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Will Djibouti become the Singapore of Africa?

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Ismail Omar Guelleh

The tiny country on the Horn of Africa hopes to use its strategic location to boost trade and diversify its economy.

The tiny nation of Djibouti has set its sights on becoming the Singapore of Africa, a trade hub that takes advantage of its location on one of the world’s busiest shipping routes.

China’s recently announced plans to build a naval base in the Horn of Africa country gave a boost to Djibouti’s ambitions. Other plans, with a price tag of $12.4 billion, include expansion of port facilities, two new airports, as well as a $4 billion rail link with Ethiopia, Djibouti’s land-locked neighbor.

“We want to follow the path of Singapore,” Dijbouti president Ismail Omar Guelleh said.

China provides significant assistance

China is playing a significant role in Djibouti’s development as the Asian nation seeks to expand its influence in the region and secure trade routes with its “One Belt, One Road” initiative. Chian is financing most of the $12.4 billion in improvements as well as the $4 billion rail link with Ethiopia.

Work is expected to start soon on the Chinese naval base, which will be located at the new multi-purpose port of Doraleh.

The two countries have agreed to a 10-year lease for the base with China paying rent of $100 million per year. The base will house about 10,000 Chinese troops and is expected to boost local employment and businesses.

The United States and France already maintain naval bases in Djibouti.

Djibouti’s plans call for development of a second port, also at Doraleh, designed to handle container shipments.

Two new airports will be built

China is also providing support for two new airports Djibouti is building at a cost of nearly $600 million. With these projects, Djibouti hopes to increase both cargo shipping and tourism, which makes up a small part of its economy.

One airport at Ali-Sabieh, south of the capital will be capable of serving 1.5 million passengers and moving 100,000 tons of air cargo annually. It is expected to begin operating in 2018.

A second, smaller airport will be built in northern Djibouti. Designed to handle more than 750,000 passengers a year, it is expecting to start operating in 2016.

Rail line to link Djibouti, Ethiopia

China also is building a $4 billion railway line that will link Djibouti with Ethiopia, one of the fastest growing economies globally, which gets about 90 percent of its imports through Djibouti. The rail line will give land-locked Ethiopia a link to the sea while Djibouti will gain access to a market of 95 million people.

Djibouti, one of the poorest countries on the continent, envisions becoming a middle-class country in two decades in its “Djibouti Vision 2035” blueprint drafted with the help of the World Bank.

Ports and trade are already at the center of Djibouti’s economy but the nation hopes to diversify.

More than two thirds of Djibouti’s gross domestic product comes from the services, primarily port and trade-related operations. The remainder is from manufacturing and agriculture. Poverty is prevalent and unemployment is 60 percent in urban areas. The literacy rate is 70 percent.

Seeking economic diversification

Djibouti seeks to further diversify its economy by becoming a regional financial hub for foreign investment, including Islamic banks. China and Djibouti also signed deals for banking and free trade zones.

“Nowadays we are shifting to a much more integrated development plan. We’re trying to diversify our economy,” Djibouti finance minister Ilyas Dawaleh said.

Dawaleh noted that his country has enjoyed strong economic growth in recent years – 6.5 percent of gross domestic product in 2015 and 5.7 percent in 2014.

He predicted Djibouti will achieve double-digit annual growth in the next three years. “This is our target with our diversification strategy we are undertaking now,” he said.

Dijbouti is one of four countries that make up the Horn of Africa and the only one that has been largely peaceful for the past two decades while its neighbors across the Gulf of Aden – Somalia, Eritrea, and Yemen, have endured conflicts. This has enabled Djibouti to emerge as the main military and maritime hub in the troubled region even though the country is largely undeveloped.

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AngloGold swings to 2015 profit on weaker currencies, oil prices

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Africa’s top bullion producer AngloGold Ashanti Ltd on Monday said it swung into profit in 2015 as it benefited from lower oil prices and weaker currencies in the countries from which it exports gold.

Adjusted headline earnings, which exclude certain one-off items, were $49 million versus a year-earlier loss of $1 million.

“The results for the fourth quarter and full year 2015 show the combination of a strong ongoing focus on cost and capital discipline, as well as the operational leverage the company has to weaker currencies and lower oil prices,” AngloGold said.

 

(Reporting by Ed Stoddard)

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Growth in African wealth brings more philanthropy

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Mo Ibhrahim Foundation

As the number of millionaires and billionaires on the continent grow, many give back to programs promoting health, education and entrepreneurship.

As the wealth of the continent increases, African philanthropy is on the rise.

