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South Africa’s Astral weighs job cuts as drought, imports hurt poultry producers

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

JOHANNESBURG (Reuters) – South African poultry producer Astral has to cut jobs, it said on Wednesday, under pressure from high feed prices due to drought and from an over-supplied domestic market.

Maize prices in South Africa have hit record highs as an El Nino triggers the largest rainfall shortages in over a century, while cheap chicken imports flood in with the ending of punitive duties on U.S. chicken imports in 2015.

Analysts said production cuts were likely to be accompanied by mergers and acquisitions as companies across the food sector scramble to offset falling revenues.

“A lot of producers are suffering under current conditions and a lot them will be forced to become very, very competitive,” said Global Trader equities analyst Paul Chakaduka.

Shares in Astral slipped more than 4 percent on Wednesday after the firm delivered its operational update.

It said the impact of rising feed costs, record poultry imports and a weak consumer market was more severe than it had originally anticipated.

“The impact of the planned production cutbacks will unfortunately negatively impact on the labour force due to the reduction in hours to be worked,” Astral said.

The company employs about 13,000 people across operations in South Africa, Zambia, Mozambique and Swaziland, with a combined processing capacity of nearly 5 million broiler chickens a week.

Astral said it had implemented an import strategy to hedge against maize shortages and high prices, but if conditions did not improve it would have to consider further cuts to production and jobs.

Government expects the 2016 maize harvest to come in 28 percent lower at 7.16 million tonnes, with an improved harvest only in 2017 with a return of more rainfall.

Astral’s fellow poultry producers RCL Foods and Quantum Foods have also struggled in 2016, both citing the effect of drought, costlier raw materials, and lower demand made worse by high unemployment and climbing food inflation.

In May, Quantum reported headline earnings per share at 14.8 cents versus 26.3 cents in 2015. RCL reported HEPS up 25 percent to 87.2 cents, higher due to its diversified products.

Astral previously said it saw HEPS falling around 30 percent to between 801 cents and 701 cents per share for the six months to end March.

Share prices in all three of the poultry producers are lower compared to a year ago.

“These stocks may continue to become cheaper but it doesn’t mean they’re in buy territory. It only means they’ve become extremely uncompetitive or that you could see further mergers and acquisitions in the sector,” Chakaduka said.

 

(By Mfuneko Toyana. Reporting by Mfuneko Toyana; Editing by Ruth Pitchford)

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Kenya’s new vehicle sales plunge 30% in first half

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

NAIROBI (Reuters) – The number of new vehicles sold in Kenya dropped 30.2 percent in the first six months of this year from the same period last year mainly due to high lending rates.

Most buyers of new vehicles, like light commercial trucks, rely on asset financing facilities by banks and interest rates were as high as 24 percent during the period.

The east African nation’s car market is dominated by low-priced second-hand imports from countries such as Japan, but investors monitor new car sales to gauge the health of the economy.

Vehicle assemblers, including GM, sold 6,946 cars in the period, down from 9,953 in the first half of last year, The Kenya Vehicle Manufacturers Association said.

Sales were not expected to pick up soon due to political uncertainty over an election set for next August and a new 20 percent excise duty on new vehicles imposed by the Treasury last month, the association said.

 

(Reporting by Duncan Miriri; Editing by Elaine Hardcastle)

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Corruption in South Africa stunting reforms: IMF

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

JOHANNESBURG (Reuters) – Corruption in South Africa is hampering reforms needed to boost economic growth and greater transparency is needed at state-owned companies, a senior International Monetary Fund (IMF) official said on Tuesday.

IMF First Deputy Managing Director David Lipton said that cutting taxes and increasing government spending would not solve the problem of sluggish growth in Africa’s most sophisticated economy.

The IMF recently cut its growth forecast to only 0.1 percent for 2016 versus a previous estimate of 0.6 in May, citing the impact of severe drought and ineffective fiscal policy.

President Jacob Zuma’s unexplained decision to change finance ministers twice in four days in December and a series of political upheavals that followed had also hurt the economy’s prospects, Lipton said.

