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Africa fails to benefit from global investment surge

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

Chemical Industry

Direct investment to Africa declined by 7% to $54 billion, giving the continent only 3% of the total worldwide investment, according to a new United Nations report.

Direct foreign investment soared in 2015 to its highest levels since the 2008 financial crisis, but Africa did not share in the wealth.

Globally, direct investment flows increased by 40% to $1.8 trillion, according to World Investment Report 2016 (pdf) by the United Nations Commission on Trade and Development.

At the same time, direct investment to Africa declined by 7% to $54 billion, giving the continent only 3% of the total worldwide investment.

While investment in North African nations, notably Egypt, increased, sub-Saharan Africa saw declines as resource-based commodities faltered and economies weakened, led by a decline of more than 60% in South Africa.

Egypt, Sudan see growth

Investment flows to North Africa increased by 9% to $12.6 billion, an increase largely driven by a boost in Egypt of 49% to $6.9 billion. The increase in Egypt reflected expansion of foreign investment in banking and pharmaceuticals as well as large investments in telecommunications.

Investment in Sudan increased 39% to $1.7 billion, thanks largely to continuing Chinese investment in oil production.

In sub-Saharan Africa, Angola reported investment more than tripled to a record $8.7 billion in investment in 2015 after years of declines. The UN report said the increase reflected loans to local institutions by foreign parent organizations.

Elsewhere on the southern continent, weak commodity prices stifled investment.

Investment in West Africa decreased by nearly 20% to less than $10 billion, in large part because of a slump in investment in Nigeria, Africa’s largest economy. Investment fell to $3.1 billion last year largely because of lower commodity prices, a faltering currency, and delays in major developments such as multi-billion dollar offshore oil operations.

Investment in Central Africa declines

In Central Africa, investment inflows dropped by more than a third to $5.8 billion. The Democratic Republic of the Congo and the Congo reported declines as commodities operations suspended operations.

Factory Workers in Kayonza, Africa

Factory Workers in Kayonza, Africa

East African investment was steady at $7.8 billion.

The European Union and the United States invested more than $2 million in Ethiopia. Investment in Kenya reached a record $1.5 billion as a result of investor confidence in the business environment and growing domestic consumption.

Southern African investment also held steady at just under $18 billion, driven primarily by the large increase in investment in Angola.

South Africa posts steep drop

Other nations saw steep declines. Investment in South Africa fell by 69% to $1.8 billion, its lowest level in a decade. The UN report said weak economic performance, lower commodity and higher power costs were to blame.

After years of record growth, Mozambique saw a 24% decline to $3.7 billion. The report blamed uncertainty about the 2015 elections and lower gas prices as well as the cancellation of major mining operations.

Meanwhile, investment outflows from Africa also declined by 25% to $11 billion because of weaker export demand and falling commodity prices. The continent’s largest foreign investor, South Africa, cut its investments by 30% to $5.3 billion. Angola investors reduced their investment abroad to $1.9 billion, less than half the 2014 amount.

U.S., U.K. lead in African investments

The top investor economies to Africa in 2015 were the United States ($66 billion), the United Kingdom ($64 billion), and France ($52 billion). As China seeks to increase ties to the continent, direct investment from the Asian nation more than tripled from $9 billion to $32 billion. South Africa was the fifth largest investor to the continent at $26 billion.

The report said the global investment surge was unlikely to continue at 2015 levels. It attributed the 2015 increase to a spate of cross-border acquisitions and  mergers.

The United Nations said investment to Africa could grow this year to as much as $60 billion. New projects valued at nearly $30 billion were announced in the first quarter of the year, up 25% from the same period a year earlier.

The report predicted the largest increases in Egypt and North Africa. “But a more optimistic scenario also prevails more widely, for example in Ethiopia, Mozambique,  Rwanda and the United Republic of Tanzania,” the report said.

However, depressed prices for oil and mining commodities will continue to be a drag on investment in other parts of Africa.

