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Mali to miss cotton crop target due to late rains: CMDT

20 October 2015 Comments (0) Africa, Economy, Latest Updates from Reuters

BAMAKO (Reuters) – Mali will miss this year’s cotton production target of 650,000 tonnes as late rains in the Sahel region have struck the start of the harvest, the head of the state-owned CMDT cotton company said on Monday.

Kalfa Sanogo said the heavy rains were damaging stocks of picked fibre and cotton still in the fields. The cotton harvest began last week in the West African country, which ranks as Africa’s second-largest producer behind Burkina Faso.

Mali had targeted production of 650,000 tonnes of raw cotton for the 2015-2016 season, up from output of roughly 550,000 tonnes the previous year.

“We have a serious problem: the rains are continuing at a time when they should stop,” Sanogo told Reuters. “The forecast of 650,000 tonnes will be revised down.”

He declined to provide a revised forecast for national production.

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South Africa’s Woolworths says strike won’t affect operations

19 October 2015 Comments (0) Africa, Economy, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Workers at a distribution centre for South African retailer Woolworths are on strike over pay, the company said on Monday but the high-end grocery and clothing seller said the strike would not affect operations.

“We can confirm that the National Union of Food Beverage Wine Spirits and Allied Workers at our Midrand Distribution Centre have embarked on protected strike action,” the firm said.

“Business continuity plans are in place for continued operations and our customers should not experience any disruption in the supply of goods to stores.”

The union was demanding wage increases of 110-130 percent for its members, Woolworths said.

Shares in Woolworths were flat at 102.28 rand by 1316 GMT compared with a 0.8 percent fall in the general retailers index.

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Value of coffee sold at Kenyan auction falls 18% in 2014/15

19 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – The value of coffee sold at Kenya’s auctions fell 18 percent to $142.5 million in the crop year to September, hit by lower volumes, the head of the Nairobi Coffee Exchange (NCE) said on Monday.

The east African nation, whose high-quality beans are sought by roasters to blend with beans from other producers, exports much of its coffee through the exchange and the rest is sold by growers directly to foreign buyers.

The NCE sold coffee worth $174.1 million in the 2013/14 season that runs between October and September.

“Drought conditions early in the year affected crop especially in the central Kenya growing areas and that has reflected in the overall performance,” Daniel Mbithi, the chief executive of the NCE told Reuters.

Officials said 568,766 60-kg bags were sold during the period, down from 671,438 the previous year. The average price at the exchange also dropped to $205.02 per 50-kg bag from $212.70 the previous year.

East African coffee is normally packed in 60-kg bags, but the prices are quoted for quantities of 50 kg.

Coffee exports were at one time Kenya’s leading foreign exchange earner but have slipped to under 50,000 tonnes in recent years from a record level of 130,000 tonnes in 1987/88.

Many smallholder coffee farmers, disillusioned with poor earnings, switched to other crops or sold land for real estate in recent years.

The area of coffee plantations in Kenya has fallen to 109,000 hectares from the average of 150,000 hectares in 1980s and 1990s, the regulator, the Coffee Directorate, has said.

 

(Editing by Duncan Miriri and Mark Potter, Reuters)

 

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Kenyan shilling strengthens ahead of bond auction

19 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – The Kenyan shilling strengthened on Monday, with the local currency supported by dollar inflows to be used for purchase of Kenya’s high-yielding government debt.

At 0715 GMT, commercial banks posted the shilling at 102.25/35 to the dollar, from Friday’s close of 102.40/102.50.

The currency, down about 14 percent against the dollar this year, was receiving support from inflows ahead of an Oct. 21 auction of an amortized one-year Treasury bond, and more broadly from its weekly Treasury bills auctions, said a trader at one Nairobi-based commercial bank.

“We have seen dollar inflows from foreign buyers coming in for the bond,” the trader said. “And, later in the week, as long as the T-bills continue to be this high, the shilling will continue to gain.”

