stability. This speech followed the publication of China’s first Arab Policy Paper, a “blueprint for China-Arab mutually beneficial cooperation, [which] reiterates the political will of commitment to peace and stability in the Middle East, in order to promote China-Arab relations to a new and higher level.” It signifies that China will no longer be taking a back seat.

The trip is likely also linked to Xi’s “One Belt, One Road” initiative, a rebuilding of the Silk Road trade routes of the Han dynasty. Xi intends to link China and Europe via Central Asia, West Asia, and the Middle East, with the help of Chinese-funded infrastructure.

And with that many interests to protect, it seems China has good reason to invest more time and money in its relations with the Middle East.

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HeroTel wants to consolidate Wi-Fi service in South Africa

Comments (0) Africa, Business, Featured

Alan-Knott-Craig-Jnr

The startup, with $4.75 million in capital, believes a single network will benefit consumers with more consistent service at lower costs.

Hundreds of small wireless providers are competing to connect Internet users in South Africa, but a new player has a different vision.

Instead of starting one more competing company, HeroTel founder Alan Knott-Craig Jr. wants to connect as many existing Internet providers as possible to form a national wireless network.

HeroTel hopes to consolidate the fragmented landscape of wireless Internet providers under a single brand. Knott-Craig said this would enable more consistent service for consumers at lower costs and aid expansion of service to areas that currently do not have broadband access.

HeroTel, launched in August 2015, has raised $4.75 million in investment capital and hopes to have a national footprint by April. Knott-Craig said he hoped the company would become the “Capitec of telecoms,” referring the South African banking network.

Knott-Craig, 38, is a South African entrepreneur and former CEO of the social network Mxit. He also founded Project Isizwe, a nonprofit that wants to put free Wi-Fi within walking distance of every South African.

Over the course of two years, the Isizwe Project has successfully turned the South African city of Tshwane (Pretoria), population 2.9 million, into the continent’s largest free public Wi-Fi network.

The network has 750 sites and more than 20 percent of the buildings in Tshwane are within walking distance of Wi-Fi, Knott-Craig said. One million people were to be connected by the end of 2015 with the entire population within walking distance of free Wi-Fi by 2017.

Knott-Craig believes that municipal governments should take responsibility for providing Wi-Fi to their citizens just as the governments provide electricity, sanitation and roads.

South-Africa Wi-Fi

South-Africa Wi-Fi

 

200 wireless providers operate in South Africa

In the private sector, he said there are about 200 wireless service providers operating in South Africa and the business is profitable. Revenues total about $53 million a year with profit margins of approximately 30 percent.

The problem, Knott-Craig said, is that consumers will demand greater wireless speeds at lower prices so a network makes more economic sense than a fragmented marketplace of providers.

Currently, Knott-Craig said, Wi-Fi speeds are doubling. But the cost to the consumer stays the same when it should be decreasing, he contends.

“People want fast reliable, affordable broadband, that’s all they want, and they don’t want you to feel like you’re doing them a favor by arriving to fix it,” he said.

Knott-Craig said South consumers now pay about 600 rand ($35) a month for 10 megabytes per second. He projected they will pay the same amount for 100 megabytes by 2017.

Five million households lack broadband access

He said HeroTel would use unlicensed spectrum, which is the same as the spectrum home and office consumers use for Wi-Fi.

In addition to improving service for existing customers, Knott-Craig believes pooling the resources of existing providers will enable the network to bring Internet access into about five million households that do not have broadband. Only about 400,000 of these are reachable by fiber-optic broadband, he said.

For the rest, he said, unlicensed spectrum Wi-Fi is the obvious answer because it is inexpensive, he said. “That’s why the HeroTel strategy makes sense.”

According to the Internet Architecture Board, South Africa has approximately 33.5 million Internet users, representing 61 percent of the population as of December 31, 2014.

Getting more people connected to the Internet will be good for all of South Africa, Knott-Craig said. “The more people in South Africa that are on the grid, whether it is the poor or the rich, the faster our economy can grow,” he said.

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South African president Zuma under pressure as economy worsens

Comments (2) Africa, Featured, Politics

Jacob Zuma

Analysts point to potential losses for the African National Congress in upcoming local elections, which could pave the way for Zuma to exit the presidency later this year.

