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South Africa’s rand recovers slightly, stocks down on Brexit

24 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand recovered some its losses against the dollar after falling heavily on Friday as Britons voted to quit the European Union, stunning emerging markets currencies.

Stocks also suffered, but gold shares soared in tandem with the metal’s price which surged 8 percent to its highest in more than two years as demand for safe havens assets like bullion and silver rose after the shock vote to leave the EU.

Investors fear Brexit could spark anti-establishment movements in other European countries, some of which have seen decline in traditional political parties.

South African President Jacob Zuma said local banks and financial institutions could withstand the Brexit shock, as they did during the 2008/09 global financial crisis.

Finance Minister Pravin Gordhan said Treasury and the central bank would take measures to deal with any Brexit shocks to Africa’s most industrialised country, which has strong trade ties with the EU.

By 1200 GMT, the rand was 4.52 percent weaker at 15.0510 per dollar after tumbling more than 8 percent in early trade to a three-week trough of 15.6800. The rand closed at 14.4400 in the previous session.

Implied volatility on the rand jumped 16 percent to six-month highs in an already highly traded session.

Capilis Asset Managers head of forex Giacomo Bonavera said the rand decline was over done. “The sellers will come back in and bring the price back down,” he said.

Government bonds also weakened, with the yield on the benchmark instrument due in 2026 adding 25 basis points to 9.13 percent, having jumped as much as 28.5 basis points earlier.

On the bourse, the JSE securities exchange’s Top-40 blue chip index dropped 4 percent to 45,502 points, while the broader All-Share index slumped 3.7 percent to 51,579 points in line with global weakening of equities due to Brexit.

Most shares were in the red with exception of gold miners.

The biggest losers were real estate firms Capital & Counties Properties and Intu Properties, who both have interests in the United Kingdom, and fell 17 percent and 14 percent respectively.

Financial services firm Old Mutual, which has a primary listing in London, and food services firm Bidcorp, which makes nearly half its sales in Britain, fell 7 percent.

Anglogold topped the gainers on the bluechip index, soaring as much as 14.54 percent to 267 rand, while Sibanye Gold, Goldfields and Harmony also shone on the wider index, each rising more than 16 percent.

 

(Reporting by Mfuneko Toyana; Editing by James Macharia)

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Nigeria’s Dangote shifts focus from cement to oil and gas

24 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Africa’s richest man, Aliko Dangote, plans to launch Nigeria’s first private crude oil refinery by 2019 while almost doubling his cement production on the continent by adding plants in eight countries as he shrugs off a regional economic downturn.

Dangote told Reuters the $12 billion refinery would have a capacity of 650,000 barrels a day, cornering the market in Africa’s most populous country, where fuel shortages are a perennial problem.

Until recently, Nigeria was Africa’s biggest crude oil producer but it imports 80 percent of its fuel because poor maintenance means its four refineries never reach full output. Its current daily consumption is 260,000 barrels, according to the International Energy Agency.

A slump in commodity prices has hammered Nigeria’s economy – along with many others on the continent – and raised the cost of borrowing but Dangote, whose business empire stretches from cement to flour and pasta, is pushing hard into oil and gas.

“It will be ready in the first quarter of 2019,” the billionaire founder of Dangote Cement said of the refinery. “Mechanical completion will be end of 2018 but we will start producing in 2019.”

Dangote said the plant, which will include a $2 billion fertilizer unit, was being funded through “loans, export credit agencies and our own equity”.

Some $3.25 billion had come from local and foreign banks, while the central bank had also chipped in. The IFC, the private sector arm of the World Bank, has lent $150 million.

Dangote also has plans for a gas pipeline through West Africa. Nigeria has the world’s ninth largest proven gas reserves, at 187 trillion cubic feet (tcf), but loses half of it to flaring and re-injection.

Despite the new focus on oil and gas, the business magnate said he planned to build cement plants in Cameroon, Ethiopia, Kenya, Mali, Niger, Nigeria, Senegal and Zambia by 2018. Another plant will open in Congo Republic by September, he added.