“The leadership changes at the National Treasury last December and other political developments have had an adverse impact,” he told a public lecture in Johannesburg.

“They have heightened concerns about governance, deepened political uncertainty and shaken investor confidence.”

Lipton also alluded to investors’ lack of faith in the management of South Africa’s 300-odd state-owned enterprises, many of which are over-staffed and under-productive.

A team commissioned by Zuma to review the firms recommended that some should be sold but nothing has happened.

“Support for money-losing companies is a growing drain on government coffers,” Lipton said.

As a solution, he suggested South Africa centralise the formulation of fiscal policy, reduce labour regulation uncertainty and root out public sector corruption.

 

(Reporting by Mfuneko Toyana; Editing by Ed Cropley)

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South Africa’s Eskom expects increase in export sales

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

JOHANNESBURG (Reuters) – South Africa’s state power utility Eskom expects a significant increase in export sales in the near future, its chief financial officer said on Tuesday.

“We foresee quite a significant increase in export sales,” chief financial officer Anoj Singh told a news conference, adding that in 2015 Eskom achieved a 12 percent rise in export earnings.

 

(Reporting by TJ Strydom; Writing by Nqobile Dludla; Editing by Joe Brock)

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South Africa’s rand retreats as lower gold price dampens risk-on rush

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

JOHANNESBURG (Reuters) – South Africa’s rand backtracked a touch on Tuesday, reversing the previous session’s strong gains with demand dampened by lower gold prices as investors held bets ahead of a local interest rate decision later in the week.

* Rand at 14.2725 at 0700 GMT, 0.3 percent weaker than New York close. Gained nearly 2 percent in previous session, testing 14.2000 resistance before retreating slightly.

* Global demand for risk assets moderating after Monday’s rush, but traders see emerging assets remaining on front foot as investors continue search for yield.

* Gold flat on Tuesday, holding on to its losses from the previous session as appetite for risk assets caps safe haven demand.

* All 31 economists surveyed by Reuters last week expect central bank to keep repo rate on hold at 7.0 percent on July 21.

* Government bonds firmer, yield on benchmark 2026 paper cuts 1 basis point to 8.83 percent.

* Stocks open weaker, blue chip index down 0.74 percent at 46,099 points, All Share slips 0.7 percent to 52,670 points.

 

(Reporting by Mfuneko Toyana; Editing by Ed Cropley)

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Rwanda tops World Bank governance ratings for Africa

19 July 2016 Comments (0) Africa, Business, Featured

Life in Rwanda

The African nation, along with Cabo Verde, Kenya and Senegal receive the continent’s highest rankings for efforts to support growth and reduce poverty.

Rwanda, Cabo Verde, Kenya and Senegal lead the continent in the quality of their governance and institutions that support economic growth and reduce poverty, according to a new report by the World Bank.

The Evaluation Policy and Institution Investment for Africa 2015 gave Rwanda a rating of 4 of 6 possible points while the three other countries each scored 3.8. The average score for the continent was 3.2, the same as the year before. South Sudan and Eritrea had the lowest scores, 1.9.

Of the 38 countries evaluated, seven improved their ratings – Ghana, Zimbabwe, Central African Republic, Chad, Comoros, Guinea and Niger. Twelve countries saw their ratings decline, with large drops in Burundi and Gambia.

The report attributed the lack of greater progress on the continent to economic challenges in 2015.

The report ranks national governance based on 16 indicators including economic management, social inclusion policies, public sector management, and structural policies.

Significant progress cited in Rwanda

According to the World Bank, Rwanda has made significant progress in transforming from a low-income agricultural economy to one that is service-based.

The government’s “Vision 2020” plan seeks to speed growth and reduce poverty with a focus on economic transformation, youth employment productivity, rural development and government accountability. The plan seeks to increase gross domestic product per capita to $1,000 by 2018 and reduce poverty so that less than a third of the population lives below the poverty line.

Rwandan youth learning to til

“These goals build on remarkable development successes over the last decade, which include high growth, rapid poverty reduction and reduced inequality,” the World Bank said.