South Africa’s venerable African National Congress party may lose political ground in upcoming municipal elections as economic conditions worsen and controversy swirls around President Jacob Zuma.

As business confidence in the government and popular opinion of Zuma plummet, some are predicting the ANC could pave the way for Zuma to exit the presidency later this year if the local elections go badly.

Zuma’s six-year tenure has been mired by accusations of corruption, policy missteps and controversial appointments that his critics contend have created economic stagnation and stifled investment in South Africa.

Ouster of finance minister sparks protests, while rand plunges

Zuma caused a national uproar in December when he abruptly fired a respected finance minister and then was forced to sack an inexperienced replacement only four days later amid protests and plunging currency rates and capital markets.

The rand dropped to under 16 to the dollar for the first time and the benchmark stock index lost the equivalent of $11 billion after Zuma fired finance minister Nhlanhla Nene and replaced him with parliamentarian David van Rooyen on Dec. 9.

Business leaders protested while thousands of South Africans took to the streets using the slogan “Zuma Must Fall” and demanding that Zuma leave office.

ANC leaders persuaded Zuma to quickly replace van Rooyen and a measure of stability was restored with the appointment of a third finance minister, Pravin Gordhan who had served in that post from 2009 to 2014.

Economy worsens with record drought

South Africa, the most industrialized country on the continent, was under economic pressure well before the latest events. The rand has steadily declined, losing half its worth since Zuma took office in 2009. The economy is stagnant, unemployment is high, and the country is undergoing its worst drought since record keeping began in 1904.

Maize production has dropped by 30 percent and prices on the South Africa Futures Exchange have more than doubled in the past year. While agriculture makes up only a small fraction of South Africa’s gross domestic product, the country will be forced to import food, including as much as $710 million worth of maize, which will result in even higher prices.

Christo Joubert, a price analyst with the National Agricultural Marketing Council, said the council expected prices to increase by as much as 20 percent in 2016. “The drought is hitting everything,” Joubert said.

The higher prices will present further struggles in a nation with an unemployment rate of 30 percent. Also, analysts predict the nation’s economy could stagnate in 2016 for the third straight year, with a growth rate of less than 1 percent.

Support for government declines

ANCBusiness confidence and popular support for the incumbent government have also dropped.

The business community’s confidence dropped to its lowest rate in 20 years, according to the South African Chamber of Commerce and Industry. As the finance upheaval unfolded in December, the chamber’s confidence index declined to 79.3 percent, the lowest level since June 1993.

Meanwhile, even before December’s events, public distrust of the president had reached a record 66 percent, up from 37 percent in 2011. A majority of South Africans believe Zuma ignores the courts and the parliament, according to an Afrobarometer poll released in November.

Municipal elections could be pivotal

The troubled economy and public distrust put in doubt whether the ANC can maintain its grip on power and whether Zuma will serve out his term.

The ANC has won 60 percent of the vote since coming to power with Nelson Mandela two decades ago.

Gary Van Staden, an analyst with NKC African Economics, said the party could lose as much as 10 percentage points of support in local elections between May and August. He said the ANC can expect to lose control in some municipalities, which run parks, libraries, utilities and sanitation.

If the elections go badly for the ANC, some analysts predict the party will try to replace Zuma.

“We look for a cornered ANC machine having the possibility of managing the exit of President Zuma around July,” said Peter Attard Montalto, an analyst at Nomura.

For now, however, the ANC has voiced support for the embattled president. In the annual speech on the January 8 anniversary of the party, Zuma touted the progress the ANC has brought to the country and said the ANC was needed as a unifier.

Meanwhile, several possible candidates to become Zuma’s successor have emerged. Among those mentioned are Zuma’s former wife, Nkosazana Dlamini-Zuma, who heads the African Union Commission; Cyril Ramaphosa, the deputy president; and Baleka Mbete, the ANC national chairwoman and speaker of parliament.

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Tanzania stock exchange poised for initial public offering

Comments (0) Africa, Business, Featured

dar es salaam stock exchange

The East African nation will become one of only three on the continent that is owned by shareholders.