A cement plant in Ivory Coast would triple output to 3 million tonnes, up from an initial target of 1 million, he said, while two new plants in Nigeria would add 6 million tonnes annually.

“As at now, what we have in operation is almost about 45 million tonnes, so we have just another 40 million tonnes to go,” he said, affirming an Africa-wide production target of 85 million tonnes a year by 2018.

 

FX CRISIS

The collapse in oil prices has hit Nigerian companies hard, with many unable to access dollars due to central bank foreign exchange restrictions imposed to prop up the naira.

The worst-affected have gone to the wall or shed large numbers of staff, but a study by Reuters of an 11-week period in March to May showed that Dangote firms managed to secure a healthy share of dollars at the cheap official rate. [nL4N19E3JX]

Dangote said the $161 million bought during that period from the central bank merely reflected the size of his business and did not represent preferential treatment.

“We have been badly affected like any other company,” he said, arguing that operational costs totalled $100 million each month due to recurring expenses such as the purchase of parts for cement production and running a fleet of 9,000 trucks.

“When you are talking about 20 billion dollars worth of projects, what is 161 million? One-hundred-and-sixty-one million dollars is my six weeks’ need,” he said.

Dangote’s sugar refinery in Nigeria had reduced capacity by 15 percent as a result of the dollar crisis. “We ended up owing a lot of dollars,” he said.

This week, the central bank removed the peg that has held the naira at the official rate of 197 for the last 16 months, leading to a 30 percent devaluation as the currency traded freely on the interbank market.

Dangote said the decline had pushed up costs. [nL8N19F31Y]

“This devaluation alone, we have lost over 50 billion naira ($176 million),” he said.

“The gas, which is our main source of power, is priced in dollars. If there is 40 percent devaluation, your price will go up by 40 percent. Every single aspect of the production will go up by that percentage,” he said.

Dangote also said he was eyeing a listing on the London stock exchange “within the next year or two”.

($1 = 284.1500 naira)

 

(By Alexis Akwagyiram. Editing by Ulf Laessing and Ed Cropley)

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Zimbabwe to import 250,000 tonnes of maize from Mexico

23 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

HARARE (Reuters) – Drought-hit Zimbabwean will import more than 250,000 tonnes of maize from Mexico to fill the shortfall caused by the severe drought sweeping through the southern Africa, the agriculture minister said on Thursday.

Joseph Made said Zimbabwe would also import the staple crop from neighbours South Africa and Zambia, as well as from the Ukraine but did not give precise figures for these imports.

“We anticipate anyway upwards of 250,000 tonnes will be coming from Mexico. The other maize will obviously be coming from Zambia as well some from South Africa and Ukraine,” Made told reporters.

An El Nino-induced drought has hit southern Africa, slashing the output of the staple maize crop.

Zimbabwe’s government previously said the drought forced it to cut the 2015 growth forecast to 1.5 percent from 3.2 percent, with the 2016 output unlikely to be any better.

The U.N. World Food Programme said earlier in June that output in Zimbabwe would fall below 60 percent of the five-year average of between 700,000 and 1 million tonnes.

 

(Reporting by MacDonald Dzirutwe; Writing by Mfuneko Toyana; Editing by James Macharia)

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South African black lobby disappointed by MTN’s new white CEO

23 June 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

JOHANNESBURG (Reuters) – South Africa’s Black Management Forum (BMF) said it was disappointed by the appointment of white South African Rob Shuter as MTN Group’s new CEO and viewed it as a serious blow to giving blacks a larger role in business.

The forum, which lobbies for black rights, criticised the mobile phone operator’s decision saying it was retrogressive to plans for the inclusion of blacks in corporate boardrooms in Africa’s most industrialised country.

Shuter was named on Monday as the replacement for Sifiso Dabengwa, a black executive who resigned last November after Nigeria imposed a fine on MTN for failing to deactivate more than five million unregistered SIM cards.

