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1.1 Billion Wallets: Preparing to Meet African Demand

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Consumer Affluence in Africa

By 2020, the African continent will have two times as many affluent consumers as the United Kingdom and companies should be preparing to market to this enormous group.

According to Boston Consulting Group (BCG), Africa will have twice as many affluent consumers as the United Kingdom by 2020. BCG predicts that Africa will have at least 1.1 billion consumers by 2020 (the current population of the continent is approximately 1.1 billion), more than the population of Europe and North America combined. Their latest report, “African Consumer Sentiment 2016: The Promise of New Markets,” provides marketing firms and corporations with the data they need to capitalize upon the increasing quantities of disposable income across the African continent.

The Numbers Game

Africa is home to nearly 15% of the world’s population–more than 1.1 billion individuals spread across more than 50 nations–while the United Kingdom has fewer than 65 million citizens, so this numerical growth in affluence should not come as a surprise. BCG defines a consumer as an individual between 18-75 years of age with a monthly income between $50 and $7,000 per month. The data for this report was compiled during 2015, when BCG polled more than 11,127 consumers across 11 African countries. Persons with no stated income, with no purchasing freedom (i.e. those who do not make purchasing decisions for their families) or those outside of the age brackets were not included in these face-to-face surveys. While this is likely the most complete data on consumers ever compiled, it should be noted it was created using data from less than one quarter of the continent’s countries.

Key Findings

During their study, BCG found that 88% of African consumers were optimistic about the future which “bodes well for the continent, because optimistic consumers are more inclined to buy.” BCG surveyed citizens in Algeria, Angola, Cote d’Ivoire, the Democratic Republic of the Congo (DRC), Egypt, Ethiopia, Ghana, Kenya, Morocco, Nigeria and South Africa and found that in the most affluent countries with the highest proportions of disposable income (Egypt and Morocco), citizens are more interested in spending on “luxury” items such as bath and beauty products, large appliances, vehicles, clothing and electronics, while those in countries with the lowest financial security (Angola, South Africa, the DRC, and Cote d’Ivoire) are less able to purchase big ticket and luxury items.

BCG helpfully noted that even in financially insecure markets, “certain products–like mobile phones–are a greater priority than food,” highlighting the potential for a wide range of multinational corporations to profit from the growing consumer population.

South African youth on mobile internet

South African youth on mobile internet

The vast majority of Africans access the internet through their phones (as opposed to through laptops or desktops), meaning that mobile phone producers stand a good chance to make a name in this market. BCG found that Africans have a strong sense of what can be considered brand loyalty: brand names play an important role in African society, and “social approval of a brand is an increasingly strong influence on purchasing decisions,” although this has decreased slightly from a similar study done in 2013. Brands are most important in electronic purchases (such as mobile phones or mobile music players) and less important in clothing and shoe purchases.

Following the Flock

Perhaps predictably, younger consumers are more influenced by the opinions of their peers while older consumers are more influenced by their spouses or partners: 59% of Moroccans ages 35-44 said their purchases are influenced by spouses while 31% of Moroccan adults 25-34 agreed (this should not be considered surprising, as those in a higher age bracket are more likely to be partnered or married) while conversely, in South Africa, just 13% of adults 35-44 said their purchases are influenced by friends while 33% of 18-24 year old South Africans agreed.

As well as mapping consumer habits, BCG also researched the most effective ways to attract consumers through advertising. Television was the most influential advertising channel overall (as opposed to radio, newspaper ads, the internet or social media), but other forms were significantly successful in various countries. In Ghana, consumers reported being influenced by radio ads, in Nigeria by online advertising and Egyptians by newspaper ads and billboards. These differing results suggest that advertisers need to know their markets in order to attract the maximum number of consumers. One size certainly does not fit all, particularly when discussing a 1.1 billion people in more than 50 countries.

The Time is Now

As optimism and disposable income increase across Africa, citizens are more likely to become major players in the global consumer culture. Corporations should pay attention to their markets and create specific, targeted advertising schemes if they wish to profit off of this growing market.