For example, Aliko Dangote of Nigeria, the richest person in Africa recently joined with the Bill and Melinda Gates Foundation to pledge $100 million to fight malnutrition in Nigeria.

Dangote has supported programs in education, youth empowerment and health as well as a program that offers micro grants to rural women and young people to help them start businesses.

Now he will help in the battle against malnutrition in his home country, where one in five children are malnourished and one in three suffers from stunted growth – the highest number in Africa.

With a fortune of $17 billion built in cement and sugar manufacturing, Dangote is considered the richest person in Africa.

Philanthropy increasing across Africa

Dangote is not alone in using some of his considerable wealth to help others.

A recent report by UBS and Trust Africa said philanthropy on the continent is on the increase, building on longstanding African traditions of giving back to family and community.

“Over the past ten to fifteen years, there has been phenomenal growth in philanthropic institutions across Africa,” according to the study, “Africa’s Wealthy Give Back” (pdf). “We have begun to see the emergence of more strategic philanthropy,” along with more formal infrastructure for giving, the report said.

The USB-Trust Africa study cited projections by McKinsey Global Institute that gross domestic product in sub-Saharan Africa will grow to $2.6 trillion by 2020. With that will come corresponding increases in the number of wealthy individuals.

Dangote with Bill Clinton

Dangote with Bill Clinton

Growing wealth fuels giving

It said there were nearly 150,000 wealthy people in African in 2013, and the number had increased 3.7 percent over the previous year. At the same time, the total wealth of this group increased by 7.3% to $1.3 trillion.

There are about 25 major foundations on the continent.

Patrice Motsepe, a South African mining tycoon, in 2010 was the first African to sign the Giving Pledge that was started by Bill Gates and Warren Buffet. In 2013, Motsepe donated half his fortune to his own foundation to help those in need. His net worth is estimated at $1.4 billion.

Sudanese billionaire Mohamed Ibrahim’s foundation produces an index of African governance and Ibrahim is known for fighting government corruption on the continent. His Mo Ibrahim foundation also offers scholarship aid to young African leaders. A pioneer of telecoms in Africa with Celtel International, his fortune is estimated at $1.1 billion.

Tony Elumelu, a Nigerian banker, whose foundation is funding 10,000 African startups at a cost of $100 million. The program provides entrepreneurs with $10,000 each, half for training and half to start the business. Elumelu’s goal is to create one million jobs and add up to $10 billion to Africa’s gross domestic product. Elumelu’s net worth is estimated at $700 million

Jim Ovia, the founder of Zenith Bank, one of the largest banks in Nigeria, and of the telecom Visafone, which has three million subscribers, supports technology startups. His wealth is estimated at $550 million.

With a fortune estimated at $450 million, Cyril Ramaphosa, vice president of South Africa, supports South African entrepreneurs through his Shanduka Foundation. His Adopt-a-School Foundation has already built 454 schools.

Philanthropy builds on African tradition

Halima Mahomed, a philanthropy advisor to Trust Africa, said the wealthy Africans are following deeply ingrained traditions of African culture. “Rich or poor, everyone gives in Africa” and the newly wealthy are following that trend, Mahomed said.

Gregorie Muhr, a philanthropy analyst at UBS, said the approach is changing, as the new philanthropists take a more business-like approach to their giving, having seen that millions of dollars previously donated in Africa have not always reached the intended objectives.

The advent of billionaire philanthropists is not unique to Africa. “The trend is global’’ in developing markets where a new class of super rich emerges, according to Jenny Hodgson, executive director of the Global Fund for Community Foundations.

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South Africa’s MTN shares slump 13% on profit warning

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Shares in MTN Group slumped more than 13 percent on Friday, a day after the South African mobile company flagged it would report at least a 20 percent drop in annual profit.

Shortly after the market closed on Thursday, MTN said the expected fall in profit was due to underperformance in Nigeria, where it faces a $3.9 billion fine for failing to cut off more than 5 million SIM card users by the set date.

Africa’s biggest mobile phone company said the profit warning did not include the penalty because it was still in talks with regulators about the final size of the penalty.

“There remains some uncertainty as to the final quantum (amount) of the Nigerian fine, should an out of court settlement be reached,” the company said.

MTN was handed a $5.2 billion penalty in October, prompting weeks of lobbying that led to a 25 percent reduction to $3.9 billion but the company was still not prepared to pay the lower fine, which equates to more than twice MTN’s annual average capital spending over the past five years.

 

(Reporting by Tiisetso Motsoeneng; Editing by Alexander Smith and Adrian Croft)

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Nigerian red tape prompts South African retailer to exit

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JOHANNESBURG (Reuters) – South African retailer Truworths has pulled out of its Nigerian business citing import restrictions, its chief executive said on Thursday, a sign President Muhammadu Buhari’s attempts to boost local industry are hurting foreign investment.