“There is a general unwillingness for transformation at top management level which has resulted in the decline in the number of black South African CEOs,” BMF President Mncane Mthunzi said in a statement. “These companies are owned by the public and yet they don’t reflect the demographics of our society.”

MTN spokesman Chris Maroleng had no immediate comment but said the company would respond later via an emailed statement.

Founded with the government’s help after the end of apartheid in 1994, MTN has been touted as one of South Africa’s biggest corporate success stories with operations in more than 20 countries in the Middle East and Africa.

Since coming to power at the end of white minority rule, the African National Congress party has pushed for change in the complexion of the civil service, the military and state-owned firms, as well national sports teams and private businesses.

The push has helped many South Africans who were excluded from the mainstream economy under apartheid and created a solid black middle class.

MTN executive Phuthuma Nhleko, also black, was appointed interim executive chairman following Dabengwa’s resignation, with an eye to renegotiating the Nigerian fine which was initially set at $5.2 billion.

In the end, MTN agreed this month to pay a 330 billion naira fine ($1.2 billion) and to list its local business on the Nigerian Stock Exchange. MTN is the largest mobile phone operator in Nigeria with 62 million subscribers and the country accounts for about a third of its revenue.

Nhleko will revert to his role as non-executive chairman when Shuter starts as CEO, which is expected to be by July next year at the latest. Shuter, who has a background in risk management, will be joining MTN from rival mobile operator Vodafone, where he is currently head of Vodafone Europe.

($1 = 283.0000 naira)

 

(Reporting by Tanisha Heiberg; editing by James Macharia and David Clarke)

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South Africa’s Eskom raises wage offer to union to 7%: NUM

22 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African power utility Eskom has raised its wage offer to 7 percent from 5.75 in negotiations with workers, the National Union of Mineworkers (NUM) spokesman said on Wednesday.

“NUM is going to seek a mandate from its members about Eskom’s latest offer, then we will respond to the management,” Livhuwani Mammburu said. The offer was still below NUM’s demand of a 15 percent increase for the least-paid workers.

The utility employs over 42,000 people with NUM representing more than 14,000 of workers.

 

(Reporting by Tanisha Heiberg; Editing by James Macharia)

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Investors cheer Nigeria currency float but won’t rush back yet

22 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LONDON (Reuters) – Nigeria’s swift one-step move to a floating currency has been welcomed by investors but most nonetheless will stay away until Africa’s biggest economy shows signs of recovering from damage inflicted by the 16-month old exchange rate peg.

Nigeria this week finally ditched the peg that had throttled foreign exchange markets, led to widespread capital flight and caused its first quarterly economic contraction since the 1990s.

Investors, local businesses and international lenders had called for a devaluation for months as the government burned through hard currency reserves to preserve the naira after a steep oil price tumble tore apart its finances.

But while investors welcomed the float as the right first step, most plan to watch Nigeria from the sidelines anticipating more pain in store.

“It is positive, it is a more credible and flexible exchange rate regime in the long-run, you will see an external rebalancing of the economy, a fiscal adjustment and so on,” said Jonas David, emerging market specialist at UBS Wealth Management in Zurich.

“But in the near term, things will get worse before they get better.”

A slide into recession after the economy shrank in the first quarter of the year and a fresh spike in inflation are among issues investors will want to wait out, said David, together with confirmation that the new regime is functioning properly.

Once that happens, focus will shift to fundamentals such as returning the economy to growth – key for a country of 180 million where some 46 percent live in poverty.

Inflation too is running at the highest in more than six years – it hit 15.6 percent in May – already above the central bank’s 12 percent interest rate.

The currency devaluation is likely to push inflation north of 20 percent in the second half of the year, meaning authorities will need to ramp up interest rates if they want to lure back foreign money to bond markets.

