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Tinkering with South African fiscal policy won’t boost growth

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

JOHANNESBURG (Reuters) – South Africa’s economy is not growing fast enough to create jobs, but tax cuts or increases in public spending are unlikely to stimulate growth, a senior Treasury official said on Tuesday.

South Africa’s unemployment currently hovers close to 27 percent of the labour force, while data on Monday showed employment in the formal sector fell by 0.2 percent to 9.273 million people in the first quarter of the year.

The Treasury estimates that Africa’s most industrialised country could grow by 0.9 percent this year compared with 1.3 percent in 2015, while the central bank and the International Monetary Fund have forecast 2016 growth at 0.6 percent.

“It is unlikely that growth … will come from tinkering or manipulation of macroeconomic policy variables …, in other words reducing taxes or increasing expenditure,” Director General Lungisa Fuzile told a business conference organised by the Gordon Institute of Business Science.

Finance Minister Pravin Gordhan in February unveiled a package of spending cuts, civil service job freezes and moderate tax hikes, partly to avoid credit rating downgrades.

Fuzile said reforms were underway at more than 300 publicly-owned companies which the Treasury has pledged to wean off state bailouts, though he did not elaborate.

Many of these firms are a drain on the state budget and have been flagged by all three major ratings agencies as a risk to South Africa’s investment grade status.

 

ELECTIONS LOOM

Fuzile said he was concerned about the quality of governance among those firms, adding that the Treasury was close to finalising proposals for merging two state-owned airlines, South African Airways (SAA) and SA Express.

However, political analysts say the reform of state firms could suffer amid preparations for local government polls in August and factional contests in the ruling African National Congress which have led to violence and deaths across the country.

“Under such circumstances, you are not going to have a sober debate in cabinet about what to do to fix (the state firms). The calculus is not sound governance,” analyst Prince Mashele told Reuters on the sidelines of the business conference.

South Africa’s private sector contracted in June after expanding for the first time in a year in May as output fell and companies cut jobs, a survey showed on Tuesday, while another report pointed to waning consumer confidence.

 

(By Mfuneko Toyana. Editing by James Macharia and Gareth Jones)

 

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Nigerian militants say they blew up oil facilities near Warri

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

LAGOS (Reuters) – Nigerian militant group the Niger Delta Avengers said on Tuesday it had blown up a Chevron well and oil pipelines near the city of Warri in the country’s southern oil hub.

The group, which says it wants a greater share of oil wealth to go the impoverished Niger Delta region, the source of most of the country’s crude, has pushed production to 30-year lows in the last few weeks through a spate of attacks.

It said it blew up a NPDC (Nigerian Petroleum Development Company) manifold, close to Banta, and two crude pipelines operated by the state oil company NNPC, adding that it also blew up “Chevron Well 10”, close to Otunana flow station. Chevron and NNPC were not immediately available to comment.

A remote manifold platform (RMP) is where small oil or gas pipelines converge before connecting to a larger storage hub.

The statement, carried on the group’s website, said the attacks happened shortly before midnight, but did not make clear whether the strikes were on Monday.

On Sunday the Avengers claimed responsibility for five attacks – the first such claim since June 16. Petroleum ministry sources said in late June a month-long truce had been agreed with militants, but the Avengers said they did not “remember” agreeing to a ceasefire.

 

(Reporting by Shalini Nagarajan in Bengaluru, and Alexis Akwgyiram in Lagos, editing by David Evans)

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After six months, Egypt finally settles wheat fungus row

5 July 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

ABU DHABI (Reuters) – Egypt’s agricultural quarantine authority settled a months-long dispute on Monday over wheat import specifications that have hampered the country’s massive state purchasing programme ahead of an anticipated new buying season.

Egyptian quarantine authorities’ earlier refusal to let in wheat infected with even the slightest amount of ergot, a fungus that can lead to hallucinations and irrational behaviour in large quantities but at trace levels is deemed harmless to humans, wreaked havoc in the market for supplying the world’s largest wheat buyer.

