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South Africa’s Amplats warns H1 profit to fall at least 20%

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

JOHANNESBURG (Reuters) – Anglo American Platinum (Amplats) expects its half-year profit to fall by at least 20 percent due to weaker metal prices, the South African miner said on Tuesday.

Platinum prices have been hurt by growth concerns in China and oversupply worries which have forced firms to abandon projects and sell mines.

Amplats, which produces around 40 percent of the world’s platinum group metals, said it would make a further announcement once it had determined a likely range for its headline earnings per share.

Headline EPS, which strips out certain one-off items, is the main profit measure in South Africa.

Shares in Amplats were little changed at 379.09 rand, largely in line with the blue-chip JSE Top-40 index.

Amplats, a unit of global mining group Anglo American, is focusing on newer and more mechanised mines and removing unprofitable ounces following a record five-month strike in 2014.

Amplats, along with rivals Impala Platinum and Lonmin, is due to start wage talks with unions at the end of June, when the current deal expires.

The National Union of Mineworkers will demand pay increases of 20 percent per year for the next two years while demands from the larger Association of Mineworkers and Construction Union are not yet known.

 

(Reporting by Tiisetso Motsoeneng; editing by Jason Neely)

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Kenya’s NIC Bank appointed to assess assets of closed Imperial Bank

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

NAIROBI (Reuters) – Kenya’s NIC Bank has been appointed as a consultant to assess the assets and liabilities of Imperial Bank, which was put into receivership in October after fraud was uncovered, the central bank said on Tuesday.

The appointment of NIC Bank, a mid-tier bank, would ensure customers receive more of their deposits after the closed bank’s shareholders failed to support a proposal for swiftly reopening Imperial, the central bank said in a statement.

Three small or medium-sized banks in Kenya have been closed in less than a year, unnerving investors. The central bank has said financial issues were specific to the banks concerned and did not pose a systemic risk to the economy of the East African nation, which is a regional financial centre.

Earlier this year, the central bank said clients with deposits of up to 1 million shillings ($9,886.31) would receive funds in full, while those with larger deposits would have to wait for investigations to end to determine the fate of their funds.

NIC, appointed by state receiver Kenya Deposit Insurance Corporation (KDIC), would oversee disbursement of a maximum of 1.5 million shillings to remaining depositors once a court rules, likely on July 4, to lift the suspension of payments.

More deposit payments could be made after that following the completion of due diligence by NIC, which would assume a portion of the remaining deposits and other assets and liabilities, including a majority of Imperial’s staff and branches.

Central Bank of Kenya Governor Patrick Njoroge told a news conference that NIC was not acquiring Imperial Bank, and also said a moratorium on new bank licences remained in place.

 

($1 = 101.1500 Kenyan shillings)

 

(Reporting by George Obulutsa; Writing by Edmund Blair; Editing by Louise Heavens)

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Nigerian naira tumbles 30 percent after peg removed

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

By Chijioke Ohuocha and Oludare Mayowa

LAGOS (Reuters) – Nigeria’s naira slumped 30 percent against the dollar on Monday after the central bank removed its currency peg in an effort to alleviate the chronic foreign currency shortages choking growth in Africa’s biggest economy.

The central bank sold $530 million for 280 naira per dollar at a special auction and later sold a further $86.5 million directly on the interbank market at 281 to 285 naira, traders said.

Monday’s rate was notably weaker than the 197 peg the central bank had maintained for 16 months before abandoning it last week in a bid to alleviate chronic forex shortages and stop the economy from sliding into recession.

The naira had traded just twice by midday, before the central bank held its special auction to clear a backlog of hard currency orders. Less than $1 million had changed hands, prompting an extension of the trading day to 5 p.m. (1600 GMT), dealers said.

Black market currency dealers were quoting the naira at 325 to 345 naira to the dollar, up to 10 percent stronger than on Friday, on expectations more hard currency liquidity on the interbank market would reduce demand on the street.

The central bank has said it may inject foreign exchange into the interbank market to increase liquidity and reduce a backlog of $4 billion backlog of demand, which could take four weeks to clear.

“We suspect that the best way to talk about the new exchange rate regime is still as a managed float, but a managed float that is responsive to market forces,” Citi analysts said in a note. “The new structure does provide a platform for the CBN (central bank) to easily step further away from the market.”

Non-deliverable forwards – contracts used to bet on future exchange rate moves – priced the naira at 302 per dollar in one month’s time. They initially weakened to a record 310 to the dollar.