“Right now you have negative real interest rates, so investors will not be enamoured with buying Nigerian bonds given where inflation is or where it is headed,” said Kevin Daly at Aberdeen Asset Management. “You need (a yield) somewhere between 15-20 percent to make this attractive.”

 

TUMBLING AND SOARING

Foreigners held $5.4 billion of Nigerian bonds in September 2013 but dumped most of them after the country was ejected last year from JPMorgan’s GBI-EM index – the most widely used emerging debt benchmark.

A country cut from the index needs to wait at least 12 months before re-inclusion.

But the bond market’s size, liquidity and turnover all made it attractive to foreign investors, said Samir Gadio, Head of Africa Strategy FICC Research at Standard Chartered Bank, noting that Lagos’ $150 million daily turnover was next only to South Africa’s on the continent.

Nigeria’s bourse has avoided the same fate, as index provider MSCI has retained it in its frontier equity indexes with a sizeable 12.4 percent weight. But local stock exchange data shows foreigners’ share dealings are down 66 percent from a year earlier.

While the market has surged about 8 percent this month in anticipation of foreigners’ return, fund managers, eyeing an ominous combination of rampant inflation and slowing growth, may not rush back.

Africa’s biggest oil exporter saw its economy shrink by 0.36 percent – its worst performance in a quarter of a century – and economists predict the contraction deepened in the second quarter due to fuel and FX shortages.

“It will be at least 12 months before we see any green shoots,” said Yvonne Mhango, Sub-Saharan Africa Economist at Renaissance Capital in Johannesburg. “The pain has to cut in full through the economy.”

An average naira rate of 270 per dollar this year implies a fall in Nigeria’s dollar GDP to $400 billion from $481 billion in 2015, Renaissance Capital estimates.

All this is set to hit the local population and firms hard, but foreign companies operating in Nigeria have also suffered. Brewer Heineken for instance reported that consumers had been shifting to cheaper brands.

“(Naira devaluation) will lead to a consumer recession, a collapse in profits in companies,” said Robert Marshall-Lee, investment director at Newton Investment Management.

While Marshall-Lee predicts an “ugly market” for the next couple of years, he says stronger companies such as Guinness Nigeria, Nigerian Breweries or lenders Zenith Bank and Guaranty Trust Bank will probably weather the storm.

“When we see the market pricing the new reality and the stocks de-rate to reflect the new profit base, we will let that shake out happen. It might well over-correct which will give us an opportunity to buy.”

 

(By Karin Strohecker. Additional reporting by Sujata Rao in London and Chijioke Ohuocha in Lagos)

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World Bank program puts Zambia on path to solar energy

22 June 2016 Comments (2) Africa, Business, Featured

solar farm zambia

The African nation will develop two solar farms that will produce more than 70 megawatts.

With an assist from the World Bank, Zambia will build two solar power projects that will provide the cheapest electricity on the continent.

First Solar Inc., the largest panel producer in the United States, along with the French company Neoen, together will build a 45-megawatt plant that will produce electricity that will sell for just over six cents per kilowatt-hour. Enel, an Italian company, will build a 28-megawatt plant that will sell power for just under eight cents per kilowatt-hour.

The two solar farms will be built near a substation that sends power to Zambia’s capital, Lusaka.

The companies are the first winners of an auction program the World Bank launched to encourage wider use of renewable energy in developing countries.

Program reduces costs, risk

The Scaling Solar program, World Bank, International Finance Corp. and Multilateral Investment Guarantee Agency pooled resources to offer financing, insurance and advice to potential solar developers. This reduces their risk and helps cut costs to build and launch projects, in hopes of attracting large developers capable of building large-scale solar farms to the continent.

The World Bank estimates that less than a quarter of the population of sub-Saharan Africa has access to electrical power. Some African countries, including Zambia, rely heavily on hydropower and have seen energy shortages and outages in recent droughts. Zambia expects to auction another 200 megawatts of solar within a year.

Solar energy development is an important piece of the continent’s plans to help fight global climate change, as approved at COP21 in Paris last year.