As well as being unable to fill its shelves, the clothing retailer said it was struggling to pay its rent and get access to foreign exchange which has dried up due to a collapse in oil prices. Nigeria is Africa’s biggest crude exporter.

“We were unable to operate the stores properly any longer because we were unable to send merchandise to the stores because there’s regulation preventing that,” Michael Mark told Reuters in telephone interview.

In an attempt to boost local manufacturing and prop up the ailing naira, Buhari has effectively banned the import of almost 700 goods, ranging from rice to toothpicks, bread and soap.

Even non-banned items are difficult to import due to dollar shortages.

Buhari won an election a year ago on promises to end a brutal Islamist insurgency in the northeast and wean Africa’s biggest economy off oil.

However, Boko Haram militants continue to launch regular attacks and economists have questioned the logic of Buhari’s shock therapy reform tactics, particularly because of the knock-on effects of the slump in oil prices.

 

(Reporting by Tiisetso Motsoeneng; Writing by Joe Brock; Editing by Ed Cropley)

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Rwanda’s economic growth to slow to 6.3% this year

Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Rwanda’s economic growth is likely to slow to 6.3 percent this year from an estimated 7 percent last year, mainly due to smaller expansions in the agriculture, construction and services sectors, the central bank chief said on Thursday.

Governor John Rwangombwa told a news conference the slower rate of expansion was partly due to the effects of El Gino rains.

“Agriculture has a big hand in that slight reduction from 7 percent to 6.3 percent,” he said, putting growth in the sector, one of the main drivers of the economy, at 5.1 percent this year compared with a projected 5.5 percent last year.

Rwangombwa said the service sector was expected to expand 7.1 percent this year after growing 7.3 percent in the first three quarters of last year.

He added the construction sector was also seen slowing compared with last year.

He said inflation was expected to remain within the 4.5 and 5.5 percent range during the year.

Rwanda’s urban inflation rate, a key indicator for the central bank, was unchanged at 4.5 percent in January compared with the previous month.

 

(Reporting by Clement Uwiringiyimana; Writing by George Obulutsa; Editing by Hugh Lawson)

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South32 considering buyout of Anglo American manganese unit

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SYDNEY (Reuters) – South32 could be among the first to buy assets placed on the block this week by South Africa’s Anglo American, with the Australian company saying it was interested in its manganese unit.

The two companies share a manganese mining and smelting business located in Australia and South Africa, with Anglo American owning 40 percent of the division.

RBC last year valued South32’s stake in manganese at around $1.8 billion, though that was before the metal halved in price.

“As a JV partner with a deep understanding of their value, we would be a buyer if the price is right,” a South32 spokeswoman said in an emailed statement, confirming a report in the Sydney Morning Herald newspaper website.

News of the interest from South32, the diversified minerals group spun out of BHP Billiton last year, comes as Anglo American turns to widespread divestment to shore up a heavily indebted balance sheet.

South32 indicated negotiations had already started to acquire Anglo American’s manganese business.

“We have a good relationship with our joint venture partner and they’ve communicated their intentions,” the statement said.

Manganese can be found in drink cans to improve resistance to corrosion. Ahead of Anglo American unveiling plans this week to cut net debt in half, South32 had been mentioned as a potential buyer of Anglo American’s niobium business.

Anglo American on Feb. 16 detailed a drastic plan to hack and slash its sprawling empire of mining assets, paring it back to diamonds, copper and platinum.

Any acquisition, though, would come at a tough time for manganese producers.

Weak prices for the metal have already led South32 to suspend mining at its Hotazel mining division in South Africa This has removed around 700,000 tonnes of manganese ore production from the global supply chain.

South32 shares were nearly 5 percent higher at A$1.26 in late trading on Thursday, double the gains of the wider market. But the stock has still lost nearly half its value since listing in May.

 

(By James Regan. Reporting by James Regan; Editing by Muralikumar Anantharaman)

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With new leadership, Ecobank Nigeria expands services

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Charles Kie

One of the country’s largest banks targets support to grow small and medium-sized business sector.

One of Nigeria’s largest banks is expanding services for small and medium-sized business enterprises as it welcomes a new top executive. The Ivorian Charles Kie is the new managing director of Ecobank Nigeria, replacing Jibril Aku, whose five-year term ended December 31. Ecobank Nigeria, based in Lagos, has more than $9 billion in assets and operates more than 600 branches, making it one of the largest banks in the country.