“The world economy continues to face major headwinds, which are unlikely to ease in the near term,” the report said.

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South Africa’s Sibanye Gold to cut jobs at loss-making Cooke 4 mine

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

JOHANNESBURG (Reuters) – South Africa’s Sibanye Gold has began talks with unions for job cuts at its Cooke 4 mine after failing to stem heavy losses at the operation.

The company first broached the subject of job cuts at the mine with unions in November 2014. Since then Cooke 4 has continued to fall short of production targets and accumulate losses forcing the producer to re-open talks, the company said.

The chief executive of Sibanye’s Gold operations, Wayne Robinson, said in a statement the losses at the mine threatened the viability of the other three Cooke operations.

“It is unfortunate that despite the joint efforts of stakeholders, the Cooke 4 operations have been unable to meet required production and cost targets and has continued to operate at a loss,” said Robinson.

The Cooke operations, including four mines and three processing plants, had an operating loss of 4 million rand ($274,000) in 2015, the company said.

Job cuts are a thorny issue in Africa’s most industrialised country where the unemployment rate is near 27 percent, a big concern for companies faced with labour disputes. Unions were unavailable to comment but have opposed job cuts elsewhere.

Sibanye spokesman James Wellsted said the previous round of negotiations in November had led to some job cuts and a new plan to revamp the mine but the operation continued losing money.

He said the mine was unlikely to run with fewer people if it was unable to pay for itself.

“I don’t want to preempt the consultation process and obviously we are looking for solutions but we have not been able to improve the situation,” Wellsted said when asked whether the mine would be shut.

Sibanye employs 1,700 workers at Cooke 4 and about 7,000 workers at all its four Cooke operations, he said.

($1 = 14.6182 rand)

 

(By Zandi Shabalala. Editing by James Macharia)

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South Africa’s rand steady, stocks to open higher

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

JOHANNESBURG (Reuters) – South Africa’s rand held its ground early on Monday and was seen getting a boost from improved risk appetite as investors search for higher yields on expectations interest rates will stay low in leading economies.

At 0630 GMT, the rand traded at 14.5825 per dollar, not far off its New York close of 14.5750 on Friday.

“The much-stronger-than-expected (U.S.) payrolls figure has not hurt global risk appetite or the rand. The market has taken the figure as confirmation that the US economy is not slowing down but not so strong that the Fed will have to hike” Rand Merchant Bank analyst John Cairns said in a note.

“A rate cut from the Bank of England on Thursday would further encourage risk-taking.”

Several U.S. Federal Reserve officials are scheduled to speak this week, offering plenty of opportunities for the market to glean clues about policy.

Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up more than 1 percent.

In fixed income, the yield for the benchmark instrument due in 2026 dipped 2 basis points to 8.685 percent.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Andrew Heavens)

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GoMyWay – the Nigerian company reinventing hitch-hiking for the 21st century

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

Traffic in Nigeria

Nigeria’s GoMyWay looks to reduce travel costs and pollution, with its ridesharing service.

Hitch-hiking may seem like a quite outdated and unsafe idea, but one Nigerian startup is revolutionizing the practice, by bridging the gap between a free ride with a stranger and a paid taxi cab. “Ridesharing” itself is not a new concept, as people have shared journey costs or hitchhiked for as long as cars have been widespread. However, GoMyWay aims to make a safe, organized network of road users who can all benefit from sharing journeys with strangers.

Reducing more than one cost

The costs of travelling by car are more diverse than simply the cost of the fuel. The driver has to consider fees for parking at their destination, car insurance, and toll roads. Therefore, any driver who could regularly charge a percentage of their costs to a passenger would clearly benefit. Likewise, while taxi cabs are expensive for any long journey, paying a driver only a percentage of their fuel cost would clearly save the non-driver money.

This is the crux of GoMyWay’s business model. Drivers can offer to take as many passengers as they have spare seats for, and potential passengers agree to a fee that covers their proportion of the journey’s cost. Users put their planned journey into the system, GoMyWay works out the suggested fee, and drivers are put into contact with people wishing to share a ride. The result is a democratized taxi service that saves all those concerned money, and reduces the number of cars on the roads too.