Rwanda, which emerged from a dark period of civil strife and genocide 20 years ago, has seen growth of its gross domestic product averaging 8 percent annually since 2001. The economy grew by 7 percent in 2014 and 2015.

However, the World Bank said poor infrastructure and lack of access to electricity are drags on private investment in the East African nation, which has a population of about 11 million people.

Cabo Verde tourism flourishes

Cabo Verde, an archipelago of islands off the west coast of Africa, has developed rapidly in recent years, thanks largely to a growing tourism industry. The government is also working to make the islands a trade and transport hub, the World Bank said.

The bank described Cabo Verde’s politics as “consensus-oriented,” with established respect for majority rule and civil liberties. It noted that since it gained independence from Portugal in 1975, Cabo Verde has not had a single coup, a distinction shared only with Senegal in West Africa.

Still, economic growth slowed to 1% in 2015 as direct foreign investment fell.

Like Cabo Verde, Senegal is considered one of the most stable countries in Africa, with strong democratic institutions dating from the country’s independence from France in 1960, according to the World Bank. The Senegalese recently approved changes in the nation’s constitution that created a new assembly and will allow independent candidates to run in elections.

Senegal’s economy grew by West Africa behind Ivory Coast. High demand, stimulated by lower energy and transportation costs, as well as a government investment program, drove growth in an economy dominated by agriculture and services.

Kenya reforms economy

With assistance from the World Bank, Kenya has implemented major structural and economic reforms that have sustained economic growth for the past 10 years. While poverty and inequality persist, the bank said the country’s 2010 constitution ushered in a new political and economic governance system that has transformed and strengthened accountability and delivery of services locally.

At the bottom of the scale in the new World Bank governance ratings, South Sudan and Eritrea struggle.

One of the least developed nations in Africa, Eritrea has seen thousands of citizens fleeing the country for the European Union via Sudan and Ethiopia to escape what they describe as forced labor and other human rights violations.

In South Sudan, meanwhile, fighting between the government and rebel forces have sent refugees pouring into neighboring Ethiopia and Sudan as well.

 

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Congo’s small miners fill hole left by downsizing multinationals

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

KOLWEZI, Democratic Republic of Congo (Reuters) – His toes bursting out of sneakers several sizes too small, a miner hacks with a pick at the copper and cobalt-laced stone in southeastern Congo, slowly filling a sack that could earn him anywhere from a handful to a few hundred dollars.

The 42-year-old father of five, who only gave his first name, Stany, has done this nearly every day for a decade, after he quit his maize fields for the comparatively lucrative mines of Africa’s top copper producer.

But unlike most artisanal mining, this is sanctioned by the Congolese government. As its mining heartland endures mass layoffs at big mines caused by low commodity prices, small-scale mining is helping to fill the deficit.

The price of cobalt, a byproduct of copper, is expected to rise 45 percent by 2020 owing to demand for electric vehicles. Congo holds about half the world’s cobalt reserves.

Seizing the initiative, the national mines ministry has recognised dozens of cooperatives of workers to exploit 10 square kilometre plots of land owned by state miner Gecamines.

Tens of thousands of people also dig near mines owned by giants like Glencore and Eurasian Resources Group, as more than 13,000 jobs have been shed in the formal sector.

Yet, as is often the case, poor local diggers say that it is savvier, well-capitalised foreign buyers who are cashing in. They accuse Chinese and Lebanese middlemen of dominating the market by colluding to drive down prices and rigging their instruments to understate the weight and tenor of ore they buy.

That could store up trouble if discontent turns into unrest, as happened in past years in Zambian copper mines, when workers beat up and killed Chinese mine managers in pay disputes.

At the Musompo market, a smattering of half-built brick and concrete depots 15 kilometres east of Lualaba province’s capital of Kolwezi, miners and traders said that of the roughly 140 buying firms, almost all are Chinese owned.

