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South Africa cbank keeps key rate unchanged, sees tepid growth

19 May 2016 Comments (0) Africa, Business, Latest Updates from Reuters

PRETORIA (Reuters) – South Africa’s Reserve Bank left its benchmark repo rate unchanged at 7 percent on Thursday, with the governor saying that moderating pressures to long term inflation left it room to pause in its tightening cycle.

The Bank had raised lending rates by a total of 100 basis points at its previous three meetings, as it fought to keep headline inflation within its target band of between 3 and 6 percent as severe drought and a weaker currency weighed.

The rand turned slightly weaker after the decision, easing to 15.9735 against the dollar.

Governor Lesetja Kganyago said the bank lowered its inflation forecast for the next three years, and noted that the country’s economic recovery would be slow.

He said that while headline consumer prices would average 6.7 percent in 2016, up from previous forecast of 6.6 percent, inflation in 2017 and 2018 would moderate.

“Although the inflation forecast has shown a moderate improvement over the medium term, the risks are still assessed to be on the upside,” Kganyago said.

“The MPC remains focused on its inflation mandate, but sensitive to the extent possible to the state of the economy.”

Inflation in Africa’s most industrialised country stood at 6.2 percent in April versus 6.3 percent in March, data showed on Wednesday.

“The MPC will not hesitate to act appropriately should the inflation dynamics require a response, within a flexible inflation targeting,” Kganyago added.

Twenty-two of the 32 economists polled by Reuters had expected the South African Reserve Bank (SARB) to hold interest rates at 7.00 percent this month.

 

(Writing by Mfuneko Toyana; Editing by James Macharia)

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African governments seek bailouts as commodity prices fall

19 May 2016 Comments (0) Africa, Featured, Politics

angola imf

Angola is the latest nation to seek an aid package from the International Monetary Fund as its oil-dominated economy falters.

As its economy buckles under the weight of falling oil prices, Angola is turning to the International Monetary Fund (IMF) for a bailout.

By one estimate, the West African nation faces a shortfall of $8 billion, or 9 percent of its gross domestic product, this year. Angola last borrowed from the IMF in 2009.

Angola is one of several cash-strapped African countries that are turning to the IMF for financial help as prices drop for commodities such as oil and minerals.

Ghana agreed to an aid package in 2015, it’s first from the IMF in six years. Zambia is also in talks for IMF aid, which would be its first since 2008. Zimbabwe has also asked the IMF for its first loan in nearly two decades.

Meanwhile, the IMF stopped a $55 million loan to Mozambique – part of a bailout approved last year – after discovering the country had failed to report $1 billion in unreported loans it owes.

South Africa and Nigeria may also be forced to turn to the IMF as their economies struggle.

Angola faces shortfall

Angola’s request was an about-face after the nation repeatedly said it would not turn to the IMF for help in the current crisis because the aid would come with too many conditions.

But the country’s reserves have fallen as oil prices stayed below $45 a barrel and the government is reluctant to cut services in advance of elections in 2017.

Oil accounts for 95 percent of Angola’s exports and about half of the government’s revenue. In addition to slumping oil revenues, the country has suffered a retrenchment by China, which has its own economic problems.

Monetary agency requires transparency

In exchange for IMF aid, the Angolan government is likely to be forced to be more transparent about its financial dealings as the international agency typically scrutinizes the finances of countries it assists.

One criticism of Angola’s economy is the extent to which it is controlled by President José Eduardo dos Santos, who has ruled the country for more than three decades. While nearly half of the country’s population subsists on just over $1 per day, dos Santos’ daughter, Isabel dos Santos, is the richest woman in Africa, raising questions about the source of her wealth. Isabel dos Santos has denied using state money to enrich herself.

“The IMF stands ready to help Angola address the economic challenges it is currently facing by supporting a comprehensive policy package to accelerate the diversification of the economy, while safeguarding macroeconomic and financial stability,” Min Zhu, IMF deputy managing director, said in a statement.

One expert urged caution. Ricardo Soares de Oliveira, an Angola expert at Oxford University, noted that a study in 2011 by IMF staff found that the government could not account for $32 billion between 2007 and 2010.

“The IMF should use the leverage it has to extract serious concessions and tangible reforms from the government,” de Oliveira said.

