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South Africa’s economy slows further, ratings eyed

1 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

PRETORIA (Reuters) – Disappointing economic growth in South Africa at the end of 2015 is likely to heighten fears its credit rating will be cut to “junk” and further unnerve investors concerned about President Jacob Zuma’s handling of the economy.

Data from Statistics South Africa on Tuesday showed the continent’s most industrialised economy expanded 0.6 percent in the final quarter, slowing slightly from the previous three months as the agricultural and manufacturing sectors shrank. Economists polled by Reuters had expected a rise of 0.8 percent.

“With all expectations that 2016 will be weaker still, this signals decelerating growth momentum in South Africa for three consecutive years, highlighting some of the long-standing concerns of the ratings agencies,” said Standard Chartered’s head of Africa research, Razia Khan.

The rand nevertheless rose 1 percent against the dollar, tracking other emerging market currencies higher as uncertainty over the pace of further U.S. interest rate hikes tempers the dollar’s momentum.

Credit rating agencies have said South Africa is at risk of a downgrade that could take it below investment grade.

The Treasury has warned such a move could trigger a sharp reversal of foreign capital flows on which South Africa relies to finance its huge current account deficit and precipitate a recession.

Fitch and Standard & Poor’s currently rate South Africa BBB-, one notch above “junk”, while Moody’s assigns a slightly higher Baa2 grade.

On a year-on-year basis, the economy grew 0.6 percent from 1 percent in October to December compared with a Reuters poll forecast of 0.4 percent.

More sluggishness is expected in 2016 as a severe drought persists and global demand for South African exports including gold and other metals remains depressed.

The government forecasts growth of 0.9 percent this year compared with an estimated 1.3 percent in 2015, which would be the lowest rate of expansion since South Africa emerged from a recession in 2009.

 

NERVOUS

Investors are also nervous about economic policymaking after Zuma’s sudden firing in December of finance minister Nhlanhla Nene in favour of a relatively unknown lawmaker precipitated a plunge in the rand and other South African assets.

To halt the sell-off, Zuma brought back Pravin Gordhan as his third finance minister in a week, but recent media reports have suggested a rift between the president and Gordhan, who won investors’ respect during a previous stint in the job.

Gordhan outlined an austere budget last week that was aimed at avoiding credit rating downgrades but which failed to reassure investors.

Zuma, who faces his second no-confidence vote in a year on Tuesday over what the opposition Democratic Alliance called his reckless handling of the economy, has denied he and Gordhan are at war.

Highlighting the economy’s weakness, separate data on Tuesday showed new vehicle sales fell by 8.1 percent year-on-year in February, their third consecutive monthly contraction.

Electricity prices could also drag on growth after the energy regulator allowed state-owned power firm Eskom to raise tariffs by 9.4 percent in the 2016/17.

“These data make it less likely that the Reserve Bank will follow up January’s 50 basis points interest rate hike with another rate rise this month, despite the deteriorating inflation outlook,” Capital Economics analysts said in a note.

The South African Reserve Bank has been hiking interest rates to tame rising inflation, despite weak growth.

The bank will announce its second interest rate decision of 2016 on March 17.

 

(By Olivia Kumwenda-Mtambo. Editing by James Macharia and Catherine Evans)

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Fred Swaniker, Educating Africa’s next great leaders

1 March 2016 Comments (0) Africa, Featured, Leaders

Fred Swaniker

One man’s determination to make Africa great by teaching its fourth generation to be good leaders.

Gaining worldwide recognition, ranked among the “top 10 young power men in Africa” by Forbes Magazine and named one of the World Economic Forum’s “Young Global Leaders” in 2012, few could wish for such an impressive list of accolades. However, for Ghanaian Fred Swaniker, they are just a few happy byproducts of his passionate dedication to educate the fourth generation of post-colonial Africa.

Having succeeded in fulfilling his first dream of opening the African Leadership Academy (ALA) in 2008, followed later by the African Leadership Network (ALN) in 2010, he is by no means ready to slow down. Instead his latest mission just goes to prove that the 38 year old is quietly leading a revolution.