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South Africa’s rand bounces as emerging markets shake off Turkey coup worries

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JOHANNESBURG (Reuters) – South Africa’s rand gained nearly two percent early on Monday as emerging markets set aside concerns about a failed coup in Turkey over the weekend and investor focus shifting back to the timing of rate hike in the United States.

* Rand at 14.2900 at 0645 GMT, 1.85 percent firmer than New York close. The rand trended firmer for most of the previous week as investors globally favoured high yield assets.

* Risk appetite could drop later in week after strong economic data from United States suggest higher interest rates soon.

* Stocks due to open flat at 0700 GMT, futures index up 0.11 percent.

* Government bonds softer, yields up 4 basis points to 8.77 percent.

 

(Reporting by Mfuneko Toyana; Editing by Ed Cropley)

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From Tragedy to Tech Triumph: Mubarak Muyika

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Mubarak Muyika

The remarkable story of Mubarak Muyika and his burgeoning tech empire.

The tech scene is exploding across Africa as ambitious young entrepreneurs are changing the face of the continent. Kenyans have been at the vanguard of the action in recent years. One individual currently making big waves is Mubarak Muyika, a dynamic 22 year old with a colorful past.

Muyika was born in Western Province, Kenya. His father was a prominent civil servant and his mother was a high school teacher. Unfortunately, his young life was marked by tragedy: his father passed away when he was two years old. Then, when he was ten, his mother died and the young orphan was taken in by his mother’s sister and her husband.

Great Beginnings

It has long been observed that tragedy seemingly makes, or breaks an individual. In Muyika’s case, it was most certainly the former. He was known as a sharp and gifted student and it was in the early days of high school that his tech-entrepreneurial promise first blossomed.

Aged 16, Muyika developed the “enhanced petrol tracker.” The tracking database was designed to mitigate government mismanagement of oil resources by more efficiently cataloguing oil tanker movements, oil flow and demand. The project was incredibly well received. He was recognized as the best student in the computer exhibit category at the annual Kenya Students Congress on Science and Technology.

His adoptive parents were the owners of a book publishing and distribution company, Acrodile Publishers. Mubarak realized that the web presence provided by their current website manager was substandard and expensive, bottlenecking the company’s productivity. He taught himself PhP, Java and HTML and built a highly functional website for the business.

Business Blossoms

On the back of his newly earned skills, Mubarak launched his first business, Hype Century Technologies and Investments LTD. The company offered website designation, management, domain reselling and hosting services. He enlisted the help of two friends and the business quickly began to take off.

In a 2012 interview, Mubarak spoke about Hype Century’s remarkable success in the startup period: “By May after our first financial year we had about 1,800 domains which represented clients in Kenya, Uganda, Tanzania, South Sudan and some in the RC (Republic of the Congo). That was something that I can say is the biggest achievement, in terms of where the company is today.”

It was during this early period that Kenyan multi-millionaire Chris Kirudi realized Mubarak’s great potential. Through his contacts he recommended Mubarak for a scholarship to one of the world’s most prestigious universities, Harvard. Incredibly, Mubarak turned down the scholarship in order to focus on his business ventures, demonstrating extreme belief in his own talents and entrepreneurial ability. He is a man who knows his own mind. He gave insight into his tenacious business philosophy, saying, “If you are in a society with intelligent people who have a plan and a strategy, you need a plan, a strategy, speed and aggression. That is the only way to succeed in Africa.”

Soon, Mubarak’s business attracted heavyweight attention. International tech investor Jignesh Patel teamed up with the rising star, buying a 25% stake in the company. This proved to be a shrewd move, as Patel’s connections and experience propelled the firm to even higher heights.

A Bright Future

Zagace platform

Zagace platform

However, Mubarak soon felt the itch to challenge himself further; he clarified his decision to move on from Hype Century saying, “I had the feeling that I was not maximizing my potential. I opted to sell my shares and develop a new venture.”