The quarantine authority said a new ministerial decree would allow it to accept imported wheat shipments containing up to 0.05 percent ergot, finally ending a long-standing zero tolerance policy that has puzzled global trade.

“A ministerial decision was taken and 0.05 percent ergot tolerance will now be endorsed,” Ibrahim Imbaby, head of the quarantine authority told Reuters by phone.

Imbaby did not give more details.

The decision comes a day after the country appointed a new head for its state wheat-importing body — one of the most influential positions in the global wheat market, ahead of the impending import season set to start this month.

The resolution to the ergot row also comes as Egypt’s domestic wheat purchases are being questioned and the earlier announced 5 million-tonne Egyptian wheat procurement figure for the season could be revised, leading to a greater import need.

The country is in the middle of a government-led recount of locally purchased wheat after the unusually high local procurement figure of 5 million tonnes, as opposed to around 3.5 million tonnes in earlier years, prompted allegations of fraud from industry officials, traders and lawmakers.

If the local purchase numbers were misrepresented Egypt might have to buy more foreign wheat to meet domestic demand while contending with a dollar shortage that has already sapped the country’s ability to import, making a resolution to the ergot squabble ever more pressing.

The quarantine’s zero tolerance policy was at odds with the more commonly accepted international standard of up to 0.05 percent already endorsed by the ministry of supplies and state grain buyer, the General Authority for Supply Commodities (GASC).

“The ministerial decree was issued after a committee in the import and export surveillance authority was formed and pressurised the agriculture ministry to issue a new decree,” one Cairo-based trader said.

The affair, which resulted in several shipments of wheat turned away at ports, a sharply lower participation at GASC tenders and higher wheat prices, was thought to be finally nearing a resolution when Prime Minister Sherif Ismail intervened in late June and said the country would adhere to the common 0.05 level.

His comments were expected to be followed by a decree changing the old regulations that governed agricultural quarantines and stipulated a zero tolerance policy.

But a decree failed to materialise until Monday’s decision and the agriculture ministry has told Reuters it had been hampered by a months-old judicial order from the prosecutor general that had banned all ergot from entering the country.

The order had followed the rejection of a French wheat shipment belonging to trading firm Bunge late last year. The firm subsequently filed a lawsuit contesting the decision.

Imbaby did not make clear how that legal hurdle had been overcome.

And after months of conflicting statements from various Egyptian agencies, some European traders remain skeptical.

“We are being cautious….they’ve changed their position so many times over ergot,” one European trader said.

 

(By Maha El Dahan. Additional reporting by Gus Trompiz in Paris; Editing by Veronica Brown and Greg Mahlich)

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Nigeria replaces Skye Bank bosses over capital failures

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

LAGOS (Reuters) – Nigeria’s central bank has replaced the chairman and chief executive of Skye Bank after it failed to meet minimum capital ratios, its governor said on Monday.

The central bank said Skye Bank’s non-performing loan ratio has been above the regulatory limit for a while and it hadmet with Skye’s board to resolve the issue, governor Godwin Emefiele told a briefing.

Earlier, banking sources told Reuters that Skye’s chief executive Timothy Oguntayo had resigned before the central bank announcement. He was the head of Skye Bank when it bought nationalised lender Mainstreet Bank in 2014.

“The basic issue is capital adequacy and liquidity. From what we see, adequacy ratio in the bank has been weakening and we don’t want it to get to a point where depositors will be at risk,” Emefiele said.

Skye Bank is designated as one of Nigeria’s systemically important banks due to the size of total sector deposits it holds after the acquisition of Mainstreet Bank. This means it has to hold more capital.

Emefiele said the central bank had conducted a stress test and decided to replace the chairman, chief executive and all non-executive directors after they failed to recapitalise the bank.

He said Skye had been a net borrower from its rediscount window for “sometime.” The central bank also appointed Tokunbo Abiru from rival First Bank to head Skye Bank.