The ambitious entrepreneur has turned his sights towards developing the African Leadership University (ALU). Announcing his plans for the first time in public during a TED talk in October 2014, Swaniker spoke of the potential to educate and develop 250,000 leaders at the University’s 25 campuses across Africa. He estimated that over 50 years that would create three million transformative leaders who could finally walk out the doors of ALU and into the world, hopefully to carry out his vision of leading Africa in a brighter, more prosperous and stable direction.

Early inspiration

The TED fellow’s early years were spent moving from country to country almost every four years due to political unrest in his continent. At the age of four he experienced his first coup d’état that forced him and his father, a lawyer, and his mother, an educator, to leave their native home.

His family moved to Botswana, a revelation to the then eight year old Swaniker, who appreciated the country’s good infrastructure, no coups, good education and the fact that “things worked.” It was here, while watching television that the young Ghanaian pin points the moment he realized the power of leadership. As he watched the incarcerated Nelson Mandela refuse to give up the struggle against the apartheid he thought to himself, “one good leader could make such a difference in Africa.”

His experience of living in many African countries kindled a deeper love for his continent and solidified his dream, to dedicate his life to making Africa great. His first opportunity came about whist living in Botswana and his mother was asked to set up a school. On agreeing she made sure to engage her son as the head teacher, a mere 17 year old at the time. It was a life changing experience that would instill in him a deep understanding of the importance of education and responsibility.

Where education and leadership meet

These two pivotal realizations in the African entrepreneur’s life were uniquely profound but combined, they were revolutionary. He realized the potential in teaching leadership skills to bright, ambitious, young Africans to give them the opportunity to transform the continent. “For Africa more than anywhere else in the world, the difference that just one good leader can make is much greater than anywhere else,” Fred Swaniker said during his 2014 TED talk.

After studying economics at Macalester College in the US, he joined McKinsey management consulting firm before going on to obtain an MBA from Stanford University. While there he came up with the idea to create his African college.

It was not an easy road to fruition; he sacrificed his time, finances, energy and even comfort in order to raise what was needed to get ALA up and running. Reminiscing on the time, Swaniker said, “The initial funding came from my friends and family but that lasted for a few months and then it ran out. I really spent the next two years without any money and we just had to find ways to survive.” Luckily his support network was strong, with friends who believed in him enough they would go on to become co-founders and colleagues.

Looking ahead

It is with unwavering belief that the leadership development expert approaches the future. As much as he has invested already in his continent, he is ready to invest more. His faith is in this new generation and he is putting all he has into making the doors of his institutions as open as possible, to all.

The university runs a scheme of “forgivable” loans that offer students money for fees and living costs which are not required to be paid back should they work in Africa for 10 years after graduating. It is his way of additionally encouraging the bright, young thinkers to remain, to put all their new found skills and knowledge back into Africa.

“I thought that if I can create an organization that can find young entrepreneurs, young leaders in every country in Africa – that has the potential to really change the continent; if I could build an institution that could develop them, then they could achieve much more than I could achieve by myself.”

And while so much of the Young Global Leader’s time is spent conjuring up new ideas and ensuring the smooth operation of his many institutions, he still makes time to enjoy his relatively new married life. Married on the 8th June, 2013 he and his wife share a love of good food, travel and Africa – a continent that is going from strength to strength thanks to visionaries like Fred Swaniker.

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South Africa’s Vodacom drops Neotel deal on regulatory hurdles

1 March 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa mobile operator Vodacom on Monday dropped a planned acquisition of local fixed line operator Neotel, citing regulatory complexities.

“It is disappointing that we have reached this conclusion despite all our efforts to find a way to deal with the complexities of the restructured transaction,” said Vodacom Chief Executive Shameel Joosub.

Vodacom, a unit of Britain’s Vodafone, had offered $500 million to Neotel owner, India’s Tata Communications, in 2014 but was forced to rework it after regulators raised anti-trust issues.

Under the modified deal, announced in December, Vodacom would have bought assets related to Neotel’s fixed-line business but not its frequency spectrum – which the Competition Commission’s said would have given Vodacom an unfair advantage in rolling out a high-speed 4G network.