Damilola Teidi, of GoMyWay, said there were “too many cars on the road and lots of them with one person driving and empty seats,” adding, “It is ecological and economical nonsense. Ride-sharing is the perfect solution for these problems.”

Building a safe network

For many people, the prospect of getting into a car with a stranger, or having a stranger get into their car, might be unnerving. However, GoMyWay has worked to create a sense of security about those registered to use the service, and allows a community of users to self-govern through reviews and feedback.

GoMyWay ad

GoMyWay ad

Users have 4 levels of verification to go through, including their Facebook profile, cell-phone number, email address and a valid form of ID. Both the driver and the passenger can write a review of their experience, and users can customize their profiles to reflect certain preferences, such as no smoking in their car.

GoMyWay’s verification system ensures that the more stages a person has completed, the more likely they are to be chosen for a journey share.

Moreover, Teidi points out that ridesharing in Nigeria already occurs, but with none of the security in place that GoMyWay provides. Teidi explained, “Ride sharing happens offline with no safety measures in place. You pass by certain roads in Lagos or at the tollgate, and you see people offering and joining rides. No verification done at all. Same thing when you flag a regular taxi on the road, no one verifies the driver.”

Driving Forwards

GoMyWay is a service on the move. Within a year of its launch, there were more than 4,000 registered members, offering 30,000 seats across 20 Nigerian states. The organization has financial backing from successful business figures, including Konga founder & CEO Sim Shagaya and former Amazon executive Bill Paladino.

GoMyWay has plans to launch its service in Kenya, South Africa and Ghana. Unlike taxi services such as Uber, GoMyWay is simply connecting people – with the same planned journey – in order to reduce financial and environmental costs.

Currently any journey arranged via GoMyWay results in the fee being paid (in cash) by the passenger to the driver. However, as the business expands, the company plans to charge a percentage fee to registered drivers for each transaction. This system will ensure that GoMyWay generates its own profits, while the service still reduces costs for its users.

GoMyWay is proving to be an affordable, convenient choice for many people, but the company has grander hopes. With a focus on city-to-city journeys, and expansion into other countries planned, Teidi states that GoMyWay can grow to such an extent that it changes the face of transport in Africa: “We are building the new African rail network…except we are doing it on roads.”

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Angola’s Sonangol halts all asset sale talks

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

JOHANNESBURG (Reuters) – New Sonangol chief executive Isabel dos Santos has suspended all talks relating to the sale of assets belonging to the Angolan state oil firm and stripped its internal legal department of most of its powers, a statement said.

Dos Santos, the billionaire daughter of President Jose Eduardo dos Santos, was appointed to the Sonangol helm last month with orders to improve the efficiency of the sprawling 40-year-old firm, the central pillar of Angola’s economy.

The statement posted on Sonangol’s website after a board meeting at the end of last month said “all processes of evaluation, negotiation and sale of any assets” had been suspended with immediate effect.

It gave no further details.

Separately, it said the board had removed the legal department’s mandate to handle anything other than disciplinary matters. Again, the statement provided no more clarity.

Isabel dos Santos told Reuters last month she planned to hive off Sonangol’s non-core assets, such as its banking, real estate and airline interests, into separate holding companies to bring the company’s focus back exclusively to oil.

Boston Consulting Group and PriceWaterhouseCoopers have been hired as external advisers to the shake-up, which has won approval from the foreign oil firms operating in Africa’s top crude producer.

Isabel dos Santos also said she intended to improve transparency at Sonangol, long been regarded as one of the most opaque institutions in Africa.

In 2011, Sonangol was accused of misplacing $32 billion in oil revenues owed to the government.

The International Monetary Fund later said it had managed to track down the missing cash, attributing the accounting discrepancy to “quasi-fiscal operations” conducted on behalf of the government.