The two-month contract < NGN2MNDFOR=> saw the naira at 313 per dollar in August. One year down the line < NGN1YNDFOR=> the naira was priced at 355.

Nigeria’s central bank is “reasonably optimistic” the naira will settle around 250 to the dollar after an initial period of weakness following a flotation, the bank’s governor said in a June 3 letter to President Muhammadu Buhari [L8N19836T].

ECONOMIC DOWNTURN

Foreign investors and economists had called for a naira devaluation for months as the shortages of foreign exchange undermined economic growth and led to widespread capital flight.

The central bank said last week it would abandon the peg in a “managed float”. The median forecast from 10 analysts surveyed by Reuters had suggested the naira might trade on Monday at as much as 300 naira per dollar.

Nigeria’s economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades as a result of the decline in oil prices since 2014 and last year’s introduction of the currency peg.

With the naira expected to fall sharply, Nigerian products will become relatively cheap and imports more expensive. That should stimulate the domestic economy, but it is also likely to light a fire under already rising inflation.

“The new system should reduce the shortage of FX in the economy and – in the long run – reduce strains in the balance of payments by discouraging imports and boosting export competitiveness,” said John Ashbourne of Capital Economics.

“But the new system certainly does not mark the end of Nigeria’s economic problems.”

The OPEC oil exporter had resisted devaluing the naira for more than a year, while other major oil producers, including Russia, Kazakhstan and Angola, allowed their currencies to fall after crude prices collapsed.

(Additional reporting by Oludare Mayowa, Ulf Laessing, Karin Strohecker, Sujata Rao and Joe Brock; Writing by Joe Brock and Ulf Laessing; Editing by Larry King)

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A snapshot of African youth, a growing consumer segment

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

group of african american college students

A new survey finds young Africans aged 15-24 spend more than two hours a day on the internet and voice concern about jobs, rising costs and corruption.

Young Africans spend more than two hours a day on the internet and nearly one-fourth say social media plays a key role in their purchasing decisions.

Those are two takeaways from a new “African Youth,” a study (pdf) of consumer practices and values of young people between the ages of 15 and 24 by the French research institute Ipsos.

Ipsos surveyed more than 1,800 young people who are part of an increasingly important demographic in the social and economic affairs of the continent. Africa has the highest concentration of young people in the world with a population of about 220 million in this age group.

Those surveyed reside in seven countries – Ivory Coast, Senegal, Morocco, Democratic Republic of Congo, Kenya, Nigeria, and South Africa.

Youth are optimistic despite concerns

Florence de Bigault, Director of Ipsos Africap, said brands must pay attention to young Africans as they have become an important consumer market.

Mall of AfricaAs a group, they “already play a leading role in the development of the African continent. They contribute to consumer spending, shopping mall visits, They aspire to education, employment, entertainment and full access to electricity and the internet,” de Bigault said.

According to the study, young Africans have high expectations for and optimism about the future, but also express concern about jobs, the rising cost of living and corruption.

Food, clothing are top expenses

Among the findings of the survey:

  • 81 percent of young Africans are optimistic about their personal future.
  • 63 percent are optimistic about the future of their country
  • 69 percent are concerned about unemployment, the top concern
  • 63 percent are concerned about the rising cost of living
  • 59 percent are concerned about corruption
  • 34 percent regularly go to shopping centers and markets
  • Their top spending items are food and beverages (43 percent), clothing (38 percent), and telecommunications and internet (33 percent).
  • They spend an average of 2:20 hours a day on the internet and social networks. Young Moroccans spend 3:15 hours per day.
  • 12 percent of those aged 20-24 work for themselves.
  • 22 percent of 15-24 year-olds are influenced by social networks in making purchase decisions
  • 49 percent in Ivory Coast and 30 percent in Senegal prefer French brands while fewer than 2 percent of young people prefer them in Nigeria and South Africa (the continent’s two largest economies).

Firm launches African research project

Ipsos is one of the largest research firms in the world. Operating in 87 countries with 16,000 employees, Ipsos has the capacity to conduct research in more than 100 countries.

The “African Youth” study is ongoing research, including quarterly updates of the youth survey as part of Ipsos’ Africap initiative.

In 2016, Ipsos launched Africap, a consultancy designed to help clients develop business in African markets. It is composed of more than 800 partners in 14 African nations – Algeria, Tunisia, Egypt, Morocco, South Africa, Nigeria, Ghana, Kenya, Tanzania, Uganda, Zambia, Mozambique, Angola, and Ivory Coast.