Tanzania’s stock exchange is poised to join an elite African club as it finalizes plans for an initial public offering by the end of March.

Only two other African exchanges trade their own stock. The Johannesburg Stock Exchange became self-listing in 2005, followed by the Nairobi Stock Exchange in 2014. But about a dozen more African countries are considering the change.

In Tanzania, the Dar es Salaam Stock Exchange (DSE) has an application for the initial public offering (IPO) pending before the Capital Markets and Securities Authority.

With approval, the stock exchange expects to conduct both its initial public offering (IPO) and self-listing before the end of the first quarter this year, according to Moremi Marwa, chief executive officer of the exchange.

Stock exchange will be owned by shareholders

In this process, the exchange will demutualize, which means it will change from a member-owned entity to become a public limited company that is owned by shareholders. Once the self-listing is completed, the name of the exchange will be changed to Dar es Salaam Stock Exchange Public Limited Company (PLC).

Conversion to a public limited company is expected to strengthen governance of the exchange and enable it to better ensure financial sustainability since it will be able to raise funds through rights issues or bond issues.

This translates into access to efficiently priced funds to finance the exchange’s growth, including investments in new trading technologies, products and services as regional financial markets become more competitive.

Ambitious plans for growth

The Dar es Salaam Stock Exchange has a market capitalization of 20.8 trillion Tanzanian shillings ($9.5 billion). The exchange has an ambitious goal: By 2017 it aspires to build more than double its market value to equal half of Tanzania’s gross domestic product, which was estimated at $40 billion in 2015.

Last year, the stock exchange scrapped controls on foreign ownership of shares in order to boost demand. As a result, the exchange was Africa’s best performer last year, when it gained 64 percent. Trading in November totaled more than $42 million, according to the African Securities Exchanges Association.

Marwa also said he expects the Tanzanian exchange to add at least five new listings of equities and corporate bonds this year.

Currently, 22 companies are listed or cross-listed on the exchange, which was founded in 1996 and began trading in 1998.

Self-listing trend grows

Self-listing by stock exchanges started when the Stockholm Stock Exchange made the change in 1993, followed by Helsinki (1995), Copenhagen (1996), Amsterdam (1997), the Australian Exchange (1998) and Toronto, Hong Kong and London stock exchanges in 2000.

Given the advantages of demutualization, Marwa said more than a dozen other exchanges in Africa are considering initiating the process. There are 29 stock exchanges on the continent.

Despite its growth in 2015, the Dar es Salaam Stock Exchange is dwarfed by Africa’s largest stock exchange, the Johannesburg Stock Exchange with a market capitalization of more than $1 trillion.

Tanzania’s economy is the 12th largest in Africa. It grew by more than six percent in 2015, with infrastructure construction and transportation projects in the run-up to national elections driving economic growth.

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South African entrepreneur is first black woman to launch an airline

Comments (0) Africa, Business, Featured

Siza Mzimela

Siza Mzimela, a longtime aviation executive, is CEO of Fly Blue Crane, which operates flights to several locations in South Africa.

South African entrepreneur Siza Mzimela is making an important mark on aviation as the first black woman in the world to start an airline.

Mzimela is founder and CEO of Fly Blue Crane, a fledgling airline that flies to several destinations within the country and hopes to expand to regional cities.

Mzimela said she is tapping her years of experience leading other airlines, including South African Airways, the country’s largest airline, to shape Fly Blue Crane to meet customer expectations for consistent, on-time travel. The CEO promised convenient, problem-free booking and travel with competitive fares.

New airline is based in Johannesburg

Blue Crane, based at O.R. Tambo International Airport in Johannesburg, launched in August offering several flights daily to Bloemfontein, Kimberley and Nelspruit.

Blue Crane later added flights between Kimberley and Cape Town and between Bloemfontein and Cape Town, but announced that flights to Nelspruit would be discontinued in January because of lack of capacity.

The airline hopes to find success serving provincial and regional capitals in southern Africa.

Mzimela said that airports in Johannesburg, Durban and Cape Town had more than enough air service. But Fly Blue Crane wants to fill gaps in the market in smaller cities such as Kimberley within South Africa and then expand to regional centers.