In recent weeks traders have reported growing dollar inflows from foreign investors who have been attracted by interest rates on government Treasury bills of more than 20 percent, far above what Kenya usually pays for short-term debt.

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Mauritius eyes Africa as pressure mounts on offshore business

16 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

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EBENE, Mauritius (Reuters) – Mauritius beats Singapore as the world’s top route for foreign investment to India and is a hub for thousands of firms managing half a trillion dollars in assets.

But there are only a sprinkling of office blocks in Ebene Cybercity, the heart of the tiny Indian Ocean island’s financial services industry, and the area only livens up at the weekend when a band plays in a bar of the district’s only luxury hotel.

Such limited activity is evidence that Mauritius is a “tax haven” for companies which generate no real business on the island yet use it to benefit from tax avoidance treaties with Asia and Africa, critics say.

“Mauritius is playing the tax competition game and they are playing it very well,” said Nadia Harrison, tax policy expert at ActionAid. “The result is that they are reducing the amount of tax that can be collected from the poorest countries.”

Concerned about the impact of tax havens, world powers are tightening the noose on multinationals seeking tax advantages and India wants changes to its tax treaty with Mauritius, forcing the island’s new government to re-examine its business model and focus elsewhere.

There is debate in the new government, which took office in December, about whether Mauritius was ever a tax haven but there is general agreement that the economy needs to shift focus to make sure firms invest locally and to prepare for any loss of business from India.

“My message for the offshore sector here is: they have to move from a tax haven to a typical transparent financial sector. This is what is happening now,” Finance Minister Seetanah Lutchmeenaraidoo told Reuters.

He wants the financial services industry to deepen investments in Africa to help lift sluggish growth in Mauritius and make it a high-income state by 2020.

“Singapore is to southeast Asia, what Dubai is to the Middle East, and what Mauritius will be vis-à-vis Africa,” Lutchmeenaraidoo said.

 

DRIVEN INTO A CORNER

New rules agreed by ministers from the Group of 20 industrialised nations this month to stop companies moving profits to low tax centres and “treaty shopping” for tax benefits combined with changes to India’s tax treaty are increasing the pressure on Mauritius.

“We know it is going to have a decisive impact on the future of offshore financial services worldwide,” said a former minister and now a fund manager, adding that the government was being driven “into a corner” by India.

India has pushed Mauritius into talks to change to its Double Taxation Avoidance Agreement. Signed in 1983, Mauritius took off as an investment route when India opened its economy in the 1990s.

A Global Business Company 1 (GBC1), the title for “offshore” firms, pays zero capital gains tax in Mauritius, instead of as much as 40 percent in India on some short-term investments.

Such benefits made Mauritius the source for 24 percent of the $24.7 billion of foreign direct investment (FDI) in India in fiscal 2014/15, Reserve Bank of India figures show, making it the largest source of FDI.

New Delhi says much of those funds are not really foreign investment but Indians routing money through Mauritius, a practice known as “round-tripping”.

Changes being discussed to the tax treaty would limit the appeal of Mauritius. If a company still chose to be based there, then it would be required, for example, to spend at least 1.5 million Mauritius rupees ($42,700) a year on the island before enjoying treaty benefits.

Mauritius has little choice but to negotiate with India, which could revoke the treaty altogether, like Indonesia a decade ago. This would be damaging for the financial services business which accounts for 10 percent of the island’s $13 billion gross domestic product. Of the more than 10,000 GBC1 firms, about 60 percent focus on India, officials say.

India also plans to implement a domestic law in 2017, known as the General Anti-Avoidance Rule (GAAR), that could supersede the treaty’s tax benefits in some instances.

“It hangs like a sword of Damocles,” said the former minister, adding that Mauritius needed several more years to refocus. “We need breathing space.”

 

SWITCH TO AFRICA

The changes in India are driving the island’s pivot to Africa. Almost 60 percent of GBC1 firms registered in the past three years focus on Africa, benefiting from more than a dozen double taxation avoidance treaties on the continent.