Other ongoing Ipsos studies of the continent include:

  • A survey of food consumption trends in urban African homes;
  • A study of media usage in French-speaking Africa;
  • A survey to study emerging lifestyles and consumption trends.

De Bigault said African youth would continue to be an important part of Ipsos research, focusing on their consumer spending potential.

Another recent study found that youth in East African want a greater voice in their future. The youth-led study by The MasterCard Foundation Youth Think Tank looked at employment and entrepreneurship trends in East Africa. The initiative trained 15 youth from Tanzania, Rwanda, Uganda and Kenya to conduct research on young people seeking to enter the job market in their communities. The study includes information from more than 400 interviews with young people, officials and other East Africans. It found young people are eager to have a voice in policy decisions that affect them and are committed to improving their skills. Barriers to earning a living include limited access to information, technology and land as well as gender inequality.

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IMF welcomes Nigeria’s decision to end currency peg

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

WASHINGTON (Reuters) – The International Monetary Fund said on Thursday it welcomed the decision by Nigeria’s central bank to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.

IMF spokesman Gerry Rice told a weekly news briefing the Fund wanted to see how effectively the naira exchange market functions once the new float system is put into effect next Monday.

Nigeria’s central bank governor said in a letter to President Muhammadu Buhari the bank expects the naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.

“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters. “It will provide greater flexibility in that market, the foreign exchange market.”

Senior IMF officials, including Managing Director Christine Lagarde, have urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. OPEC member Nigeria is a major oil producer. IMF officials have said that Nigeria has not requested IMF financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.

“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. “Allowing the exchange rate to better reflect market forces is an integral part of that.”

 

(Reporting by David Lawder; Editing by James Dalgleish)

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Tunisia’s dinar hits record lows over tourism, economic data

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

TUNIS (Reuters) – Tunisia’s dinar currency has fallen to record lows versus the euro and the U.S. dollar this week as weaker exports, lower investment and a plunge in tourism revenues have eroded the country’s foreign reserves.

The dinar traded at 2.47 against the euro and 2.13 against the dollar on Wednesday and on Thursday was at 2.43 versus the euro and 2.16 against the dollar, according to central bank figures.

The government was expected to announce new measures on Monday aimed at stabilizing the currency. The North African state’s tourism industry has been shattered by two major Islamist militant attacks on foreign visitors last year.

“The record drop in the value of the dinar is caused by lower exports and a lack of investment that have lowered foreign exchange reserves,” central bank director Chedli Ayari told reporters in parliament on Wednesday.

He said the central bank would not interfere to halt the slide in the dinar because “the level of reserves is still average… and reflects the reality of the Tunisian economy.”

Exports fell 2.6 percent during the first five months of the year while foreign direct investment dropped 5 percent to $268 million in the same period compared to a year earlier, according to government statistics.

Tourism, which comprises 8 percent of GDP and is a key source of foreign revenue, has been struggling.

Islamic State gunmen attacked the Tunis Bardo museum and a Sousse beach hotel packed with tourists within a 3-month period last year, prompting many tour operators to suspend visits to the North African country.

Tunisia’s government is currently trying to push through reforms and some austerity measures to curb its deficit, among the measures demanded by international lenders such as the International Monetary Fund and the World Bank.

Government spokesman Khaled Chaouket said officials would next week announce measures meant to arrest the fall of the dinar including commerce ministry initiatives. Some analysts expect these to include restrictions on luxury imports.

The weakened dinar may boost smaller local exporters by making their products cheaper abroad, but could also make debt service payments tighter and widen the deficit if the government does not act, said local financial risk expert Mourad Hattab.

“The dinar has never been at these levels against the dollar and the euro,” he said. “But there is a tendency for the financial authorities not to interfere because it is part of the reforms the IMF is demanding.”

 

(Reporting by Tarek Amara; Writing by Patrick Markey; Editing by Mark Heinrich)

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Nigeria to abandon naira peg in favour of open market trading

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

ABUJA (Reuters) – Nigeria’s central bank said on Wednesday it would begin “purely” market-driven foreign currency trading next week, abandoning its 16-month peg and setting the stage for the naira to fall sharply.

Nigeria’s central bank previously pegged the naira at 197 to the U.S. dollar but the currency trades at about half that on the black market as slump in oil revenues has hammered public finances and foreign currency reserves. The new trading rules begin on Monday, Central Bank Governor Godwin Emefiele said.