She wants to use the airline to open new routes that will help improve the economies of smaller markets, she said.

fly blue crane

Regional expansion is a goal

While service within South Africa is the immediate priority, the new airline wants to expand beyond those borders. Mzimela hopes to add destinations in Botswana, Namibia, Zimbabwe and the Democratic Republic of Congo.

Fly Blue Crane operates a fleet of four fuel-efficient 50-seater Embraer Regional Jet 145 aircraft, which enables quick turnaround and efficient crews.

The new company is taking off at a time when the airline industry in Africa is poised to expand. According to the African Airlines Association, there is opportunity for African carriers to expand intra-African and domestic travel for a growing middle class while global carriers dominate intercontinental travel. More than 20 carriers are based in South Africa, the largest being South African Airways with a fleet of 65 planes.

Founder has headed two other airlines

Launching an airline isn’t the first “first” for Mzimela.

She was the first female CEO at both South African Express Airways and South African Airways. At South African Airways, she introduced non-stop flights to New York and Beijing  – a first in the history of the airline.

Mzimela also was the first woman in 67 years named to the board of directors of the International Air Transport Association. She serves on the South African Tourism Board and is a member of the board of the Oprah Winfrey Leadership Academy for Girls.

In 2012, she was named one of the 10 Greatest Female Leaders in Africa Today by Ventures Africa.

Mzimela also founded Blue Crane Aviation, an aviation services company providing African airlines with consulting, and legal and aircraft management services. She serves as the company’s executive chairperson.

She graduated with a degree in economics and statistics and began her career in banking before moving into the airline industry as a researcher.

Few women rise to the top in the airline industry

Mzimela said being a woman executive in the aviation industry has posed challenges. Globally, only 12 of 248 airline CEOs are women, fewer than 5 percent. Sexism and lack of female mentors are cited as factors that hold women back from executive posts.

“I don’t know how many times I walked into meetings and people just assumed I probably was the one who was going to be taking notes,” she said.

Mzimela said her success managing established companies motivated her to want to “build something better from the ground up.”

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Nigerian Billionaire Aliko Dangote Takes On a New Industry: Tomatoes

Comments (0) Africa, Business, Featured

nigeria tomatoes

Africa’s richest man Aliko Dangote has built a giant tomato processing factory which aims to boost Nigeria’s tomato production, domestic output, and jobs.

Nigeria grows around 1.5 million metric tons of tomatoes each year, making it Africa’s second largest producer and the world’s 13th. And yet Nigeria is not on the list of official exporting countries of tomatoes or tomato products. In fact, to meet local demand of more than 2 million metric tons of tomatoes, the country imports large quantities of both fresh and processed tomatoes, mostly from China. It is the world’s largest importer of tomato paste, seeing over 300,000 metric tons ($360 million) of tomato paste imported annually.

It’s a situation comparable to Nigeria’s oil industry. While it is the largest oil producer in Africa, gasoline shortages are a regular occurrence as a lack of infrastructure, poor maintenance, and mismanagement have left refineries working below capacity and forced a reliance on imports. Oil makes up just 14% of GDP, while 38% of the country’s imports are petroleum products.

In explanation of the tomato statistics, the Central Bank of Nigeria reports that the approximately 200,000 Nigerian farmers growing tomatoes lose about half of their harvest each year, due to poor food supply chain management and inadequate infrastructure of water, storage, and power supply facilities. The remaining half of the harvest is then subject to price depression, caused by the perishable nature of crops, pests and disease, high rains at peak season, poor marketing, multiple levies by state and local government agents, corrupt practices by officials at air and sea ports, and the costs of processing, packaging, and storage machinery and equipment. Farmers are unable to consistently make a profit, and as a result, many have stopped cultivation.

Dangote Tomato Processing Factory

Aliko Dangote

Aliko Dangote

But Africa’s richest man, Aliko Dangote, is looking to change the future of Nigerian tomatoes. Aiming to create jobs and boost Nigeria’s tomato production and domestic output, he has spent the last five years building a $20 million tomato processing plant outside the country’s second largest city, Kano (a city which has been blighted by poverty and unemployment, and the Islamist group, Boko Haram).