In 2013, he settled a deal netting himself a cool six figure settlement for his 60% stake. Astonishingly, Mubarak was still only 19 years old.

His newest venture, ZAGACE is both ambitious and innovative. His firm offers a unique service providing a completely integrated, online business management toolkit for small and medium sized companies. ZAGACE allows users to manage human resources, inventory, accounting and communications all through a series of well designed, instanced apps. The concept has been lauded as ingenious and effective.

Eager to feed his business with the best talent available, Mubarak has recently moved his operations to Silicon Valley, USA. The young Kenyan means serious business, and the world has noticed. In 2015, he was named one of Africa’s most promising entrepreneurs in Forbes 30 under 30, while Yahoo named him one of nine “Mark Zuckerbergs” of other countries. With his talent, resilience and determination, Mubarak Muyika is setting the tech scene ablaze. We will no doubt be hearing more about him, very soon.

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ExxonMobil declares force majeure on Nigeria’s Qua Iboe crude oil: spokesman

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LONDON (Reuters) – ExxonMobil subsidiary Mobil Producing Nigeria has declared force majeure on exports of Nigeria’s Qua Iboe crude oil, the country’s largest export stream, a spokesman said on Friday.

The declaration came after the company observed a “system anomaly” during a routine check of its loading facility on July 14.

“We are working to ensure loading activities at the facility return to normal. We cannot speculate on any timeline for repairs,” the spokesman said. “Qua Iboe Terminal is operating and production activities continue.”

Nigeria has struggled to maintain its crude oil production following a spate of militant attacks and technical problems that in May pushed production briefly to 30-year lows. While the cause of the latest issue was not immediately clear, traders said it would take least two to four weeks to repair.

Earlier this week, Exxon denied claims from militant group the Niger Delta Avengers to have blown up the Qua Iboe 48″ crude oil export pipeline operated by the company.

Spokesman Todd Spitler said on Friday there was no connection between the force majeure and militant attacks.

Exxon has struggled to bring production of Qua Iboe back to normal after an accident in May on a drilling rig that damaged a pipeline, after which the company also declared force majeure.

Since lifting that declaration in early June, there have been roughly three revisions to loading schedules, attributed to a slower-than-expected resumption of flows, with loading delays of at least five days.

 

(Reporting by Libby George; editing by David Clarke and David Evans)

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South Africa’s mines minister calls for quick platinum wage deal

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CARLETONVILLE, South Africa (Reuters) – Platinum mining firms and South African trade unions should conclude wage talks quickly to avoid the protracted disputes that led to a five-month strike two years ago, mines minister Mosebenzi Zwane said on Friday.

“I wish that everybody can negotiate with cool heads and avoid a strike and speedily resolve these negotiations,” he told reporters at a Sibanye Gold mine.

Talks between unions and the mining companies started this week.

The Association of Mineworkers and Construction Union (AMCU), the biggest union in the sector, is demanding pay hikes of more than 50 percent, while a smaller union, the National Union of Mineworkers, is seeking a 20 percent increase.

The demands are well above inflation at 6.1 percent. Africa’s most developed economy is struggling due to lower commodity prices and drought. The International Monetary Fund estimates almost zero growth this year.

South Africa has the biggest and most lucrative platinum reserves but labour unrest and regulatory uncertainty have dampened investor appeal.

The strike in 2014, which was led by AMCU, hit Anglo American Platinum , Impala Platinum and Lonmin, forcing them to cut jobs, sell mines and, in some cases, make cash calls to investors.

 

(Reporting by Nqobile Dludla; Writing by Tiisetso Motsoeneng; Editing by Joe Brock)

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Beninese doctor honored for “green” anti-malaria drug

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Valentin Agon

Valentin Agon wins $100,000 innovation prize for an effective and inexpensive treatment made from a plant extract.

A Beninese doctor has won a top innovation prize of $100,000 for an anti-malaria drug he developed from a natural plant extract.

Valentin Agon received the Innovation Prize of Africa in June for his creation of the drug, Api-Palu, which is already being marketed in Benin, Burkina Faso, Chad and Central African Republic.