 

(Reporting by Ed Cropley and Herculano Coroado; Editing by James Macharia)

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South Africa’s AMCU union to start wage talks with platinum firms next week

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

JOHANNESBURG (Reuters) – The largest union in South Africa’s platinum industry said on Thursday it would be demanding higher wages for its members when it begins wage talks next week with Anglo American Platinum, Impala and Lonmin.

The union will seek a net salary of 12,500 rand ($853) as minimum wage for its lowest paid members who now take home around 8,000 rand or a 56 percent increase, and a 15 percent hike for higher paid employees when the talks start on July 12.

“At the rate that inflation is running I think surely we should push every worker in the mining sector to be (earning) 12,500 rand,” AMCU’s president Joseph Mathunjwa told reporters, adding that he would push for a one-year wage agreement.

The platinum firms did immediately respond to requests for comment.

While South Africa is by far the world’s largest platinum producer, the industry has been squeezed by rising costs, labour unrest and plunging global prices for the commodity.

Demand for the metal used to build emissions-cutting catalytic converters in automobiles has also been tepid.

The union made similar pay demands during the platinum wage talks in 2014 as well as in the gold sector in 2015, saying it was seeking “a living wage” for its members.

In both instances the hardline union was unsuccessful, which triggered a record five-month work stoppage in the platinum sector in 2014. The union did not hold a pay strike in 2015.

The companies are still recovering from the 2014 strike with Lonmin and Implats forced to raise cash from investors and Amplats hastening its mechanisation drive through sales.

“We will be approaching these wage negotiations with both parties respecting each other because they know what we are capable of,” Mathunjwa told Reuters.

This year’s wage-bargaining season has kicked off in the power, automotive and mining sectors, with some demands ranging from 13 to 20 percent, far above the current inflation rate of 6.1 percent.

($1 = 14.6545 rand)

 

(By Zandi Shabalala. Editing by James Macharia)

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Renewable Africa: The future is clean

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

Renewable Energy

Why groups like Access Power are vital to unlocking Africa’s vast clean energy potential.

The developed world has spent over a century thoroughly addicted to fossil fuels and such entrenched habits are proving hard to kick. On the other hand, Africa is bubbling with the promise of a renewable energy explosion.

Access Power, an organization which owns and operates renewable energy projects in developing nations, is leading the charge. Earlier this month, Access announced the winners of its $7 million competition: Access Co-Development Facility 2016 (ACF). Designed to kick-start promising African renewable energy projects, the competition was hotly contested.

Fierce competition

Reda El Chaar, Executive Chairman of Access Power, highlighted the scope of the African renewable revolution: “This year’s ACF competition introduced us to almost 100 projects, demonstrating the scale of entrepreneurialism and ambition across the African continent to meet the electrification challenge.”

Three companies were recognized as winners after a grueling three stage process: AGES, a solar project from Sierra Leone, Mentach Energy, a wind power development from Nigeria, and Stucky Ltd, a combined Hydro & Solar project from Madagascar. Together these schemes are expected to deliver over 100 megawatts to countless homes in their respective countries.

The revolution is coming; this year the ACF competition received a 75% increase in applications from budding renewable start-ups. What’s more, applications poured in from across the continent with a 40% increase in the number of nations involved in the competition. Africa is beginning to realize that it has massive clean-energy potential.

Energy Africa

The scope of this potential cannot be understated. Looking to the future, Africa has everything required to become the clean energy dynamo for the planet, in a new world where renewable energy is predominantly used.

African Energy Windtower

African Energy Windtower

The continent possesses huge stretches of land where solar power could generate enormous returns, particularly in the Sahara where the sun shines relentlessly. Some studies have suggested that a solar facility covering 0.3% of the Sahara could generate enough electricity for the whole of continental Europe. Particularly in West Africa, where strong winds sweep costal and elevated regions, wind farms could be utilized to harvest significant amounts of clean energy. Hydroelectric power can also be used to far greater effect as the continent is rich in powerful rivers and vast lakes. According to the UN’s Environment Programme, East Africa’s Great Rift Valley region could produce over 4,000 MW of geothermal energy. What’s more, Africa has a huge coastline waiting to be exploited by tidal power projects.