 

COOPERATIVES

Lualaba Governor Richard Muyej would rather see farming and tourism, which he considers paths to more inclusive, sustainable development but reluctantly accepts the need to expand small mining in the near term.

Muyej said giving cooperatives measuring instruments would help level the playing field between miners and foreign buyers.

Alain Chinois, the Congolese president of a cooperative with 34 members, said he might be forced to turn to foreign investors to secure the necessary funding. Under his set up, diggers will receive 60 percent of revenues from the mine while cooperative members consisting of Congolese traders running them and an investor — likely Chinese or Lebanese — would split the rest.

He said the cooperatives would result in better working conditions, equipment and access to capital.

“As a cooperative, we can go to a bank as a well-established group,” said Chinois. But he acknowledged that foreign buyers with money to invest would continue to exert major influence.

At Musompo, Louis, a Chinese buyer who checked London Metal Exchange prices on his phone between deliveries, sells to a smelter owned by Congo Dongfang Mining International (CDM), a wholly-owned subsidiary of Chinese mineral giant Zhejiang Huayou Cobalt Ltd, China’s top cobalt chemicals producer.

According to a January report by Amnesty International, CDM exports to China before selling to battery manufacturers who claim to supply electronics companies including Apple, Samsung SDI and Sony.

Hearing miners’ complaints, Louis shrugged: “Those who are happy with the price sell the product. Those who aren’t, leave.”

And the old concerns about the dangers and abuses of artisanal mining haven’t gone away. At the Tilwizembe mine where Stany works, despite its cooperatives, research by Amnesty in 2013 documented deadly accidents and abuse of workers.

But whatever its flaws, few see a viable alternative to more small-scale mining in the near term.

“I do this because there is nothing else. If something else came along, I would do it,” Stany said.

 

(By Aaron Ross. Reporting by Aaron Ross; editing by Susan Thomas)

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1.1 Billion Wallets: Preparing to Meet African Demand

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

Consumer Affluence in Africa

By 2020, the African continent will have two times as many affluent consumers as the United Kingdom and companies should be preparing to market to this enormous group.

According to Boston Consulting Group (BCG), Africa will have twice as many affluent consumers as the United Kingdom by 2020. BCG predicts that Africa will have at least 1.1 billion consumers by 2020 (the current population of the continent is approximately 1.1 billion), more than the population of Europe and North America combined. Their latest report, “African Consumer Sentiment 2016: The Promise of New Markets,” provides marketing firms and corporations with the data they need to capitalize upon the increasing quantities of disposable income across the African continent.

The Numbers Game

Africa is home to nearly 15% of the world’s population–more than 1.1 billion individuals spread across more than 50 nations–while the United Kingdom has fewer than 65 million citizens, so this numerical growth in affluence should not come as a surprise. BCG defines a consumer as an individual between 18-75 years of age with a monthly income between $50 and $7,000 per month. The data for this report was compiled during 2015, when BCG polled more than 11,127 consumers across 11 African countries. Persons with no stated income, with no purchasing freedom (i.e. those who do not make purchasing decisions for their families) or those outside of the age brackets were not included in these face-to-face surveys. While this is likely the most complete data on consumers ever compiled, it should be noted it was created using data from less than one quarter of the continent’s countries.

Key Findings

During their study, BCG found that 88% of African consumers were optimistic about the future which “bodes well for the continent, because optimistic consumers are more inclined to buy.” BCG surveyed citizens in Algeria, Angola, Cote d’Ivoire, the Democratic Republic of the Congo (DRC), Egypt, Ethiopia, Ghana, Kenya, Morocco, Nigeria and South Africa and found that in the most affluent countries with the highest proportions of disposable income (Egypt and Morocco), citizens are more interested in spending on “luxury” items such as bath and beauty products, large appliances, vehicles, clothing and electronics, while those in countries with the lowest financial security (Angola, South Africa, the DRC, and Cote d’Ivoire) are less able to purchase big ticket and luxury items.

BCG helpfully noted that even in financially insecure markets, “certain products–like mobile phones–are a greater priority than food,” highlighting the potential for a wide range of multinational corporations to profit from the growing consumer population.