Critics say Mauritius is simply becoming a “tax haven” for Africa instead of India, a charge the government denies.

“We need to be able to reassure our friends in Africa that that is not our aim, to siphon money,” said Deputy Prime Minister and Tourism Minister Charles Gaëtan Xavier-Luc Duval. “Our aim is to contribute towards investment into Africa.”

To do so, the government has held talks with insurance firms, such as Axa and Prudential, on using Mauritius as a regional headquarters. An investment vehicle is being set up with Ghana for technology, poultry, sugar and other projects, with Mauritius firms and money involved.

But African governments should be cautious about tax pacts, ActionAid’s Harrison said.

“In the past there have been these sweeping assumptions that tax treaties will always be good for investment,” she said. “We are just encouraging countries, and particularly developing countries, not to take that for granted.”

(By Edmund Blair, Reuters)

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Safaricom bags lion’s share of Kenyan mobile revenues

16 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Safaricom dominates the Kenyan mobile market, sweeping up more than 90 percent of revenues in areas such as voice calls and text messaging, according to regulator data that could further fuel a debate about competition in the industry.

Rivals like Bharti Airtel and some officials have complained that Safaricom’s dominance stifles competition. France’s Orange is seeking to sell its Kenya operation, becoming the second international operator to quit the country after India’s Essar Telecoms sold its Yu business last year.

The data obtained by Reuters comes as the East African nation is amending the telecom sector’s competition law to give the regulator more powers to penalise companies deemed to be abusing dominant positions in the industry, though what would constitute such abuse is as yet unclear.

Safaricom, in which Britain’s Vodafone has a 40-percent stake, has dismissed accusations it hampers competition, saying it does not abuse its dominance.

Safaricom’s revenues from calls amounted to a 91.63 percent market share in 2014, while its closest competitor, Airtel, had 8.33 percent, according to the data obtained from the Communications Authority of Kenya (CAK).

In text or short messaging services, Safaricom had more than a 90-percent share of total market revenues from that segment, the regulator said.

In mobile data, or internet services, Safaricom’s revenues were 85.50 percent of the market share in 2014, while Airtel had 14.43 percent, Orange had 0.01 percent and Equitel, operated by Equity Bank’s subsidiary Finserve, 0.06 percent.

The figures for Orange are for 2013 as it had not submitted audited accounts for 2014 to the regulator, CAK said.

The regulator usually issues quarterly figures for number of subscribers, which give Safaricom a 67 percent share of Kenya’s 35 million users in June. It also gives traffic volumes for areas such as calls.

Asked about the regulator’s revenue breakdown, Safaricom Chief Executive Bob Collymore told Reuters: “We don’t recognise that data.” He said subscriber numbers and network traffic were a better gauge of how the firm was performing.

 

M-PESA

The data did not detail revenue from phone financial services, where Safaricom’s M-Pesa service is the most popular offering, allowing users to pay bills or send money even using the most simple mobile phone device.

Analysts say this service draws customers to use Safaricom’s wider telecoms services over its rivals.

Eric Musau, analyst at Standard Investment Bank, said the dominance of a single operator was hurting competition by driving out rivals like Essar and Orange.

He said, however, that some smaller operators were failing due to inadequate capital, frequent shareholding changes and a lack of a sound strategy for the local market. “I would say one player had a better strategy than the rest,” he added.

CAK said in August that it was amending the telecom sector’s competition law, but said it was not targeting Safaricom or any other company. It did not aim to penalise any company just for being dominant, but only if there was abuse of its position in the market.

The regulator’s head, Francis Wangusi, said at the time the new regulations would break down the telecoms sectors into segments including mobile and fixed voice, data, text messaging and mobile money transfer services.

“It is too early for us to come up to say ‘Safaricom you are dominant’, because Safaricom can be dominant in certain markets, but not dominant in others,” he said. “In all these markets, we would not apply the same rules,” he added.