Ghana receives bailout

Angola is the not the only country turning the IMF.

Ghana, an oil and gold producer, received a three-year, $918 million bailout in 2015. The country saw the value of its crude exports cut in half between 2014 and 2015, falling to $1.5 million in the first three quarters of last year as both prices and demand fell. Gold exports fell by nearly one third to $2.4 million.

In December, the IMF also agreed to a $283 bailout loan package for Mozambique that required the southern African nation to disclose all of its borrowing. In April, the IMF said it stopped a disbursement of $55 million after learning the country had not reported millions in loans by Credit Suisse Group and the Russian VTB Group.

Mozambique, a natural gas producer, saw exports fall by 14 percent in 2015.

Zambia, Africa’s second largest copper producer, saw a shortfall of 8 percent of gross domestic product in 2015 and is also seeking IMF assistance in 2016. Zimbabwe also expects an IMF loan in the third quarter of this year.

In addition to the IMF aid, the World Bank said it expects to lend up to $25 billion this year to countries reeling from falling commodity prices.

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Starbucks arrives in South Africa

18 May 2016 Comments (0) Africa, Business, Featured

starbucks south africa

Hundreds in Johannesburg line up on opening day of the coffee giant’s first store in sub-Saharan Africa.

The U.S. coffee giant Starbucks opened its first cafe in sub-Saharan Africa – a store in an affluent Johannesburg suburb – and the company plans to open at least a dozen more stores South Africa in the next two years.

Many people waited overnight and hundreds of people lined up before the opening to get their first taste of Starbucks while #StarbucksSA trended on Twitter on opening day.

Previously, Starbuck’s only African locations were in Morocco and Egypt. The global corporation has about 23,000 stores in the Americas, Europe and Asia.

Starbucks founder Howard Schultz said the company might eventually open as many as 150 stores in South Africa.

Second store opens soon

A second location is set to open soon at another Johannesburg shopping mall, but there are no plans to expand to other countries in the region.

The new stores are being launched through a licensing partnership between Starbucks Coffee Company and Taste Holdings, a South African management group and leading licensor of international brands.

“We are proud to be bringing Starbucks to South Africa,” said Kris Engskov, president of Starbucks for Europe, Africa and the Middle East. “We’re going to deliver a great Starbucks experience. The coffee market here (in South Africa) is vibrant and growing fast – we want to be part of that growth.”

Taste Holdings operates stores

Under the agreement, Taste Holdings gains exclusive rights to open Starbucks outlets in South Africa. It will own and operate the stores.

Carl Gonzaga, chief executive officer of Taste Holdings, said the partnership is committed to development of local suppliers and Taste Holdings has a program to increase employment among unemployed South Africans, who will benefit from new opportunities at Starbucks.

Engskov said young people have been the key to Starbucks’ success. With most of its workers aged 17 to 25 years old, “talented youth has always been a priority,” he said.

Taste Holding’s also holds a licensing agreement for Domino’s Pizza in South Africa and the company owns and operates Zebro’s Chicken, the Fish & Chip Co., Maxi’s Restaurants and St. Elmo’s Woodfired Pizza.

Hundreds line up for coffee

A line at the new Starbucks location in Johannesburg

A line at the new Starbucks location in Johannesburg

At the April 21 Starbucks opening in Johannesburg’s Rosebank district, a long line of customers was waiting when the store opened at 7:30 a.m.

Mohamed Mala, a 19-year-old student, said he waited for 12 hours to be the first customer. ” We wanted to be the first customers at Starbucks, and we were,” he said.

“Starbucks has been one of the things missing from the South African scene,” said Norma Cooper, a bank employee.

Starbucks will compete with many established locally owned coffee brands and independent coffee shops.

Gonzaga said the menu was designed to reflect local customer tastes including local products such as Rooibos tea.

Some of the coffee beans are sourced from nine African countries, including Kenya and Burundi, he said.

South Africa attracts U.S. food chains

With the most developed economy on the continent, South Africa has seen recent openings of several U.S. food chains, including Krispy Kreme Doughnut and Burger King.

Starbucks’ Engskov noted that significant quantities of Starbucks coffee products from Africa, Ethiopia, Rwanda and Tanzania, where the company has established farmer support networks.