“(Skye) bank is not in distress and remains able to continue banking activity,” Emefiele said.

Nigeria’s central bank has powers to remove bank executives and used them during the 2008/2009 global financial crisis when it sacked nine CEOs at banks which were undercapitalised.

Last year, the regulator gave three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 percent.

Skye Bank has been in talks with shareholders and new investors to raise 30 billion naira ($150 million). It suspended plans for a rights issue last year due to weak market conditions.

Emefiele said the overall banking industry was sound, despite weaknesses in the economy but that none of Nigeria’s 21 commercial lenders were in distress.

Shares in Skye fell 9.5 percent.

 

(By Chijioke Ohuocha and Oludare Mayowa. Additional reporting by Alexis Akwagyiram; Editing by Louise Heavens and Jane Merriman)

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Ivorian cocoa arrivals down around 10 pct by July 3 vs last season

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

ABIDJAN (Reuters) – Cocoa arrivals at ports in top grower Ivory Coast reached around

1,412,000 tonnes by July 3 since the start of the season on October 1, 2015, exporters estimated on Monday, down from 1,575,000 tonnes in the same period the previous season.

Exporters estimated around 18,000 tonnes of beans were delivered to the West African state’s two ports of Abidjan and San Pedro between June 27 and July 3, down from 29,000 tonnes during the same period last year.

 

(Reporting by Ange Aboa; Editing by Matthew Mpoke Bigg and Louise Heavens)

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Gold eases off near 2-yr high, silver crosses $21/oz

4 July 2016 Comments (0) Asia, Business, Latest Updates from Reuters

BENGALURU (Reuters) – Gold eased off a near two-year high, while silver breached the $21 level for the first time since July 2014 in highly volatile trade on Monday, prompted by a burst of short-covering in China.

Spot gold rose about 1 percent at one point to touch a session best of $1,357.60 per ounce. This was close to the $1,358.20 level reached on June 24, the highest since March 2014, when global markets went into a tailspin in the wake of Britain’s vote to exit the European Union. Spot gold was up 0.3 percent at $1,346.60 an ounce as of 0418 GMT. U.S. gold was up 0.7 percent at $1,348.50. Silver soared 7 percent at one point to $21.107, the highest since July 2014, before retreating below $20.25 by 0415 GMT.

“There is a little bit of a two-way battle going on in silver with a number of players going short in China,” said an analyst with an international investment bank.

The Shanghai Exchange Futures went limit-up as onshore players have aggressively been covering their short positions in the last few days, especially on Monday, said the analyst.

“Once the onshore market went limit-up, the short-covering buying spilled over to the London market.”

Chinese commodities from nickel to cotton surged on Monday on hopes Beijing would unleash more stimulus to prop up a sluggish economy, brightening the outlook for raw material demand. MKS trader Sam Laughlin said in a note global uncertainty would likely continue to fuel the recent rally in precious metals, but warned that there could be sharp periods of volatility. “The metal (silver) continues to be buoyed by its unique position as both an industrial metal in risk-on conditions and a safe-haven asset in times of uncertainty,” Laughlin added. Spot gold is expected to break a resistance at $1,351 per ounce and rise more to the next resistance at $1,367, said Reuters technical analyst Wang Tao. Hedge funds and money managers raised their bullish positions in COMEX gold and silver contracts to record highs in the week to June 28. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.41 percent to 953.91 tonnes on Friday, the highest since July 2013. [GOL/ETF] The U.S. markets are closed on Monday for the Independence Day holiday.

 

(By Vijaykumar Vedala. Reporting by Vijaykumar Vedala in Bengaluru; Editing by Joseph Radford and Subhranshu Sahu)

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Ivorian government to reduce export taxes for cocoa products

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

ABIDJAN (Reuters) – The Ivorian government has announced reduced export taxes for cocoa products in a bid to encourage production and processing in the West African country.