The path ahead

Africa is truly an untapped gold mine when it comes to renewable energy, which is why organizations like Access Power are so important in driving forward the expansion of renewable energy usage. The region is lagging behind the rest of the world when it comes to energy availability. Over 70% of sub-Saharan Africa is without access to reliable power, with many rural areas almost entirely off the grid. The problem is compounded by population growth as Africa’s population is set to increase by 1.3 billion between now and 2050.

Renewable energy is the obvious answer. Renewables like wind and solar can provide rural populations with accessible, closed-loop power, while large scale projects have greater long term promise than fossil fuels for improving net availability. As Africa rushes to improve its energy infrastructure, it needs to embrace clean power, not dirty.

Currently, renewable energy accounts for only 7% of Africa’s current energy production. As the region becomes more energy hungry, a continuation of this trend would be a hammer blow to climate change goals, and a huge missed opportunity given the continent’s potential. However, Africa is also home to abundant traditional energy options such as coal and gas. For developing nations, the temptation to lean on such resources is strong, especially as they remain the easier option in the absence of foreign investment.

The Africa EU Energy Partnership (AEEP) has a crucial role to play at this juncture. Dr. Michael J. Saulo, of the Technical University of Mombasa explained, “Africa needs Europe and Europe needs Africa. Europe has the know-how and the private investment, Africa has a vast potential for renewables. All factors converge together.”

Increased Euro-African cooperation is removing many historical deterrents to investment, such as political uncertainty and cumbersome government regulation. Another obstacle, the perception of poor returns on investments, has also melted away now that the start-up costs for wind and solar projects have plummeted to very attractive levels.

For the future of renewables in Africa, the signs are promising. However it is not just Africa that stands to gain. The continent is about to become a pivotal battleground in the fight against climate change. More foreign investors like Access Power are sorely needed if Africa is to realize its clean energy potential.

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South Africa’s net reserves rise to $40.826 billion in June

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

JOHANNESBURG (Reuters) – South Africa’s net gold and foreign exchange reserves rose to $40.826 billion in June from $40.48 billion in May, Reserve Bank data showed on Thursday.

Gross reserves rose to $46.366 billion from $46.081 billion previously, the central bank said.

The forward position, which represents the central bank’s unsettled or swap transactions, edged down to $1.616 billion in June from $1.64 billion in May.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Kevin Liffey)

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South Africa should not underestimate ratings downgrades risk

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

JOHANNESBURG (Reuters) – South Africa should not underestimate the risk of credit rating downgrades this year if the ailing economy does not improve, Central Bank Deputy Governor Daniel Mminele said on Wednesday.

Pretoria dodged ratings downgrades from Moody’s, S&P Global Ratings and Fitch earlier this year, giving policymakers time to act to strengthen the economy of Africa’s most industrialised country before the next round of reviews due by December.

Analysts have said South Africa’s economy faces hurdles and that the threat of “junk” status is looming.

“During May and June, South Africa received confirmations of unchanged credit ratings from all three major credit rating agencies,” Mminele said in a speech posted on the bank’s website.

“These confirmations, however, came with a very clear message: further improvements in the macroeconomic fundamentals are required.”

He said this suggested that “in the absence of demonstrable progress being made as part of a concerted effort involving all social partners, the risk of downgrades during the next reviews towards the end of this year should not be underestimated.”

The bank expects South Africa’s economy to grow by 0.6 percent this year and a modest recovery is seen over the next two years, but Mminele said the assumptions underlying the estimate had not factored in any possible spillover effects from Britain’s vote to leave the European Union.

“The UK’s present and future are now riddled with uncertainty, naturally accompanied by a flight to safety,” Mminele said.