South Africa is in the midst of switching its television signal to digital from analogue, a move that would free up much-needed airwaves as consumers increasingly use smartphones to browse the internet and download applications.

 

(Reporting by TJ Strydom; Editing by Tiisetso Motsoeneng and Joe Brock)

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South African rand recovers as Zuma says not at war with finmin

29 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand firmed against the dollar on Monday after President Jacob Zuma said he was not at war with Finance Minister Pravin Gordhan, following media reports of a fallout.

The currency fell nearly 4 percent on Friday, its biggest daily loss since 2011, after Gordhan said there were attempts to discredit him and the integrity of the Treasury.

Gordhan’s statement followed a newspaper report which quoted sources as saying he had threatened to resign after receiving a letter from the elite Hawks police unit questioning his knowledge of a suspected rogue unit at the revenue service.

This followed media reports of a clash between Gordhan and the head of the South African Revenue Service (SARS).

The Hawks also said they were not investigating Gordhan, and there was no case against the minister.

“The media has incorrectly reported, among other things, that there is a war at SARS and that the President and the Minister of Finance are somehow at war. This is a total fabrication and mischievous sensationalism,” the presidency said in a statement.

“The President wishes to emphasise that Minister Gordhan remains the Minister of Finance and any positing that the position of the Minister is under any threat is dismissed with the contempt it deserves.”

As of 1344 GMT, the rand had firmed 1.45 percent to 15.9260 versus the dollar from Friday’s close of 16.1600.

Government bonds also recovered. The yield on the benchmark instrument due in 2026, which soared as much as 28 basis points in early trade, was up 4.5 basis points to 9.41 percent as of 1434 GMT.

“It is a case of correction following knee jerk selling on Friday. The markets will continue to keep a close eye on narrative and look for further confirmation Gordhan will be allowed to do his job,” NKC African Economics economist Bart Stemmet said.

On the stock market, both the Top-40 index and the broader All-share were largely unchanged.

Barclays Africa Group Ltd fell as much 6 percent when the market opened, and traded 5 percent lower after Barclays Plc said on Sunday its board was evaluating strategic options in relation to its shareholding in its African business.

($1 = 16.0379 rand)

 

(By Olivia Kumwenda-Mtambo. Additional reporting by Stella Mapenzauswa and Nqobile Dludla; Writing by James Macharia, editing by Ed Osmond)

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Kenya’s inflation falls, may pave way for easing of rates

29 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s year-on-year inflation rate slowed to 6.84 percent in February, the statistics office said on Monday, prompting at least one analyst to say the central bank could start easing rates gradually.

February’s rate is the lowest since October last year, when it stood at 6.72 percent, the statistics office said.

Razia Khan, head of research for Africa at Standard Chartered in London, said this supported the case for policymakers to start lowering costs of credit later this year.

“While lower global oil prices have clearly helped, we nonetheless expect the CBK (Central Bank of Kenya) to enact a moderate pace of easing, paying careful attention to continued foreign exchange stability in the process,” she said.

The statistics office added the fall was driven by a -0.43 percent monthly drop in the price of food, which has the biggest weighting in the basket of goods used to measure inflation.

“This resulted from notable decreases in prices of key food items which slightly outweighed the increases,” the Kenya National Bureau of Statistics said in a statement.

Prices of housing and transport also came down on a monthly basis, the bureau said.

The governor of the central bank Patrick Njoroge told Reuters in December he expected inflation to be contained within the government’s preferred band of 2.5-7.5 percent.

 

(Reporting by Duncan Miriri; Editing by Janet Lawrence)

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Kenya, Senegal join effort to fight tax evasion

28 February 2016 Comments (0) Africa, Business, Featured

Kenya signs the Convention on Mutual Administrative Assistance in Tax Matters

Twelve African countries sign multilateral agreement to counter tax abuse, which costs the continent an estimated $50 billion annually.

Kenya and Senegal have joined 10 other African countries in signing an international agreement designed to reduce tax evasion.

The multilateral convention enables cooperation among nations, including exchange of information about tax evaders and assistance in collecting taxes from them.