The support centers opened after Ethiopia and the company settled a dispute in which that nation and Oxfam accused Starbucks of trying to block Ethiopia from obtaining trademarks for two of the country’s best-known coffee beans – Harrar and Sidamo. A third coffee, Yirgacheffe, was trademarked in the U.S. in 2006.

Under the agreement, Starbucks was allowed to promote and sell the three brands in markets where they are trademarked as well as where they are not while recognizing the integrity of the Ethiopian coffee brands.

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South Africa’s NUM union says rejects power firm Eskom’s wage hike offer

18 May 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s National Union of Mineworkers said on Wednesday its members had rejected a 5 percent wage hike offer from power utility Eskom, and demanded increases of up to 18 percent.

The union demanded an increase of 18 percent for the lowest paid workers and 15 percent for the highest paid workers.

 

(Reporting by Stella Mapenzauswa; Editing by James Macharia)

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Congo to seek up to $500 million in budget support from World Bank

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

KINSHASA (Reuters) – Democratic Republic of Congo will seek between $250 million and $500 million in budgetary support from the World Bank this year, pending a review of its economy by the International Monetary Fund next month, the government said on Tuesday.

Africa’s leading copper producer has been hit hard by a fall in commodity prices since last year. This month the government proposed a 22 percent reduction in the 2016 budget and cut its annual growth forecast to 6.6 percent from 9 percent.

It also announced on Monday that it would scale back the size of a planned international bond issue to finance infrastructure projects to 256 billion francs from 653 billion francs ($686 million).

The support would allow the central bank to boost its foreign currency reserves, which have fallen from $1.48 billion at the end of 2015 to $1.2 billion this week due to a slowdown in exports, said Vincent Ngonga, a deputy chief of staff to the prime minister.

After years of exchange rate stability, a lower supply of dollars has heaped pressure on the franc, causing it to lose more than 2.5 percent of its value against the dollar this year.

“The advantage of budgetary support is that it affects the reserves because, once you have the support, it’s in dollars,” Ngonga said. “The reserves increase but the revenues of the state increase too.”

However, the negotiations with the World Bank can only begin if the IMF certifies Congo’s conformity with governance and macroeconomic standards during a visit next month, he added.

The IMF called off a $530 million loan programme in 2012 after the government failed to provide sufficient details on the cession of mining assets by state miner Gecamines to a company based in the British Virgin Islands.

Ngonga said it was not clear when the government could expect to receive the first tranche of support. The World Bank’s office in Congo was not immediately available for comment.

Ngonga said the government would also seek budgetary support from the African Development Bank (AfDB) but said that too depended on the IMF’s blessing. The AfDB was also not immediately available for comment.

 

(By Aaron Ross. Editing by Matthew Mpoke Bigg and Gareth Jones)

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Egypt’s central bank offers $120 million to cover pharmaceutical imports

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

CAIRO (Reuters) – Egypt’s central bank said it is offering $120 million in its regular currency sale on Tuesday to be used for imports of pharmaceutical products, manufacturing components, vaccines and related chemicals and infant formula.

Egypt’s economy has been hobbled by a shortage of foreign currency since a 2011 uprising drove away tourists and foreign investors. Dollars are rationed through weekly auctions imports of essential goods get priority.

The central bank, which has been keeping the pound artificially strong, devalued the currency on March 14 to 8.85 per dollar from 7.7301 and announced a more flexible exchange rate policy. It later strengthened the pound to 8.78 per dollar, where it has remained since.

A weaker currency has made it more expensive to import raw materials, and with the price of finished medicines fixed by the Health Ministry, some manufacturers have stopped making cheap generic medicines to staunch growing financial losses.

On Monday, Egypt raised the price cap on medicines that cost up to 30 Egyptian pounds ($3.38) by 20 percent in an effort to address drug shortages, the health minister said on Monday.

 

($1 = 8.8799 Egyptian pounds)

 

(Reporting by Asma Alsharif, editing by Larry King)

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A second-hand clothing ban in East Africa?

17 May 2016 Comments (5) Africa, Business, Featured

africa second hand clothes

Burundi, Kenya, Rwanda, Tanzania, and Uganda consider ending imports of used garments by 2019 in order to increase domestic production.

Five East African countries may ban sales of second-hand clothing from abroad – a staple of many residents’ wardrobes – in order to bolster domestic garment making.