The drug is significantly less expensive to produce than other anti-malarial drugs and is more effective.

“Api-Palu is a remarkable product that (has) affordability, a good safety profile, and a fast rate of malaria parasite clearance from the blood following short-term treatment at relatively lower doses,’’ innovation prize officials said.

Nearly 1,000 contestants

Agon won first place in the competition among 10 finalists chosen from nearly 1,000 applicants.

Imogen Wright of South Africa took 2nd place for Exatype, software that helps health care workers determine whether HIV patients are responding to drug treatments. Eddy Agbo of Nigeria received the Special Prize for Social Impact for Urine Test for Malaria, a medical device that can diagnose malaria in less than a half hour. Wright and Agbo each received $25,000.

Innovation Prize for Africa 2016

Innovation Prize for Africa 2016

The awards program, a project of the Africa Innovation Fund, rewards healthcare solutions that address Africa’s malaria and HIV/AIDS problems.

Jean Claude Bastos de Morais, founder of the innovation competition, said the project had amassed a database of more than 6,000 innovators and made cash investments of $1 million since it began five years ago.

He said the award to Agon for his anti-malaria drug was particularly gratifying.

“A product for malaria coming from Africa for Africans, this is my dream. My dream comes true. Finding a solution based on a natural product is what I have dreamed about,” de Morais said.

Green medicine researchers

Educated in Canada and Cuba, Agon has researched green medicines for 25 years and has spent 16 years developing the drug. He plans to use the prize money to increase production and hopes to distribute the drug in every country in Africa by 2017.

His discovery is cheaper because it is extracted from a plant that is abundantly available on the continent. It is also more effective than other anti-malarial drugs because it inhibits 3D7 strains of Plasmodium falciparum, which cause malaria, and can act against the disease within a few hours, the innovation judges said in awarding him the top prize. It is available in the form of tablets, capsules or syrup.

An estimated three billion people are at risk for malaria worldwide. The World Health Organization estimates that sub-Saharan Africa accounts for 88% of all cases of malaria and 90% of reported deaths.

Costly treatment

“Some African governments spend up to 40% of their public health budgets treating malaria,” the innovation contest said. “In this context, Api-Palu, can be considered a significant contribution in the fight against malaria.”

According to the Centers for Disease Control and Prevention, Africa is highly vulnerable to malaria because the predominant species, Plasmodium falciparum, is most likely to cause death, and the climate allows transmission to occur year round.

In other areas of the world, such South Asia and Latin America, malaria is less likely to cause death but can still result in severe illness and incapacitation, according to the CDC.

The disease continues to be a serious problem, but eradication efforts are showing results.

Since 2000, malaria death rates globally have fallen by 60%, and new cases have dropped by more than a third, according to the World Health Organization. In Africa, death rates dropped by more than two-thirds.

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IMF agrees $150 mil credit facility with Niger

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NIAMEY (Reuters) – The IMF has agreed a $149.7 million extended credit facility to Niger, one of the world’s poorest countries, with the first $17.1 million tranche to be paid immediately, its finance minister said on Thursday.

“Niger continues to record key progress in the implementation of its programme,” Saidou Sidibe said in a statement.

Niger, a main supplier of uranium to French nuclear power plants, has suffered a double economic hit over the years from insecurity at the hands of Islamist Boko Haram militants operating in its southeast and poor harvests caused by erratic weather.

The IMF expects the economy to grow 5.2 percent this year, after some improvements in agriculture, oil and mining. The land-locked West African nation is currently ranked bottom of the U.N. Human Development Index out of 188 countries.

 

 

(Reporting by Boureima Balima; Writing by Tim Cocks, Editing by Angus MacSwan)

 

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After two decades, Gabon returns to OPEC

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Tullow Oil in Gabon

The West African nation becomes the smallest producer of oil in the cartel, producing only 200,000 barrels a day.

More than 20 years after Gabon left OPEC in a dispute over its budget contribution, the West African nation has rejoined the oil cartel.