African nations lose an estimated $50 billion per year to illegal financial transfers, including tax avoidance, according to a 2015 report by the African Union and UN Economic Commission for Africa. In comparison, Africa received about $29 billion in foreign aid in 2013.

The tax evasion problem is particularly acute for poorer countries that do not have tools to fight sophisticated schemes by large multinational companies. The report and aid groups have noted that these billions of dollars might otherwise be used to develop services and infrastructure on the continent.

Multinational companies blamed

“Africa is hemorrhaging billions of dollars because multinational companies are cheating African governments out of vital revenues by not paying their fair share in taxes. If this tax revenue were invested in education and health care, societies and economies would further flourish,” said Winnie Byanyima, executive director of Oxfam International.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters is one tool to fight large-scale tax evasions. It was developed by the Council of Europe and the Organization for Economic Cooperation and Development in 1988 and updated in 2010.

Parties to the agreement cooperate by providing financial information to other party countries on request, performing tax examinations and assisting with recovery of tax dollars.

Twelve African nations sign agreement

Kenya and Senegal signed the agreement in February. Other African parties to the convention are Morocco, Gabon, Cameroon, Mauritius, Uganda, Ghana, Nigeria, South Africa, Tunisia and Seychelles. Globally, a total of 94 countries have signed the convention.

Kenya also recently passed a law that prevents companies from using a common tax-avoidance practice called “transfer pricing” or “trade mispricing.”

Using this practice, companies allocate their costs to subsidiaries in high-tax jurisdictions in order to pay most of their taxes at the lower rate while moving their profits to jurisdictions where they pay little or no tax.

For example, the African Union study described a South African case in which a multinational corporation claimed that a large part of its business was located in the United Kingdom and Switzerland, with relatively low tax rates.

On investigation, South African officials found the European branches had only a few staff while the company conducted most of its business in South Africa. The scheme had enabled the company to avoid $2 billion in taxes, which the South African government reclaimed.

Invoices misstate value

Other practices are “under-invoicing” or declaring a low value on exports to minimize profits on paper and “over-invoicing” by declaring a high cost on imports.

For example, Mozambique records showed an export of 260,385 cubic meters of timber was exported to China in 2012 while records in China show 450,000 cubic meters were imported from Mozambique that year, according to the report.

Another study, by Global Financial Integrity (GFI), found high rates of over and under-invoicing in Kenya, Ghana, Mozambique, Tanzania and Uganda in the decade leading up to 2011.

Kenya, Tanzania see high losses

GFI said Kenya had an estimated $10 billion and Uganda $813 million in under-invoicing. At the same time, Tanzania had $10 billion to over-invoicing. Ghana had more than $14 million for the decade in misstated invoices and Mozambique more than $5 million.

The African Union report said illicit financial outflows from Africa have more than doubled since 2001, from $20 billion to the current $50 billion. The report said African nations lost about $850 billion to illegal transfers between 1970 and 2008, including $218 billion from Nigeria, $105 billion from Egypt and $82 billion from South Africa.

The report said mispricing occurs in a number of sectors, including mineral production in the Democratic Republic of the Congo and South Africa, crude oil exports from Nigeria, and timber sales from Mozambique and Liberia.

Corporations, organized crime cited

Thabo Mbeki, the former president of South Africa who chaired that panel that produced the report said large corporations were the main tax abusers aided by corrupt officials and weak governance.

“The information available to us has convinced our panel that large commercial corporations are the biggest culprits of illicit outflows, followed by organized crime,” Mbeki said.

African and non-African governments as well as oil, mining, banking, legal and accounting firms were involved in tax avoidance schemes, according to the study.

It found that 38 percent of the outflows from the continent originated in West African and 28 percent in North Africa. Southern, Central and East Africa each accounted for about 10 percent.

While significant to the continent, Africa’s losses are a small share of the illicit outflows globally, about six percent of an estimated $1 trillion between 2007 and 2009.

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Rwandan economic growth to slow to 6.8% in 2016

26 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Rwanda’s economic growth rate will ease to 6.8 percent in 2016 from 7.1 percent in 2015, the World Bank said on Friday, noting the slow implementation of the country’s budget.