Taxes on exports of cocoa butter will fall to 11 percent from 14.6 percent and taxes on cocoa mass will drop to 13.2 percent from 14.6 percent, the government said.

The export tax on cocoa powder will fall to 9.6 percent from 14.6 percent.

Also, trading houses such as Cocoa Barry, Olam and Cargill will be able to increase their processing capacity by 7.5 percent. Smaller processors will be able to expand by 10-15 percent.

The changes are pending formal contracts to be signed between processors and the government.

 

 

 

 

(Reporting by Ange Aboa; writing by Edward McAllister; editing by Jason Neely)

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Brexit: Challenges ahead for Africa

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

British Prime Minister David Cameron visits South Africa

The United Kingdom’s departure from the European Union could slow trade and investment in the continent.

Brexit could not be happening at a worse time for Africa.

The economy of the continent is already struggling with falling commodity prices and the economic slowdown in China. The decision by British voters to withdraw from the European Union could trigger decreases in trade with Africa as well as aid and direct investment from the United Kingdom.

The vote, which followed a bitter campaign that centered on immigration, may signal that Britain will increasingly turn away from its support for world development, according to the Brookings Institution.

“Perhaps the biggest impact of the Brexit on Africa would be the end of British ‘outwardness’ – the country’s concern with and responsiveness to global development issues,” Amadou Sy, a senior fellow and director of the Africa Growth Initiative at Brookings, said.

Britain contributes significant aid

The United Kingdom is one of the largest contributors to the European Union’s development assistance fund for low-income economies. The nation contributes $585 million, nearly 15 percent of the total fund, second only to Germany (20 percent) and France (18 percent).

While the U.K. might provide aid directly, new mechanisms and policies would first have to be put in place, a potentially complicated and lengthy process.

Sy said Brexit also is expected to weaken trade ties between the U.K. and Africa.

Britain is one of Africa’s largest trading partners within the EU, accounting for more than 12 percent of all European Union trade with the continent (down from a peak of nearly 18 percent in 2012).

Dozens of trade pacts must be negotiated

According to General Robert Azevedo, director-general of the World Trade Organization, Brexit would require the United Kingdom to renegotiate trade agreements with the organization’s 161 member nations, a complex and time-consuming effort that could slow down trade with African and other nations. With Britain’s exit, the European Union also would have to renegotiate dozens of bilateral trade agreements, Sy said.

For example, a recent agreement between the EU and the Southern Africa Development Community allows free access to the EU market for Botswana, Lesotho, Mozambique, Swaziland and Namibia. However, with Brexit, the value of that access would be significantly diminished as it would not include the U.K. market and a separate agreement might have to be negotiated.

African agriculture may also be affected. According to Sy, the United Kingdom has been a strong opponent against agricultural subsidies the EU provides within the Eurozone because they put African agricultural imports at a disadvantage. With Britain’s departure, Africa would lose a strong voice in the EU for its farmers.

Nigeria, South Africa will feel impact

money nigeriaAfrica’s largest economies may be hard hit.

The U.K. is the fourth largest destination for exports from South Africa. That nation’s battered economy took a further hit as the rand fell by 7 percent the day after the British vote.

Economists at South Africa’s North-West University estimated that Brexit could shave 0.1 percent off South Africa’s annual economic growth, which already declined by more than 1 percent in the first quarter of 2016.

“With current growth in South Africa in 2016 expected to be close to zero, [Brexit threatens] a loss in growth South Africa can ill-afford,” Raymond Parsons and Wilma Viviers, professors at North-West, said.

Nigeria’s market reforms may be delayed

Trade between Nigeria and the United Kingdom is estimated at more than $8 billion and had been expected to more than triple by 2020. However, those advances also are likely to be interrupted as new trade deals are negotiated.

Nigeria, on the brink of recession, has been liberalizing market controls in order to spur the economy. But fallout from Brexit may also slow that effort.