South African youth on mobile internet

South African youth on mobile internet

The vast majority of Africans access the internet through their phones (as opposed to through laptops or desktops), meaning that mobile phone producers stand a good chance to make a name in this market. BCG found that Africans have a strong sense of what can be considered brand loyalty: brand names play an important role in African society, and “social approval of a brand is an increasingly strong influence on purchasing decisions,” although this has decreased slightly from a similar study done in 2013. Brands are most important in electronic purchases (such as mobile phones or mobile music players) and less important in clothing and shoe purchases.

Following the Flock

Perhaps predictably, younger consumers are more influenced by the opinions of their peers while older consumers are more influenced by their spouses or partners: 59% of Moroccans ages 35-44 said their purchases are influenced by spouses while 31% of Moroccan adults 25-34 agreed (this should not be considered surprising, as those in a higher age bracket are more likely to be partnered or married) while conversely, in South Africa, just 13% of adults 35-44 said their purchases are influenced by friends while 33% of 18-24 year old South Africans agreed.

As well as mapping consumer habits, BCG also researched the most effective ways to attract consumers through advertising. Television was the most influential advertising channel overall (as opposed to radio, newspaper ads, the internet or social media), but other forms were significantly successful in various countries. In Ghana, consumers reported being influenced by radio ads, in Nigeria by online advertising and Egyptians by newspaper ads and billboards. These differing results suggest that advertisers need to know their markets in order to attract the maximum number of consumers. One size certainly does not fit all, particularly when discussing a 1.1 billion people in more than 50 countries.

The Time is Now

As optimism and disposable income increase across Africa, citizens are more likely to become major players in the global consumer culture. Corporations should pay attention to their markets and create specific, targeted advertising schemes if they wish to profit off of this growing market.

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South Africa’s rand bounces as emerging markets shake off Turkey coup worries

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

JOHANNESBURG (Reuters) – South Africa’s rand gained nearly two percent early on Monday as emerging markets set aside concerns about a failed coup in Turkey over the weekend and investor focus shifting back to the timing of rate hike in the United States.

* Rand at 14.2900 at 0645 GMT, 1.85 percent firmer than New York close. The rand trended firmer for most of the previous week as investors globally favoured high yield assets.

* Risk appetite could drop later in week after strong economic data from United States suggest higher interest rates soon.

* Stocks due to open flat at 0700 GMT, futures index up 0.11 percent.

* Government bonds softer, yields up 4 basis points to 8.77 percent.

 

(Reporting by Mfuneko Toyana; Editing by Ed Cropley)

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ExxonMobil declares force majeure on Nigeria’s Qua Iboe crude oil: spokesman

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

LONDON (Reuters) – ExxonMobil subsidiary Mobil Producing Nigeria has declared force majeure on exports of Nigeria’s Qua Iboe crude oil, the country’s largest export stream, a spokesman said on Friday.

The declaration came after the company observed a “system anomaly” during a routine check of its loading facility on July 14.

“We are working to ensure loading activities at the facility return to normal. We cannot speculate on any timeline for repairs,” the spokesman said. “Qua Iboe Terminal is operating and production activities continue.”

Nigeria has struggled to maintain its crude oil production following a spate of militant attacks and technical problems that in May pushed production briefly to 30-year lows. While the cause of the latest issue was not immediately clear, traders said it would take least two to four weeks to repair.

Earlier this week, Exxon denied claims from militant group the Niger Delta Avengers to have blown up the Qua Iboe 48″ crude oil export pipeline operated by the company.

Spokesman Todd Spitler said on Friday there was no connection between the force majeure and militant attacks.

Exxon has struggled to bring production of Qua Iboe back to normal after an accident in May on a drilling rig that damaged a pipeline, after which the company also declared force majeure.

Since lifting that declaration in early June, there have been roughly three revisions to loading schedules, attributed to a slower-than-expected resumption of flows, with loading delays of at least five days.

 

(Reporting by Libby George; editing by David Clarke and David Evans)

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