The change of tack is a “managed float” and puts Nigeria in line with most central banks, including the Bank of England, a senior central bank official told Reuters. Nigeria’s central bank has no target for the naira, he said.

The latest interbank level will be posted on the central bank’s website daily from Monday, the official said, adding: “The old rate of 197 does not exist anymore.”

Following the announcement, three economists estimated the fair value of the naira between 280 and 300 against the dollar, although the black market rate is around 370.

Nigeria, Africa’s largest crude exporter, has resisted devaluing its currency for more than a year despite other major oil producers, including Russia, Kazakhstan and Angola, allowing currences to fall amid lower crude prices.

The central bank will still be able to inject dollars into the market, giving it some control over the exchange rate within the limit of its foreign reserves which fell to $26.7 billion in June, from $42.8 billion in January 2014.

Emefiele hopes opening up trading will ease severe U.S. dollar shortages caused by a slump in oil revenue.

With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy but also lift inflation.

“To improve the dynamics of the market, we will introduce foreign exchange primary dealers who would be registered by the CBN (central bank) to deal directly with the bank for large trade sizes on a two-way quote basis,” Emefiele told reporters.

Nigeria’s stock market gained 3 percent following the announcement.

“This is a major about-turn. The central bank has traditionally favoured a managed rate and preferred a strong currency to contain inflation,” said Gregory Kronsten, head of macroeconomic and fixed income research at FBN Capital in Lagos.

“It seems the CBN is eager the market captures forex from remittances (international money orders) as well as FDI (Foreign Direct Investment),” he said.

 

PRIMARY DEALERS

The central bank said eight to 10 primary dealers would supply the interbank market with dollars, handling minimum volumes of $10 million.

The primary dealers will be allowed to sell back 70 percent of any dollars bought from the central bank on the day of purchase. Sales must be backed by a specific customer order to avoid currency speculation, the central bank said.

Nigeria’s currency dealers will meet on Thursday to discuss new forex guidelines, two bankers.

Retail currency operators will not be able to buy from the interbank market, meaning dollars will remain in scarce supply for private individuals and small businesses.

Emefiele also said the central bank would open a foreign exchange futures market to ease demand on spot trading, reduce volatility and give businesses the opportunity to hedge risks.

Africa’s biggest economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades after the decline in oil prices and last year’s introduction of a currency peg that prompted a large-scale capital flight.

Nigeria’s cabinet agreed on Wednesday to borrow more abroad in foreign currency to lower lending costs and raise funds to support its ailing economy.

“Over the long run, a weaker currency will help Nigeria’s economy by encouraging import substitution and attracting foreign investors, who have shunned the country for fear of a devaluation,” Capital Economics’ John Ashbourne said.

“But the move will be painful over the short term. Higher import prices will add to inflation … This will probably force the authorities to tighten monetary policy.”

 

(By Ulf Laessing and Joe Brock Additional reporting by Alexis Akwagyiram, Chijioke Ohuocha, Sujata Rao and Camillus Eboh; Writing by Joe Brock and Ulf Laessing; Editing by Richard Balmforth)

 

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Steinhoff buys Poundland stake ahead of possible takeover bid

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

JOHANNESBURG/LONDON (Reuters) – South Africa’s Steinhoff has bought 23 percent of Poundland and is considering a full cash bid for the British no-frills homeware chain in its latest attempt to expand in Europe.

Steinhoff, a $22 billion furniture conglomerate which has lost out in two high profile takeover battles already this year, said on Wednesday it had acquired 22.78 percent of Poundland, which sells every item at a single price point of 1 pound.

Under UK takeover rules, Steinhoff has until July 13 to announce a firm intention to bid for all of Poundland, whose main shareholder had been private equity firm Warburg Pincus, which said on Tuesday it had sold down its 15 percent stake.

Steinhoff, which has lost out to rivals in two battles for Britain’s Home Retail and France’s Darty in the last three months, bought just over 61.2 million Poundland shares, which would be worth around 120 million pounds at the closing price. Poundland has a market capitalisation of around 537 million pounds ($761 million).

Poundland shares closed up 2.2 percent higher at 200 pence, after rising around 25 percent on Tuesday. The stock is still down about 7 percent so far this year.

News of the South African company’s latest move raised questions about its approach to expansion in Europe, where it already runs chains such as white goods retailer Conforama in France and furniture chain Harveys in Britain.