Razia Khan, chief economist for Standard Chartered Bank said risk aversion world wide as well as soft oil prices could slow investment and delay normal operations on the newly liberalized market.

Africa is not alone in feeling the impact of Brexit, and stabilizing markets is the first step to blunting the economic impact, Kahn said.

As emerging markets come under pressure globally, “much will depend on how quickly financial market stability can be restored.”

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Nigeria signs $80 bln of oil, gas infrastructure deals with China

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

LAGOS (Reuters) – Nigeria has signed oil and gas infrastructure agreements worth $80 billion with Chinese companies, the West African country’s state oil company said on Thursday.

Nigeria, an OPEC member which was until recently Africa’s biggest oil producer, relies on crude sales for around 70 percent of national income, but its oil and gas infrastructure is in need of updating.

The country’s four refineries have never reached full production because of poor maintenance, causing it to rely on expensive imported fuel for 80 percent of energy needs.

These problems have been exacerbated by a series of attacks on oil and gas facilities by militants in the southern Niger Delta energy hub which pushed production down to 30-year lows in the last few weeks.

Oil minister Emmanuel Ibe Kachikwu, who also heads the Nigerian National Petroleum Corporation (NNPC), has been in China since Sunday for a roadshow aimed at raising investment.

“Memorandum of understandings (MoUs) worth over $80 billion to be spent on investments in oil and gas infrastructure, pipelines, refineries, power, facility refurbishments and upstream have been signed with Chinese companies,” said NNPC in a statement.

NNPC added the China roadshow was “the first of many investor roadshows intended for the raising of funds” to support the country’s oil and gas infrastructure development plans.

Earlier this week, NNPC said oil production had in the last few days risen by around 300,000 barrels per day (bpd) to 1.9 million bpd, due to repairs and no attacks having been carried out since June 16.

Goldman Sachs, in a report published on Wednesday, said a “normalization” in Nigerian oil production would put pressure on global oil prices and may mean prices will average less than $50 a barrel during the second half of 2016.

 

(Reporting by Alexis Akwagyiram; Editing by Mark Potter)

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Egypt’s central bank says no ban on using debit cards abroad

30 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Debit cards linked to Egyptian pound bank accounts can be used outside the country in a “regular” way, the central bank said on Thursday, after instructions it sent to banks on Wednesday appeared to ban customers from using them abroad.

Although Wednesday’s letter suggested a blanket ban, the central bank said its instructions “only apply to individuals misusing debit cards to acquire large amounts of foreign currency without a clear reason for doing so, which saps banks’ foreign reserves”.

“The Central Bank of Egypt affirms the continued use of all cards, debit or credit, under existing limits set by each bank,” it said in a statement.

In the letter sent on Wednesday and seen by Reuters, the central bank had told bank chiefs: “Please ensure that debit cards, including pre-paid cards, issued in local currency by Egyptian banks are only used within the country.”

Central bank Governor Tarek Amer had initially denied the Wednesday directive existed, telling state news agency MENA on Thursday the rules on using debit cards abroad were unchanged.

“It is up to each bank to set limits on its clients’ usage of foreign currency abroad through debit cards linked to local currency accounts, but we need vigilance because some clients use debit cards to get large dollar amounts not intended for travel, tourism, or shopping,” he said.

The bank’s later statement acknowledged the instruction had been sent but said it applied only in some cases. Wednesday’s letter did not indicate that was the case, however.

Egypt depends on imports for everything from food to fuel but has suffered from a shortage of dollars in the banking system to pay for them since a 2011 uprising drove away tourists and foreign investors, crucial sources of hard currency.

Many import businesses now rely on the black market, where they can get hard currency for a higher price. The pound’s rate on the black market has weakened since the central bank devalued the Egyptian pound in March, at which time it was roughly in line with the official rate.

 

(By Ehab Farouk and Ahmed Aboulenein. Additional reporting by Mostafa Hashem; Writing by Ahmed Aboulenein; Editing by Catherine Evans)

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