Senegal, Madagascar participate

Madagascar and Senegal are also participating in the Scaling Solar project and the World Bank expects to add a fourth African country later this year.

The goal is to encourage development of 850 megawatts of capacity in Zambia, Madagascar and Senegal, which would require an investment of about $1 billion.

The program could be adopted in Asia as well.

“It’s not designed for Africa” alone, said Jamie Fergusson, global lead for renewable energy at the IFC, told Bloomberg. “It’s designed for countries with limited independent power producing experience where the power buyer is a publicly-owned utility.”

Competitive auctions

Scaling Solar uses competitive auctions to award development rights and offers the endorsement of the World Bank. This can allay concerns of international banks about political risk. Using standard contracts, it also speeds development significantly.

More than 90% of Zambia’s generating capacity comes from hydropower.

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

The reservoir has been at 12%capacity this year and dam authorities cut hydropower production to 25% of capacity in January. A year earlier, the dam, which is fed by the Zambezi River, was at more than 50% capacity.

Africa turns to renewables

With renewable energy a priority on Africa’s climate change agenda, solar developments are becoming more common on the continent.

Morocco this year turned on the first phase of what will be a 580-megawatt farm that will be the world’s largest and serve more than one million people when it is completed in 2018.

Noor 1, the first section located near Ouarzazate, currently produces 160 megawatts of power.

Morocco, which imports more than 90% of its energy, wants to generate 40% of its energy from renewable sources by 2020, with a third of that total coming from solar, wind and hydropower each.

In South Africa, George Airport will use electricity from a 750-kilowatt solar project. Projects that will provide hundreds of megawatts are underway in the nation, where clean energy investment rose to $4.5 billion last year.

Entrepreneurs boost small efforts

Smaller efforts are also taking shape as “solarpreneurs” enter the market.

In Ghana, a local company named Volta builds small solar projects for hospitals, health clinics and schools and lets them pay over time. According to the company’s founder, Mahama Nyankmawu, a 45% reduction in energy costs puts repayment well within reach for his customers.

Another company, Off-Grid Electric, said it is installing more than 10,000 solar units a month in Rwanda and Tanzania. The company recently raised $70 million in investment to expand its operations.

As interest in solar grows on the continent, the World Bank’s Scaling Solar project should help quicken the pace of development.

Antonio Cammisecra, head of business development at Enel in Rome, said the World Bank program for Zambia “accelerated our entry by as much as a couple of years.”

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South Africa’s rand steady, caution prevails ahead of British referendum

22 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand pulled back from seven week highs against the dollar on Wednesday, with traders and analysts expecting caution to prevail on the eve of a British referendum on whether to remain in the European Union.

Domestic economic headlines have taken a backseat in moving the currency this week, although inflation data due out at 0800 GMT could boost it slightly if higher than expected, raising the prospect of higher interest rates this year.

At 0653 GMT the rand traded at 14.7290 to the dollar, not far off its previous close at 14.7350.

It was however down about 10 cents from Tuesday’s high of 14.6225, the rand’s strongest level since May 4 which came on the back of a rise in risk appetite as investors bet on Britain staying in the EU after Thursday’s vote.

“Optimism in financial markets ahead of the UK referendum has tempered ahead of the vote tomorrow,” Standard Bank said in a note.

Government bonds edged higher in early trade, with the yield for debt due in 2026 dipping 2 basis points to 8.97 percent.

The stock market’s Top-40 futures index was up 0.26 percent, signalling a slightly firmer start for the bourse at 0700 GMT.

 

(Reporting by Stella Mapenzauswa; Editing by Tiisetso Motsoeneng)

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Nigeria stocks near 8-month high on investor interest after FX float

21 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigerian stocks ended near an 8-month high on Tuesday as investors renewed interest in shares after the central bank floated the naira to lift currency curbs viewed as harming investment and helping cause the economy to contract.

The main share index rose 2.27 percent to 29,422 points, a level last seen on October 2015.