Safaricom has opposed the proposed changes saying they could deter investments by targeting large firms.

Airtel Kenya CEO Adil El Youseffi said the current market situation was limiting innovation and consumer choice and driving operators out of the country. “The sector is unable to attract new or incremental investments from other international players,” he told Reuters.

Orange Kenya gave no specific comment on the figures.

(By Duncan Miriri, Reuters)

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African Currencies in Decline

15 October 2015 Comments (0) Africa, Business, Featured

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As currencies across the African continent fall against the dollar, the International Monetary Fund stated that the financial sector should brace itself for additional volatility. The IMF warned Wednesday in a semiannual assessment of risks to the global financial system, that the fallout from the end of “easy-money policies” by central banks could decelerate global economic expansion, reveal inflated asset prices, and further strain overextended lenders. Several factors contribute to the decline, including a trend by international investors to abandon emerging markets.

MSCI’s primary emerging equity fell 1.4 percent, declining to a one-month low, and Asian shares with the exception of Japan lost 1.6 percent. China led with a 2.75 percent rout on stocks. India, among the best equity performers this past year, realized its lowest daily fund outflow as of Wednesday. Resultant currency declines included record lows in several countries, including South Africa’s rand, Zambia’s kwacha, Uganda’s shilling, Tanzania’s shilling and Ghana’s cedi. The zloty and forint also fell sharply against the rising euro. China, by far the leading investor in African frontier markets, led this trend due to predicted increases in US interest rates which have yet to materialize.

Symptoms of global decline observed in more volatile emerging markets


Neil Shearing, head of emerging markets research at Capital Economics, stated that, “It is a bit of a bloodbath in equity markets. There are several things going on … the rise in oil prices, inflation expectations. Bond yields globally, including in emerging markets, have gone up and equity markets have come off the boil.” In some countries economic indexes are below the crisis levels set in 2008. Symptoms of global decline have been first observed in more volatile emerging markets.

China’s influence cannot be exaggerated. China’s decelerating growth struck fear among investors in emerging markets, from South Africa all the way to Malaysia. Equal with the fortunes of the world’s second-largest economic force, China’s financial grumbling reaches into pockets around the globe. Following an Asian recession and market meltdown, the Beijing government supported its own economy and stock market with a liquidity injection, but emerging market currencies cannot rely on such support. As a result, African markets now feel the domino effect.

Compliance failure could further jeopardize economic stability

African governments are taking stopgap measures to stem collapses. Nigeria, Africa’s top economy, froze its foreign exchange market, but this had the repercussion that it’s Naira was excluded from the influential JP Morgan bond index. The new currency crisis is increasing government debts as well, which reduces ability to comply with debt forgiveness specifications. Compliance failure could further jeopardize economic stability in many countries. Bond issues reveal yet another hedging mechanism already in play.

Bonds, commodities, and currencies are all near 16 year low figures. Stephen Bailey-Smith of Standard Bank Group Ltd. said, “Everyone’s putting on a helmet and just hoping to get through the day. African Eurobonds have been hit harder than average because they’re perceived as being more commodity-dependent.” Kenya’s shilling dropped 0.3 percent to 103.7 per dollar, the lowest closing since October 2011. And finance ministers claim that selling dollars on the currency market to compensate is not effective because speculators will quickly respond. African markets may have an opportunity to rally if the US Federal Reserve holds interest rates steady. Without a specific catalyst, African currency markets may be headed for a very long decline.

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South Africa boosts power output after maintenance

15 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa added 1,286 megawatts (MW) to its national grid on Thursday when two generating units were brought back online following an extensive “overhaul”, power utility Eskom said.

Eskom said electricity supplies would continue to be tight as it carried out other plant maintenance.

South Africa, the continent’s most developed economy, suffered almost daily power outages earlier this year as ageing power plants struggled to meet demand. South Africa’s national generating capacity is around 42,000 MW.