“For South Africa, the implications through direct trade links are expected to be relatively minimal. In 2015, the UK accounted for only 4 percent of our total merchandise exports.”

Mminele, however, said financial linkages were far larger relative to the size of the South African economy.

For example, the value of South African assets owned by UK corporates and investment funds amounted to 46.5 percent of South Africa’s gross domestic product (GDP) at the end of 2014.

In turn, South African investors owned UK assets amounting to 33.2 percent of the African country’s GDP.

“In addition, both foreign direct investment and portfolio flows are also significant. This means that South Africa could very well be affected by the realization of tail risks emanating from asset liquidation by UK corporates and investment funds,” Mminele said.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia)

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WeFarm combines cutting edge ideas with simple technology

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

wefarm

WeFarm aims to help farmers around the world support each other through simple SMS connections.

WeFarm was launched in 2014, as a means of giving farmers – in very different areas – access to advice and information from other people in the trade. The idea was to connect people who had no internet access, in order to give them the opportunity to learn from each other, and help share vital information. The company’s slogan is: “The internet for people without the internet”.

Connecting the unconnected

With 500 million small-scale farmers across the world, offering a wealth of experiences and methods to draw on, peer-to-peer networking for this essential group of workers could be huge. CEO and founder Kenny Ewan spent 7 years working with many remote agricultural workers in Peru before he devised the idea.

Ewan explained what inspired his idea: “I was always very impressed with the unique and low-cost solutions farmers would come up with as solutions to their problems, (but) farmers living less than 20 miles away wouldn’t have any way to hear about these local innovations because very few people in rural Latin America and Africa have internet access.”

From here the WeFarm idea was born. Ewan approached his co-worker, Claire Rhodes, and the two quickly drafted out their plans. After winning grants from the Nominet Trust and the Knight Foundation, WeFarm began to pilot its service in Kenya and Peru.

WeFarm CEO and founder Kenny Ewan

Strength in diversity

While it might initially seem unusual to try and connect such different markets as Kenya and Peru, Ewan explains that a wide range of experiences is a strength for the system. Citing a recent example of a Kenyan farmer who wanted information on keeping rabbits, Ewan says, “He was able to ask questions and get information from someone who’d been keeping rabbits for 20 or 30 years on their farm. He was a farmer in Kenya. His question got answered in Peru.”

Once a farmer has signed up to the service, they simply text a question to the local WeFarm number, and WeFarm’s online system scans the question for keywords, before forwarding it to farmer profiles that seem relevant. A body of translators ensures that questions can be asked and answered in English, French, Spanish, and Swahili.

WeFarm had 33,000 Kenyan farmers signed up inside 10 months of launching, and within its first month in Uganda there were 5,000 Ugandan members.

Ewan hopes that by sending questions to both local and remote members, all those using the service can benefit greatly. “Farmers,” he noted, “can obtain both instant, relevant local knowledge as well as new ideas and insights from further afield.”

Growth for all

With over 5.2 million messages having already been sent, and with an average of 65% of all users contributing their own knowledge to the service, WeFarm is growing quickly.

The service is on the verge of launching in Tanzania and The Ivory Coast, but it also has plans far beyond these impending introductions.

There are planned moves into the markets of Rwanda, Ethiopia, India, and Brazil, with Ewan and his team currently raising $2.9 million in funding to drive this expansion.

As the database of information increases, so does the opportunity for the company to expand its positive influence. The beneficial information, that farmers can find ranges from more in-depth reports on market prices and products, to shared tips about adapting practices to climate change.

As the company grows, so does the proportion of farmers in the developing world who can grow their own business. Moreover, as everything at the user level requires no more than a basic cell phone, the penetration of the project far outstrips internet access.

Ewan says that some people were skeptical about farmers helping each other for no fee, but on the contrary their users embrace the chance to share their views. Ewan said, “It’s not just about the exchange of information; it’s also about empowering people to have their voice heard.”

As WeFarm continues to grow, a lot more of the farming world’s voices should soon be heard.

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