“There’s seem to be no obvious strategic fit but it might just be a matter of adding discounted chains to its stable because that’s essentially what they are: a discount retailer,” said Vestact’s Sasha Naryshkine in Johannesburg.

South African retail mogul Christo Wiese, Steinhoff’s chairman and biggest shareholder, told Reuters he was interested in Poundland because it would be a “good fit” for Steinhoff, adding it had a disciplined approach to acquisitions.

 

POUNDLAND PRESSURE

Steinhoff, which sells beds and cupboards to lower-income shoppers in Europe, southern Africa and Asia, is keen to expand further in Europe, where pressure on consumer income has made German’s Aldi the continent’s fastest growing supermarket chain.

Poundland, which is due to report annual earnings on Thursday, would give Steinhoff a company with more than 900 shops in Britain, Ireland and Spain but also one whose 1 billion annual sales have been under pressure.

Poundland’s 2015 purchase of rival 99p Stores for 55 million pounds has raised questions over its price model.

“Although Steinhoff has a proven track record of integrating businesses and improving their margins over time, we would see this acquisition as higher than average risk given the increasingly crowded UK variety discount space,” said RBC Europe Ltd’s analyst Richard Chamberlain.

Poundland, which competes with B&M, Home Bargains and Wilko and Bargain Buys, told shareholders to take no action, noting that there was no certainty an offer would be made.

Warburg Pincus originally listed Poundland in March 2014 at 300 pence per share.

($1 = 0.7059 pounds)

 

(By Tiisetso Motsoeneng and Freya Berry. Additional reporting by Wendell Roelf in Cape Town; Editing by Jane Merriman and Alexander Smith)

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South African rand on shaky ground after current account gap widens

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

JOHANNESBURG (Reuters) – South Africa’s rand stayed on the back foot against the dollar early on Wednesday a day after central bank data showed a wider-than-expected current account deficit.

By 0711 GMT the rand was at 15.2850 against the greenback, little changed from its New York close at 15.3040 in the previous session.

The local currency had fallen as much as 1.5 percent to its weakest in more than a week on Tuesday after the South African Reserve Bank said the current account deficit widened to 5 percent of GDP in the first quarter of this year 4.6 percent.

Government bonds edged higher, and the yield for the benchmark instrument maturing in 2026 eased 3 basis points to 9.17 percent.

South Africa relies heavily on portfolio flows to plug its current account shortfall, making the rand more vulnerable than its emerging market peers when risk appetite wanes.

“Local data this week has not provided any comfort for the local unit and this, long with markets bracing for a number of significant events, has seen the rand remain firmly under pressure,” Nedbank said in a market commentary.

Traders and analysts said markets were focused mainly on the U.S. Federal Reserve’s policy meeting later on Wednesday while the prospect of Britons voting to leave the European Union at a June 23 referendum had dampened risk appetite.

On the equity market, the JSE exchange’s All-Share index was up 1 percent in early trade, while the benchmark Top-40 index added 0.9 percent.

 

(Reporting by Stella Mapenzauswa; Editing by Andrew Heavens)

 

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IMF says Angola needs fiscal prudence in run-up to 2017 elections

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

LUANDA (Reuters) – Angola needs to maintain fiscal prudence in the run-up to the 2017 elections, an International Monetary Fund (IMF) team said on Tuesday after a two-week visit to the oil producing country.

Angola’s economy grew fast after a 27-year civil war ended in 2002, peaking at growth of 12 percent three years ago, but a sharp drop in oil prices has sapped dollar inflows, dented the kwanza and prompted heavy government borrowing.

Oil output represents 40 percent of Angola’s gross domestic product and more than 95 percent of foreign exchange revenue in sub-Saharan Africa’s third biggest economy.

The IMF team said the outlook for 2016 remained difficult, despite the increase of oil prices in recent weeks.

The global lender also warned that economic activity will likely decelerate further, adding that a modest recovery could be expected in 2017 if shortages of dollars are tackled.

“The significant fiscal effort carried out last year was a very important step to assuage fiscal and public debt sustainability concerns,” Ricardo Velloso, who led the team, said in a statement.

“However, further steps are still needed to reduce vulnerabilities, and maintaining fiscal prudence in the run-up to the 2017 elections will be critical.”

The IMF team arrived in Angola on June 1 to discuss options on how to diversify the economy and reduce the dependence on the oil sector, Angolan authorities have said.

 

(Writing by Nqobile Dludla; Editing by James Macharia)

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