Rwanda maintained “steady growth and macroeconomic stability” for much of 2015, the bank said in a report, adding that the aid-dependent country had benefited from low oil prices.

“Downside risks have been increasing, both externally and domestically,” Yoichiro Ishihara, the bank’s senior economist for Rwanda, said in a statement. “On the domestic front, delayed execution of the budget and inadequate financing for development are of concern.”

Rwanda is one of the economies in the region that investors have hailed for solid fundamentals, including low debt and inflation.

The growth rate averaged 8.2 percent from 2006 to 2012 in the landlocked state, which has become a favourite with international investors two decades after the 1994 genocide.

 

(Reporting by Clement Uwiringiyimana; Editing by Edith Honan and Hugh Lawson)

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6 African, Middle East startups in global competition

26 February 2016 Comments (0) Africa, Business, Featured, Middle East

New ventures from South Africa, Morocco, Sudan, Saudi Arabia and Egypt will compete in the Get in the Ring final in March.

Six startups from Africa and the Middle East will compete in the world finals of Get in the Ring, a global competition that helps raise the visibility of new ventures and connects them with potential investors.

The six startups representing South Africa, Morocco, Sudan, Saudi Arabia and Egypt include delivery services, mobile applications and energy developers. They will compete in the Get in the Ring world final in Medellin, Columbia in March.

Get in the Ring is one of the world’s largest competitions for startups.

Contestants face off in a boxing ring to deliver 30-second pitches for their product or service and they are judged by investors and other experts. They are scored based on their business model and potential market, their team, their achievements and their financials.

Two South African startups win regional

Winners for the sub-Saharan region are two South African startups, Newtech Rail and iMORPH3D.

Newtech Rail has developed technology for railway overhead infrastructure. Jan Jooste, a South African industrial engineer and director of innovation at Vaal University of Technology, launched the startup in 2015.

iMORPH3D is a mobile application that enables users to create anamorphic 3D illusions. Android and Apple versions are available for download. It is a product of Adfire Creative M3dia.

Morocco, Sudan among winners

In the North African regional competition, held in Casablanca, Moroccan startup LIK and a Sudanese startup SmartDelivery emerged as the winners.

LIK from Morocco is a mobile application that gives users free phone credits in exchange for agreeing to display advertising on their smart phones when they receive calls. The ads are location-based and contextual based on age, gender, and language. Launched late last year, the app already has more than 100,000 users.

LIK at Level Up Competition

LIK at Level Up Competition

LIK found that its users were seeing advertising everywhere but were not realizing any benefit from viewing the ads. “With LIK, they can finally benefit,” Ismail Bargach said. He co-founded LIK with Omar Kadiri, and Yassine Faddani. The startup also won the Level Up Morocco competition last year in Casablanca.

The Sudanese startup SmartDelivery lets customers order fresh vegetables, fruit and meat via an app and it provides free delivery. It is able to charge lower prices because it buys directly from farmers and eliminates the middlemen. According to the company, the app enables efficient communication on customer orders.

Middle East winners

Vanoman from Saudi Arabia and SolarizEgypt won the Middle East regional competition.

Vanoman is a platform to connect truck drivers in Saudi Arabia with customers who want furniture transported. Fadi Almaghrabi, its CEO, represented the company.

SolarizEgypt designs and installs grid-connected PV solar power plants as a supplement for conventional types of power for industrial, commercial and residential customers. The company was launched by a group of graduates of the American University in Cairo.

Participants pitch their ventures

Get in the Ring brings entrepreneurs together to compete in local, national and regional competitions that winnow the field for the world finals, where they compete for funding of up to one million euros and investment dollars.

Along the way, participants received expert advice, coaching on their pitches and the opportunity to meet investors and develop a fan base.

“This event is not just about pitching for funding. It is also about pitching for attention’’ according to Brian Walsh, founder and chief executive officer of The REAL Success Network, one of the partners for the event. Walsh said the multiple rounds of competition expose them to thousands of potential funders and supporters.

Steven Cohen, head of event co-sponsor Sage One International, said Get in the Ring “is helping to encourage excellence and innovation among local businesses, and to provide role models and inspiration for the entrepreneurs of the future.”