New services for small, medium-sized businesses

The bank recently launched a number of initiatives designed to support the small and medium enterprise (SME) sector of the economy.

Calling small and medium-sized businesses the engine of economic growth for the nation, Sunkanmi Olowo, head of SME and Value Chain Banking at Ecobank Nigeria said the bank would increase funding and support to the sector.

Olowo said Ecobank Nigeria was launching SME Club, which will provide preferred business support and tailored products to small and medium-sized businesses.

SME Club will provide capacity development, technical assistance and business, accounting, tax and legal services building to small and medium-sized enterprises as well as information mining, networking and capacity, he said.

The bank is also launched MyMall, an online e-commerce platform on which businesses can market and sell their services and goods.

Olowo said Ecobank will also offer training and funding through a New Venture Initiative, he said.

New managing director named

Charles Kie, the Ecobank Nigeria’s new managing director, joined Ecobank Transnational in 2011 and served as chief operating officer of Ecobank Capital and then became head of Ecobank group’s corporate banking division.

Previously he was chief executive officer of Groupe Banque Atlantique, based in Togo and Ivory Coast with operations in nine West and Central African countries. He also worked for Citibank, serving as CEO of Citigroup West Africa.

A graduate of the Ecole supérieure de commerce d’Abidjan in Ivory Coast, Kie has Master’s degree in Business Administration from the London School of Economics and a Master of Science degree from the University Of Clermont-Ferrand (France). He also attended Harvard Business School’s Advanced Management Program.

Parent organization emerges from scandal

Ecobank Nigeria is a subsidiary of Ecobank Transnational, a pan-African banking group based in Togo with more than 1,250 branches and offices in 36 countries in sub-Saharan Africa. It has $24 billion in assets and 11 million customers.

The parent organization got new leadership last year after two years of scandals that saw the bank accused of poor governance and fraud.

The Nigerian Ade Ayeyemi was named group chief executive in September as the bank was poised to expand its footprint on the continent.

“This organization went through a near-death experience two years ago. And now we’ve recovered, we need to power through,” Ayeyemi said.

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As the UNMDGs expire, Togo measures its poverty

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togo

The National Institute of Statistics and Economic and Demographic Studies (INSEED), Togo’s national poverty statistics tracking organization, recently released their findings for poverty levels in the country for 2015.

Between 25 August and 30 September of 2015, INSEED surveyed 2,400 households to measure the living conditions of the Togolese. The conclusion of the 2015 survey is significant for a variety of reasons, but none more important than the expiration of the United Nation’s Millennium Development Goals (UNMDGs). The UNMDGs were the world’s first data-driven goals meant to end global poverty by 2015 or 2020, depending upon the goal. Drawing upon the eight vastly general UNMDGs, INSEED used broad poverty indicators to measure the status of their citizens: access to basic social services; food safety; education and literacy; subjective poverty and monetary poverty. INSEED’s Technical Director Akoly Gentry said that survey results indicated that economic growth had occurred in Togo, although more than half of the Togolese continue to live in poverty and are subjected to the health, education and employment challenges that stem from continued poverty. The overall conclusion was that, between 2011 and 2015, economic development had reached the poorest of the poor in some way.

Conducting the Survey: Why Now?

With the expiration of the majority of the UNMDGs came the birth of the UN’s latest broad development goals, called the Sustainable Development Goals (SDGs). Where there were once 8 MDGs, there are now 17 SDGs, and in order to give a strong baseline for Togo’s SDG targets, the survey was necessary.

59% of the Togolese are 25 years old or under: continued economic development is imperative for a generation that never knew the harsh reign of colonialism and have grown up in a world where they are well aware of the wealth of the outside world. In surveying the levels of poverty of a diverse set of households around the country, INSEED was able to gather a comprehensive set of data with which to inform their development plans.

Access to Basic Social Services

Many households in the developing world do not have access to what are considered basic necessities in the western world, including electricity and improved drinking water. The proportion of households now using electricity as their main mode of lighting is 48.3%, up 9.1 percentage points since 2011. As the use of electricity has increased, the use of other/traditional modes of lighting has decreased. The use of oil lamps, the cause of many house fires and childhood burns, declined from 23.5% in 2011 to 3.1% in 2015. This alone is a massive achievement for Togo.

In countries where tap water is not fit for consumption or available at all, citizens must rely upon bottled or bagged water. In 2011, 55.9% of Togolese were utilizing drinking water, a figure that has improved to 61.8% in 2015. The availability of improved drinking water is a major component of development: clean water promotes good health and hygiene, prevents waterborne illnesses such as cholera and giardia, and prevents unnecessary deaths.