Burundi, Kenya, Rwanda, Tanzania, and Uganda make up the East Africa Community (EAC), which directed its member countries to phase out textile and shoe imports by 2019. The heads of state of all five countries must agree before the limits could take effect.

The proposal comes as many African countries seek to increase manufacturing and other industries to fuel economic growth.

Charitable donations resold

Second-hand clothing, mostly from Europe and North America, are a mainstay of local clothing markets in Africa, according to Dr. Andrew Brooks, author of Clothing Poverty: The Hidden World of Fast Fashion and Second-hand Clothes.

In Uganda, for example, second-hand garments account for 81 percent of all clothing purchases, Brooks said.

East Africa imported more than $150 million worth of second-hand clothing in 2015. Brooks noted that the used clothing is less expensive than locally produced garments or even inexpensive new imports.

U.S., U.K. are largest exporters

Most of the second-hand clothing sold around the world comes from charitable donations by European and North American residents who are unaware the clothing will be sold, Brooks said.

The United States and the United Kingdom are by far the largest exporters of used clothing.

The United States exported used garments worth more than $685 million in 2013, according to United Nations data. Much of it went to Central and South America, Canada and Mexico but Tanzania and Angola also received major shares.

Uganda imports 1,500 tons of used clothing each year from the U.S. alone, according to the U.S. International Trade Commission.

The United Kingdom’s exports totaled more than $620 million with major shares going to Ghana, Benin, Kenya, and Togo.

Germany was the third largest exporter at more than $500 million, with large shares going to Cameroon and Angola.

Other major exporters are South Korea, The Netherlands, Belgium, Canada, Poland, Italy and Japan.

South Korea and Canada together exported $59 million worth of used clothes to Tanzania while the UK exported $42 million worth of used clothes to Kenya.

Regional industry declines

Garment manufacturing in Ghana

Garment manufacturing in Ghana

Brooks, a lecturer at King’s College in London, said local garment makers employed hundreds of thousands of people in East Africa before the debt crisis hit in the 1980s and 1990s when domestic producers struggled to compete and many factories closed.

In Kenya alone, a garment industry that employed 500,000 people was reduced to only about 20,000 garment workers today.

The East Africa Community pointed to the need to rebuild domestic production as it proposed the ban on second-hand imports.

“The region, like the other developing countries, is ready to transition into an industrial bloc with a higher level of production quality and manufacturing practices,” said Betty Maina, Kenya’s Principal Secretary at the EAC Ministry. “It will benefit industry and increase access to locally manufactured products in the region and create more employment opportunities.”

No ban on new clothing imports

Brooks noted that the ban does not include imports of new clothing, which could also undercut the domestic garment makers. While rebuilding the local garment industry may be beneficial in the long-term, higher prices could hurt local consumers.

In the near term, government would also suffer losses of tariffs collected from clothing importers. For example, Kenya collected $54 million in tariffs on 100,000 tons of imported used clothing in 2013.

Rwanda earlier this year nearly tripled its import duty on imported clothing from 35 percent to 100 percent in order to encourage purchases from the country’s lone textile mill. Two years ago, the factory was producing at 40 percent of capacity but that has dropped to 20 percent.

Comprehensive approach urged

To revive the garment industry, Brooks said, more comprehensive action than the ban must be taken.

These include improvements in transportation and power supplies to stabilize the distribution system as well as tax relief for factories and support for the sustainability of east Africa’s cotton sector.

“A revitalized local market would ultimately boost the (regional) economy by providing more jobs than the second-hand sector while retaining money that currently goes to Europe and the U.S. to pay for second-hand imports,” Brooks said.

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Nigerian oil output down 40% on Delta pipeline attacks

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

ABUJA (Reuters) – Nigeria’s oil production has fallen by almost 40 percent to 1.4 million barrels a day due to militant attacks on facilities in the Delta region, its oil minister said on Monday.

Emmanuel Ibe Kachikwu’s comments come amid a resurgence of militancy in the southern region which produces most of the crude oil that Nigeria relies on for around 70 percent of national income, and days after Britain’s foreign minister said local grievances need to be addressed. [nL5N18B0L2]

Kachikwu said efforts would be made to engage with people in the area.