In 2014, the South African startup GoMetro was a runner-up in the global finals.

Get in the Ring began in 2012 in the Netherlands and has grown rapidly into a major global event. Get in the Ring competitions are now held in more than 60 countries. Between 2012 and 2014, more than 3,000 startups participated.

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African Development Bank approves $1.1 billion in loans to Tanzania

26 February 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

DAR ES SALAAM (Reuters) – The African Development Bank (AfDB) has approved a loan package worth $1.1 billion to Tanzania to be paid out over five years to fund infrastructure projects and improve public sector governance, it said.

The line of credit will be used primarily to support the transport and energy sectors and improve the business environment in east Africa’s second-biggest economy.

The loans would support “transport and energy to promote domestic and regional transport connectivity and improve access to reliable, affordable and sustainable electricity,” AfDB said in a statement late on Thursday.

“The second pillar prioritises strengthening of financial management and improving the enabling environment for private sector investment and finance for sustainable job creation.”

The government plans to spend $14.2 billion to construct a new standard gauge rail network in the next five years financed with external loans. It also plans to build a new $10 billion port at Bagamoyo, expand existing airports and invest in new roads.

Tanzania, like its neighbour Kenya, wants to profit from its long coastline and upgrade existing rickety railways and roads to serve growing economies in the land-locked heart of Africa.

Tanzania boasts economic growth of 7 percent a year, yet it is largely driven by state investment and poverty remains stubbornly high.

It also has natural gas reserves that are estimated at more than 57 trillion cubic feet (tcf) and the central bank believes 2 percentage points would be added to its annual economic growth simply by starting work on a plant to process that would draw in billions of dollars of investment.

“Board members underscored the need for Tanzanian authorities to ensure that the country’s high GDP growth delivers robust economic transformation, poverty reduction and improved livelihoods,” AfDB said.

 

(Reporting by Fumbuka Ng’wanakilala; Editing by Toby Chopra)

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Tough year ahead for South African retailers as Massmart stalls

25 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Massmart reported flat annual earnings on Thursday and highlighted the difficulties South African food retailers are likely to face this year as shoppers contend with rising prices, mounting debt and high unemployment.

The retailer, majority owned by Wal-Mart Stores Inc, earns 91 percent of its revenue in South Africa, an economy expected to grow by less than 1 percent this year.

The biggest worry this year is how inflation will affect the lowest income earners, Chief Financial Officer Hans van Lierop told Reuters.

Massmart, which also sells appliances and building materials to wealthier shoppers, supplies staples such as maize and rice in bulk to traders who sell them on to poor urban and rural consumers.

Though retailers absorb some of the cost increases, maize and sugar prices could climb by a double-digit percentage due to a severe drought in southern Africa, said Van Lierop.

Poorer South Africans spend a large part of their income on food and transport, so even when retailers do not pass on price increases they struggle to afford anything but essentials.

Massmart noted a slowdown in general merchandise sales toward the end of 2015 as business confidence sagged and the currency depreciated to new lows.

The rand has declined 20 percent against the dollar since October, offsetting gains for consumers from lower fuel prices.

“People are travelling less, less often and less far to go to shops,” said Chief Executive Guy Hayward in a presentation to analysts.

Basket sizes are smaller than a year ago, he added.

Rival Shoprite also noted the impact of transport costs on customers when it reported an 8.9 percent rise in half-year profit on Tuesday.

In some parts, shoppers increasingly prefer informal retailers to stores because it involves less travel, Shoprite Chief Executive Whitey Basson said then.

Low-income shoppers would struggle, Basson said, adding Shoprite could benefit as middle-income customers trade down.

Pick n Pay, a grocer focused on the middle and upper end of the market, on Thursday piloted a project to supply informal shops, called “spazas”.

The trial could be extended to hundreds of independent spaza owners if successful, it said.

Massmart posted diluted headline earnings per share (EPS) of 508.8 cents for 2015, compared with 504.7 cents in 2014.

Headline EPS is South Africa’s main profit gauge and strips out certain one-off items.

 

(Reporting by TJ Strydom; Editing by Stephen Coates and Mark Potter)

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