Gabon returns to the Organization of Petroleum Exporting Countries amid a two-year oil glut that has reduced the cartel’s power to prop up global oil prices.

Gabon was the second former member to rejoin OPEC this year, following Indonesia, which quit in 2008 then returned in January.

Gabon is the smallest producer among OPEC’s 14 member countries. It produces 200,000 barrels of oil per day, but according to the International Energy Agency, the nation’s output is declining.

Gabon, which joined OPEC in 1975, left in 1995 after the cartel refused its request to reduce its financial contribution to the organization, making it more proportionate with its production. At the time, Gabon produced about 340,000 barrels of oil per day, about one percent of total OPEC production.

Struggling with oil slump

Like other OPEC members, Gabon is struggling with the slump in global oil prices, and rejoining the cartel enables the country to strengthen its ties with countries that share similar challenges.

In response to the slump, Gabon is also working to shift more of its economy to agriculture. The nation, with a population of less than 2 million, currently imports nearly all of its food.

Working with Olam International Ltd., the Gabonese are trying to persuade young people to take up farming.

Farming in Gabon

Farming in Gabon

“We need to foster development of an agro-industry here,” Gagan Gupta, country head at the Singapore-based company’s Gabon unit, told Bloomberg. “It’s about creating human capital.”

As part of the effort, about 2,500 Gabonese will observe cocoa farming in Ivory Coast, learn techniques at a palm-oil plantation in Asia, or train as bulldozer operators in Morocco, Gupta said.

Unemployment high, despite growth

Olam also will work with Gabon to develop nearly 250,000 acres of oil-palm plantations.

According to the World Bank, Gabon is an upper-middle-income country that experienced strong economic growth during the last 10 years, mostly from oil and manganese production.

In 2015, oil accounted for 70% of Gabon’s exports, and 20% of the nation’s gross domestic product. Economic growth weakened to 4% in 2015 because of the drop in oil prices, forcing the government to cut investments designed to promote economic diversity.

Even though Gabon’s economy has been growing, it has failed to create enough jobs, the World Bank said. Unemployment in 2010 was more than 20%.

Nations seek production freeze

OPEC, meanwhile, has seen its global clout diminished. The cartel has attempted to negotiate a deal with Russia to freeze production levels in order to prop up prices. However, OPEC disunity has stalled the effort so far.

In June, Venezuela oil minister Eulogio del Pino said talks might revive in September, when Iran reaches pre-sanction output levels. Iran, freed last year of international sanctions that limited production, has sought to boost output and has resisted limits.

Del Pino said he also would propose that OPEC adopt “production ranges” that would allow production to fluctuate, rather than talking about an unpopular production ceiling.

Venezuela has suffered badly from the oil price collapse production declines. Del Pino said recent rains that helped power production have prompted a recovery.

In 2014, OPEC abandoned its policy of limiting oil production to shore up prices.  Steep price declines followed. Oil, which sold for $110 a barrel in 2014, slumped to a low of $26 per barrel earlier this year. It recovered somewhat this spring with prices mostly in the range of $45-$50 in recent months.

OPEC nations, led by Saudi Arabia, have been willing to absorb the financial impact of plummeting oil prices in order to preserve market share and hurt competitors with higher productions costs, such as U.S. shale producers.

OPEC also accounts for a smaller share of global production that in the past, when the cartel dominated the marketplace. Total OPEC production is nearly 37 million barrels a day while non-OPEC production is nearly 57 million barrels daily, according to Global Risk Insights.

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Steinhoff gets its European deal with $800 mln Poundland buy

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By James Davey and Zandi Shabalala

LONDON/JOHANNESBURG (Reuters) – South African retailer Steinhoff has agreed to pay nearly $800 million for British-based discount chain Poundland after two previous attempts to expand in Europe fell through this year.

The $23 billion company, which sells beds and cupboards to less affluent shoppers in Europe, southern Africa and Asia, is keen to grow its European business when consumers are turning to cheaper chains and its home market is also struggling.