Set to open next month, the Dangote Tomato Processing factory will be Africa’s largest: the size of 10 football pitches set within 17,000 hectares of irrigated fields. It is expected to produce 430,000 tons of tomato paste per year. And it will directly employ 120 people, buying tomatoes from 50,000 farmers. The factory will employ modern farming techniques and improved seed varieties and chemicals (funded by the Central Bank of Nigeria) which are expected to increase yields and encourage farmers back into growing tomatoes.

The factory’s general manager, Abdulkarim Kaita, said: “Nigeria is such a huge market for tomato paste that we will find quite challenging to satisfy. Already local tomato paste packaging companies have placed orders with us which we will have to work hard to satisfy. We are set to begin operations. We are only waiting for the tomatoes which are ripening in the fields.”

Aliko Dangote

Aliko Dangote is the founder of the Dangote Group, one of Africa’s leading conglomerates. He comes from Kano, now home to his tomato factory, where, in 1977, he started the Dangote Group as a small food-trading company. Helped with a $3,000 loan from an uncle, he went on to transform this small business into an import and trading company with interests in flour, sugar, and salt. And almost four decades later, the Group is active in 15 African countries, and has expanded to cement, steel, real estate, telecommunications, haulage, port operations, polypropylene packaging, and oil and gas.

Dangote Cement is Africa’s largest cement producer, and counts plants in Cameroon, Ethiopia, Zambia, and Tanzania, producing more than 30 million metric tons annually. And, dominating the sugar market in Nigeria, the Dangote Group sugar refinery in Lagos is the second-largest in the world.

Despite a weak Nigerian currency and domestic difficulties which saw his net worth plunge $5 billion over the past year, Dangote is still Africa’s richest man. With an estimated net worth of $14.3 billion dollars (Jan 2016), Forbes ranks him as the 67th richest person in the world.

The Dangote Group

But while undoubtedly Dangote has seen huge success in Nigeria, there are also concerns that his actions are not entirely positive for the country.

Dangote Cement Factory

Dangote Cement Factory

For example, thanks to Nigeria’s characteristic power cuts, the Kano factory is to rely on diesel generators for electricity, something which will significantly add to production costs and therefore reduce the factory’s ability to compete with imported products. This status quo has so far led to the closing of numerous factories in the state of Kano, including two of Dangote’s own factories. As a solution, the Nigerian government plans to put restrictions on tomato imports in place this year, giving Dangote a forced competitive edge. The vice-president of Nigeria’s manufacturers union, Ali Madugu, comments: “Once the government can place restrictions on the import of Chinese tomato pastes… the sky’s the limit for the Dangote tomato paste because the market is there for them to exploit”.

Some fear that this policy of government assistance – whether higher tariffs, restrictions on imported products or outright bans – is creating damaging monopolies in Nigeria, which push up the local prices that everyday Nigerians must pay. For example, Dangote Cement makes a profit margin of 60% per bag of cement in Nigeria, but a margin of between 6% and 13% across the rest of Africa. Nigerians pay, as a general rule, twice or three times more than any other African country for cement. Restrictions on imported paste (which could be sold at prices that undercut the Dangote Group) could have the same effect, placing Dangote Tomato Processing in a position of monopoly, able to control pricing, production, and jobs.

Again aligning his own interests with those of the nation, as his businesses often seem to have done, Dangote has also announced a move into Nigeria’s precarious oil industry. The 650,000 barrel-per-day Dangote Petroleum Refinery and Petrochemical Company, located in the Lekki Free Trade Zone in Lagos, is scheduled for completion by early 2018. Promising to reform the Nigerian oil industry, increase productivity, and create more jobs, the facility will produce gasoline, diesel, aviation fuel / household kerosene, polypropylene, and fertilizer, and will be the fifth-biggest in the world.

Senior General Manager, Madhav Kelkar, said Dangote’s plant would not just supply the domestic market, but could lead to a self-sufficient Nigeria that could export to other parts of the world. And perhaps this is so. But for now, only the longer-term local price of tomato paste will reveal whether this tomato processing factory has been a positive development for the people of Nigeria.

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