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South Africa’s Mediclinic agrees deal for Al Noor Hospitals

14 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – South Africa’s Mediclinic Intl agreed to buy United Arab Emirates’ Al Noor Hospitals Group, gaining the upper hand on rival NMC Health in a tussle for expansion in the fast growing Gulf region.

But NMC Health, already a major player in the UAE, vowed to fight on, saying on Wednesday it remained committed to a tie-up with Al Noor.

Shares in Al Noor jumped 19 percent to 1,185 pence, above the 1,160 pence value of Mediclinic’s agreed offer and valuing the company’s equity at 1.38 billion pounds ($2.12 billion), as investors anticipated a battle for the group.

Mediclinic’s Chief Executive Danie Meintjes, who will remain CEO after the deal, said the combined group would be the largest private healthcare provider by revenue in the “highly attractive growth market of the UAE”.

Mediclinic, which has more than 50 hospitals in South Africa and Namibia, also has a presence in the UAE. Combining the two companies will create an operator with around 20 percent of the private beds in the region, analysts said.

It will also be the biggest player in Switzerland, the third largest in South Africa, and will have a 29.9 percent stake in Britain’s Spire Healthcare Group.

The deal, structured as a reverse takeover of Al Noor by Mediclinic, will create a London-listed group with a turnover exceeding $4 billion operating 73 hospitals and 35 clinics.

NMC Health, which is also listed in London, said it had made an informal cash-and-shares offer to buy Al Noor on Oct. 9, days after Al Noor and Mediclinic said they were in talks.

Al Noor Chief Executive Ronald Lavater said there was a “compelling strategic fit” with Mediclinic, and together they could expand coverage and service delivery in the region.

He said the board had considered the NMC Health proposal and had concluded it was “inferior both on the value and on the deal certainty”.

The tie-up with Mediclinic is backed by the two major shareholders in Al Noor, Sheikh Mohammed Bin Butti Al Hamed and Kassem Alom, who combined hold 34.3 percent, the companies said.

NMC, however, was undeterred. “This confirms our belief in the competitiveness of our initial possible offer and that the combination of NMC and Al Noor has the strongest strategic and financial rationale for all stakeholders,” it said.

Al Noor was advised by Rothschild, Goldman Sachs and Jefferies, while Morgan Stanley and Rand Merchant Bank worked for Mediclinic.

(By Paul Sandle, Reuters)

 

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Burundi’s inflation eases to 4.1% year-on-year in September

13 October 2015 Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Burundi’s inflation rate dipped to 4.1 percent year-on-year in September from 4.2 percent a month earlier, helped by better production of some crops which slowed food price rises in local markets, official data showed on Tuesday.

The tiny central African coffee producer nation is facing one of its worst political crises after President Pierre Nkurunziza was re-elected in July for a disputed a third term.

Nkurunziza’s opponents said running again broke a peace pact that ended more than a decade of civil war in 2005. The country endured months of protests and violence and tens of thousands of people fled unrest that included an attempted coup in May.

As a result, Burundi’s economic output is expected to shrink by 7.2 percent this year after growing 4.7 percent in 2014, the International Monetary Fund said in its report on world economic output for October.

Burundi’s Institute of Economic Studies and Statistics (ISTEEBU) said inflation was under control between August and September due to a fall in the price of beans and rice, the most consumed food in a nation of nearly 10 million people.

Food price inflation slowed to 3.8 percent in the year to September from 4.6 percent in August, ISTEEBU said.

Economic analysts fear Burundi’s economic situation could worsen if the crisis persists and if more donors cut aid.

Some major donors such Belgium have already cut aid, in condemnation of the violence and human rights violations committed since April.

The European Union, which funds about half the annual budget of Burundi, is also considering whether to limit its aid, diplomats say, but is wary of hurting the general population.

It has imposed individual sanctions on security officials close to Nkurunziza who were implicated in the violence.

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