Steinhoff already owns the Bensons Beds and Harvey’s furniture chains in Britain. The Poundland deal is third time lucky after it failed to secure Britain’s Home Retail, which owns Argos, and was also unsuccessful in a bid for Darty in France.

It is the biggest takeover of a listed British company since a vote on June 23 to leave the European Union, a decision which has prompted concern that Britain may fall into recession.

The fall in the value of the pound is making British assets cheaper for foreign buyers.

Steinhoff, in which South African billionaire Christo Wiese is the largest shareholder, has a reputation for buying underperforming companies that can benefit from its wide global network to source goods at lower prices.

It will pay 220 pence per share plus 2 pence in dividends, valuing the Poundland at 597 million pounds ($791 million).

The price is a premium of 39 percent to Poundland’s share price on June 13 — the day before Steinhoff first bought Poundland shares. It had since built up a 23.6 percent stake.

Shares in Poundland surged 12.6 percent to 220.7 pence by 1050 GMT.

Momentum Wealth head Wayne McCurrie questioned the price the Johannesburg-based company plans to pay for Poundland, which as its name suggests sells every item at a single price of a pound at its UK stores.

“Steinhoff is paying quite a big premium,” McCurrie said. “This might be a bit negative for Steinhoff in the next year or two as the British economy tries to find its new home.”

Poundland listed at 300 pence in 2014. But its shares have lost 42 percent of their value over the last year, hit by subdued trading, adverse currency moves and the distraction of integrating the 99p Stores chain it bought for 55 million pounds.

It has also faced pressure as British supermarkets fight a price war spurred by the growth of German discounters Aldi and Lidl.

COMPLEMENTARY FIT

Buying Poundland would give Steinhoff more than 900 shops in Britain, Ireland and Spain.

“Steinhoff is developing a fast-growing, price-led retail business across the UK and the rest of Europe. Poundland would be a complementary fit to this growth story,” said Steinhoff Chief Executive Markus Jooste.

The deal gives Poundland shareholders a return on their investment without having to await the benefits of a turnaround strategy.

“The Poundland Board believes that (Steinhoff’s) all-cash offer presents Poundland shareholders with an opportunity to realise their shareholding at a certain and attractive price,” Chairman Darren Shapland said.

Jim McCarthy, who stepped down this month after 10 years as chief executive, is in line for a 22 million pound payment for his stake.

Steinhoff’s further expansion in Europe, where it already makes more than 70 percent of its sales, would reduce its reliance on a shaky home market where its furniture unit JD Group is cutting jobs and closing branches because of weak demand.

($1 = 0.7547 pounds)

($1 = 0.9043 euros)

(Editing by Keith Weir)

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South Africa’s May retail sales beat expectations

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JOHANNESBURG (Reuters) – South African retail sales rose more than expected in May to their strongest level in more than two years, signalling the economy may be on the mend after contracting in the first quarter of this year.

Retail sales in Africa’s most industrialised economy rose by 4.5 percent year-on-year in May, its strongest rise since early 2014 after expanding by a revised 1.6 percent in April, Statistics South Africa said on Wednesday.

Analysts polled by Reuters had forecast a 1.6 percent year-on-year increase in May.

On a month-on-month basis, sales rose by 3.4 percent and were up 3 percent in the three months to May compared with the same period last year.

The South African economy, beset by high and persistent unemployment, has been hobbled by low commodity prices and a severe drought.

“Second quarter 2016 saw commodity prices recover, with tentative signs to date that the industrial sector has pulled out of recession on a stronger performance from manufacturing production,” Investec economist Annabel Bishop said in a note.

“The economy could just manage to avoid recession in the first half of this year, potentially recording a small fractional positive for the second quarter instead.”

Manufacturing data on Tuesday showed output rose more than expected in May to its strongest level in nearly a year.

Overall economic output fell by 1.2 percent in the first quarter of 2016 mainly due to a slide in the mining sector, putting South Africa on course for its first recession in seven years.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Ed Cropley)

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