Investors snapped up shares across banks, and consumer goods, hoping that a “freely” traded interbank forex market will help foreign buyers return to stocks after Nigeria ended an currency peg, which caused them to flee.

 

(Reporting by Chijioke Ohuocha)

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Africa’s crippling brain drain

21 June 2016 Comments (0) Africa, Business, Featured

africa brain drain

Millions of highly educated African professionals move to other countries in search of greater opportunities, undermining health care, science and development.

With thousands of well-educated Africans emigrating each year, brain drain is stunting the continent’s growth, especially in medicine and science.

African migrants totaled more than 30 million by 2010 – about 3 percent of the total population of the continent – more than doubling over the previous 20 years, according to a report by the World Bank. About half migrated to other countries within Africa, while others went abroad to the Middle East, Europe and the United States. Many are fleeing conflict in their home countries or seeking better economic opportunities in more advanced African economies. However, many of those fleeing are among Africa’s best educated, and they are seeking to work abroad.

“You cannot eat patriotism”


Gichure wa Kanyugo, a Kenyan-born psychiatrist who works in Boston, said domestic conditions such as poverty, conflict, unemployment and poor health care discourage Africans from returning to their homelands.

“We would like to return home, but domestic conditions don’t allow it. You cannot eat patriotism, can you?” Kanyugo said.

The Economic Commission for Africa estimated that 20,000 educated professionals have left Africa every year since 1990 and the United Nations declared that the outflow of African professionals is “one of the greatest obstacles to Africa’s development.”

The problem is especially acute in the fields of health and science.

In sub-Saharan Africa, 38 of 47 nations fall short of the minimum standard of 20 doctors per 100,000 people set by the World Health Organization.

Shortages of qualified medical personnel were evident during the recent Ebola crisis. In 2014, for example, Liberian officials reported that there were only 170 doctors in the country. Liberia had nearly eight doctors per 100,000 people in 1973 but the rate dropped to just 1.4 by 2008.

Limited opportunities

Meanwhile, experts say most engineers and scientists who train in Africa choose to work abroad because opportunities are limited in Africa, which provides only one percent of the world’s scientific research.

Thierry Zomahoun, chairman of the Next Einstein Forum, said Africa loses $4 billion a year because jobs in science, technology, engineering and math must be outsourced to foreign professionals.

Zomahoun, whose organization staged Africa’s first international science and technology conference in Dakar in 2016, said the solution is greater investment in science and research on the continent to make scientists who have remained on the continent more visible.

The International Development Research Center said brain drain also has financial and societal costs. This is because African countries lose significant amounts of their investment in higher education as graduates leave or decide not to return home when they finish studies abroad.

According to the World Bank, Egypt, Morocco, Burkina Faso, Algeria and Zimbabwe were the top five African emigration countries in 2010.

Emigration rates are among the highest in countries that have gone through armed conflicts, such as Eritrea and Liberia, and in countries with small populations such as Cape Verde and Lesotho.

The most common destinations are France, the United States, Ivory Coast, Saudi Arabia and South Africa.

In the United States, African immigrants account for 4 percent of the country’s foreign-born population. Nigerian, Ethiopian, Egyptian, and Ghanaian immigrants account for 4 in 10 of the African born population in the U.S.

A slowing drain?

Fortunately, there are signs the drain may be slowing. Adcorp, a South African human resources management company, found that more than 350,000 highly skilled South Africans returned from other countries in the six years following the 2008 financial crisis.

One expert said governments must put in place policies that encourage African expatriates to return.

But African businesses also must create more opportunities, said Menghis Bairu, CEO of Serenus Biotherapeutics, which develops medical therapies for sub-Saharan Africa.

Until Africa can more effectively retain professionals or persuade those who have left to return, “Virtual participation” may help ease the problem, engaging expatriate professionals to coach, mentor and help plan advancements, according to the International Development Research Center.

“Virtual participation … shows promise as a means to engage the African Diaspora in development efforts,” the center said.

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