Nigerian oil output has been driven lower after attacks by a group calling itself the Niger Delta Avengers which says it wants a greater share of oil profits and independence for the swampy region where residents have long complained of poverty.

Attacks in the last few weeks have hit platforms belonging to Chevron and Shell.

“Because of the incessant attacks and disruption of production in the Niger Delta, as I talk to you now, we are now producing about 1.4 million barrels per day,” Kachikwu told the House of Representatives.

“We were at 2.2 million bpd but we have lost 800,000 barrels,” said Kachikwu, who was invited to address the lower house of parliament about the country’s oil sector.

The 2016 budget assumes oil production of 2.2 million barrels per day at $38 a barrel.

Nigeria has moved in army reinforcements to hunt the militants but British Foreign Minister Philip Hammond on Saturday said the government needed to the deal with the root causes of the conflict because a military confrontation could end in “disaster”.

Kachikwu echoed these sentiments when he told parliamentarians experience had shown that force alone tends not to solve problems.

“There are going to be robust engagements on what could have happened to the contract or relationship that used to exist between the Niger Delta and the Nigerian police that has suddenly resorted to sabotage,” said Kachikwu.

President Muhammadu Buhari has extended a multi-million dollar amnesty signed with militants in 2009 but upset them by ending generous pipeline protection contracts.

“We are trying to look at the amnesty and what has happened. Policing is key, security is key and throwing economic palliative to those sectors are also key,” added Kachikwu.

He said the government was “trying to create funding mechanisms for some private investments including funding mechanisms for some modular refineries” and “actually getting them involved in the security of the facilities”.

 

(By Camillus Eboh. Writing by Ulf Laessing and Alexis Akwagyiram; editing by Adrian Croft and David Evans)

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Burundi’s inflation slows to 2.6% in April yr/yr

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

KIGALI (Reuters) – Burundi’s year-on-year inflation eased to 2.6 percent in April from 4.3 percent in March thanks to a significant fall in food costs, official data showed on Monday.

Food inflation in the year to April slowed to 2.5 percent from 6.4 percent in the previous month, the country’s Institute of Economic Studies and Statistics(ISTEEBU) said in a report.

Burundi has been grappling with unrest for more than a year, mainly in the capital Bujumbura. Western donors have suspended vital aid, leaving the poor nation more dependent on its modest coffee and tea exports and on domestic tax revenues.

Burundi’s economy shrank by 7.2 percent in 2015 and is expected to expand by 3.4 percent this year, the International Monetary Fund (IMF) said in a report.

 

(Reporting by Patrick Nduwimana; Editing by Edmund Blair and Gareth Jones)

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Carlyle sets up $500 mln Europe, N.Africa energy vehicle

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

LONDON (Reuters) – Carlyle Group on Monday announced an investment in Tunisia-focused oil and gas explorer Mazarine Energy which will also receive $500 million to make bolt-on acquisitions in Europe and North Africa.

The deal is the first investment in over a year for Carlyle International Energy Partners, the private equity firm’s overseas oil and gas investment fund, which has more than $2.5 billion at its disposal, CIEP head Marcel van Poecke said.

The size of the investment in Mazarine was not disclosed.

Private equity funds including Carlyle, Riverstone and CVC Partners have built up significant firepower in recent years to invest in the oil and gas sector which has struggled following the collapse in oil prices since mid-2014.

“I think we will see more deals this year. Very slowly the M&A (merger and acquisition) space is starting to pick up,” van Poecke told Reuters.

Mazarine will seek investments in “low cost, low-risk opportunities” in onshore exploration and production assets, Chairman and founder Edward van Kersbergen told Reuters.

The company will focus on onshore fields in Romania, where CIEP acquired assets in March 2015 from Sterling Resources, as well as North Africa.

“We want resources that we can develop in a relatively short space of time at a low technical cost,” van Kersbergen said.

In Tunisia, Mazarine expects to start production of 1,500 to 2,000 barrels per day next year, according to van Kersbergen.

CIEP has in recent years created two companies to invest in assets in the North Sea and the Indian subcontinent.

Neptune, the North Sea vehicle set up by CIEP and CVC Partners a year ago which is headed by former Centrica boss Sam Laidlaw, was expected to make an investment over the next 12 months, van Poecke said.

 

 

(Reporting by Ron Bousso; editing by Jason Neely and David Evans)

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