Food Safety

In the developed world, bananas and oranges are available 365 days a year, regardless of the growing season. For the billions of people living in the developed world, access to calories is not guaranteed due to famines. Famines are, of course, not a natural disaster: they occur when food management, transportation and storage systems fail. In 2011, nearly half of the population had difficulty finding food. The survey revealed that now, in 2015, one-third (33.1%) of the population has difficulty accessing adequate nutrition. These are institutional failures endemic in impoverished countries. Whether it is the physical unavailability of food or the inability of an individual to find enough capital to obtain food, one third of Togo’s population is not considered food secure. In an era where obesity threatens to overshadow cardiac disease as a leading cause of death in the western world, this is unacceptable.

Health Indicators

Health is closely linked to food and clean water access. Be it illness from contaminated water, uncooked or unclean meat or pesticide covered vegetables, these two are inextricably linked. 23.9%, or nearly one quarter, of Togolese surveyed reporting being ill within the past four weeks, up from 20.6% at the last survey. Illness was not clearly defined, and thus is an entirely subjective indicator. According to the CIA World Factbook, Togo’s risk of disease is “very high”: malaria, dengue and yellow fever are a threat particularly during rainy seasons when mosquitoes thrive; typhoid and hepatitis A as well as meningococcal meningitis are also listed as high risk diseases. The physician density is 0.05 physicians per 1,000 people–since the average size of a Togolese household is not listed, this statistic cannot be extrapolated to the survey group. It is safe to say that, at best, there may have been one doctor available to the entire group.

Education and Literacy

66.2% of the population over the age of 15 is literate according to INSEED’s survey results–according to the CIA World Factbook, 78.3% of males over 15 and just 55% of women over 15 are literate, showing gross education discrepancies between genders. Overall enrollment rates in primary and secondary schools (which does not measure attendance) improved from 81.8% to 84.8% and 41.0% to 49.2%, respectively.

Employment, Subjective Poverty and Monetary Poverty

The reported unemployment rate declined from 6.5% to 3.4% while the underemployment rate, or the percentage of people who are employed (usually through the selling of their crops at market) but who consider their employment situation insufficient for any number of reasons, rose from 22.8% to 24.9%.

The percentage of households who consider themselves to be poor in comparison to those around them fell from 81.4% to 61.7%. This does not necessarily mean that nearly 20% of the population became less poor, but that they perceive themselves as more equal to their peers.

The incidence of poverty as measured by international organizations such as the World Bank, International Monetary Fund and UN, fell from 58.7% to 55.1% in 2015. The GINI inequality co-efficient, meaning the proportion of people who own wealth in the country, was reported as 38 (although this is not recorded by the World Bank)–a score of 0 means a country has perfect equality, and a score of 100 means the country has perfect inequality (one person would own all of the wealth). By comparison, the United States has a GINI co-efficient of 41.1. Thus, the lower a score, the more equal the society.

The incidence of poverty increased from 28.5% to 34.8% in the Greater Lome region, as well as in some rural areas.

To Go Forward

Poverty is difficult to measure. Standards were created by the very countries that are partially to blame for the stunted development of enormous swaths of the world. The existing modes of development, where a country is given a loan full of conditionality (that often cut social programs), accompanied with crippling loan repayment rates, clearly does not work.

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Burundi annual tea revenue jumps by 52%

Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Burundi’s tea export revenues jumped 52 percent in 2015 from a year earlier, thanks to a fall in output of regional rival Kenya, a tea board official said on Wednesday.

Tea output in Kenya, the world’s leading exporter of black tea, fell by 10 percent last year, mainly because of dry weather conditions in East Africa’s biggest economy.

“The decline of Kenya’s tea production largely contributed to drive up prices and earnings for Burundi’s tea,” Joseph Marc Ndahigeze, the head of exports for the Burundi tea board (OTB), told Reuters.

The average export price per kilogram climbed to $3.09, against $2.17 in 2014, state-run OTB said in a report.

Tea is Burundi’s second-largest earner of hard currency behind coffee and supports 300,000 farmers in a nation of 10 million people.

OTB, which exports 80 percent of its tea through a regional weekly auction held in the Kenyan port city of Mombasa, said tea export revenue totalled $32.4 million last year, up from $21.3 million in 2014, with export volumes rising by 6.6 percent to 10,495 tonnes.

The rise in Burundi tea exports has come despite nine months of political chaos that has resulted in 400-plus deaths, pushed 240,000 people into exile and hampered many elements of the nation’s fragile economy.

 

 

(Reporting by Patrick Nduwimana; Editing by Drazen Jorgic and David Goodman)

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