MENU

Business
Category

South Africa’s rand halts rally, GDP data, Fitch review keep market wary

8 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – The rand pulled back from the previous session’s four-week highs against the dollar on Wednesday and traders said South African GDP data expected to show a small contraction in the first quarter could add pressure on the currency.

The rand has gained as much as 5 percent against the dollar since Friday, reaching 14.7995 on Tuesday in a relief rally prompted by S&P’s decision to maintain South Africa’s investment grade BBB- rating.

The currency however gave back some of those gains on Wednesday to trade at 14.9175/dollar by 0650 GMT, down 0.1 percent from the previous session’s close.

Traders saw a risk to the currency from Statistics South Africa’s GDP data due out at 0930 GMT, with economists polled by Reuters expecting the economy to have shrunk 0.1 percent on a quarter-on-quarter annualised basis in the first three months of the year.

“If this is indeed the case there is not much chance the rand will be able to continue its journey lower (firmer),” Standard Bank trader Warrick Butler said in a note to clients.

Another rand-moving headline could be a review from Fitch, which is also expected to retain its own BBB- rating on Africa’s most industrialised economy, although it could change the outlook to negative from stable.

Fitch has not set a date for its announcement, but the Treasury has said it expects it on June 8.

In fixed income on Wednesday, the yield on debt maturing in 2026 was flat at 9.1 percent.

The JSE securities exchange’s Top-40 futures index was down 0.4 percent, pointing to a slightly weak start for the local bourse at 0700 GMT.

 

(Reporting by Stella Mapenzauswa; Editing by Ed Stoddard)

Read more

South Africa’s Telkom agrees performance-based pay deal with unions

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

JOHANNESBURG (Reuters) – South African fixed line telecoms network operator Telkom has reached a performance-based pay deal with two of it three largest labour unions while agreeing not to cut jobs for two years, the company said on Tuesday.

Telkom, reported a 15 percent rise in full-year profits on Monday after completing a three-year restructuring as it adapts the business to slowing revenue from fixed-line telephony and a sharp increase in data traffic.

The firm said on Tuesday it had signed a deal with Solidarity and the South African Communications Union to implement a performance-based remuneration scheme for both individual employees and teams. A third union, the Communications Workers Union, has agreed in principle, Telkom said.

“The agreement covers Telkom’s 11,000 unionised employees, out of a total headcount of just over 13,500 at the end of March 2016,” Telkom said in a statement.

As part of the deal, Telkom committed to no compulsory job cuts for the next two years and limiting outsourcing moves to less than 1,000 employees over the same period.

Telkom, in which the government owns a stake of about 40 percent, said it would not be offering any employee an annual increase in pay this year but was willing to pay workers more if they reached certain targets.

“The company is offering employees the opportunity to earn up to 12 percent more each month should they meet and exceed sales and customer service targets,” Telkom said.

 

(Reporting by TJ Strydom; Editing by James Macharia, Greg Mahlich)

Read more

Swiss and UK watchdogs quiz Credit Suisse over Mozambique loans

7 June 2016 Comments (0) Africa, Business

ZURICH (Reuters) – Switzerland’s financial watchdog said it is in touch with Credit Suisse over Mozambique’s undeclared loans, while Britain’s regulator is also making inquiries, according to a source familiar with the situation.

In April, Mozambique, one of the world’s poorest countries, disclosed as much as $1.35 billion of sovereign borrowing that may have made its debt unsustainable.

Swiss bank Credit Suisse and Russia’s VTB have been active in Mozambique, arranging loans for state-owned firms as well as helping with a eurobond issue.

A spokesman for Swiss financial watchdog FINMA told Reuters on Tuesday it was in contact with Credit Suisse over its engagement with the sub-Saharan African nation.

“We are aware of the issue and are in contact with the bank over this matter,” he said on Tuesday, declining to give any further details.

Separately, a source told Reuters on Monday that the UK’s Financial Conduct Authority (FCA), was looking into the role both Credit Suisse and VTB played.

Credit Suisse declined comment.

VTB said it had been open and transparent with the regulator on the Mozambique transaction and was not aware of any investigations.

“As we previously said, the total public debt number disclosed in the prospectus of the issued sovereign eurobond was inclusive of all outstanding direct and publicly guaranteed government debt, as confirmed to us by Ministry of Finance of Mozambique,” the Russian bank said.

Mozambique’s foreign debt – including $2 billion of commercial borrowing arranged without consulting parliament as required – has ballooned in the last four years, largely due to expectations it was set to become a major natural gas producer.

However, those expectations are now being shown to be wildly premature, leaving the country with a foreign debt burden equal to $400 per head – only a fraction below the International Monetary Fund’s $435 annual per capita GDP estimate.

 

(Reporting by Joshua Franklin and Oliver Hirt in Zurich, Alexander Winning in Moscow and Ed Cropley in Luanda; Editing by Michael Shields and Alexander Smith)

Read more

Kenya’s tourism earnings fall 3 pct in 2015

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

NAIROBI (Reuters) – Kenya’s revenue from its tourism sector dropped 2.87 percent last year to 84.6 billion shillings ($837.21 million), its tourism minister said.

Visitor numbers and earnings have plunged in the past four years as al Shabaab militants from neighbouring Somalia launched attacks on Kenyan soil in retaliation for Kenya’s military intervention.

Showing the depth of the fall, tourist arrivals fell from 1.8 million in 2011 to 1.18 million last year. The country earned 98.9 billion shillings in 2011 compared with the 84.6 billion shillings last year.

Najib Balala said the sector was on course for a recovery in 2018, in line with government plans, but cautioned that violent protests against the country’s electoral body could curb arrivals.

“A lot of people I meet are saying Kenya is maturing but when they see the incidents of the last weeks, they say we are going backwards,” he told Reuters on Monday.

“My concern is that, the efforts and the road map is working very well, I don’t want the political noise to interrupt that programme.”

Tourism is one of the main hard currency earners for Kenya.

President Uhuru Kenyatta’s government wants to bring in 3 million visitors a year according to its manifesto when it was elected in early 2013.

Efforts to revive the sector include boosting security, opening new source markets such as Nigeria and Poland and increased budgetary allocations to the sector.

Visitors are expected to rise by a third this year to 1.6 million and to recover to 1.8 million in 2018, matching a record high set in 2011.

($1 = 101.0500 Kenyan shillings)

 

(Reporting by John Ndiso; Writing by Duncan Miriri; Editing by Alison Williams)

Read more

Fitch may keep South Africa rating but cut outlook, analysts say

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

JOHANNESBURG (Reuters) – Ratings agency Fitch is likely to affirm South Africa’s investment grade credit rating this week but may lower its outlook to negative, analysts said, as Africa’s most industrialised economy grapples with slow growth.

South Africa has dodged downgrades from S&P Global Ratings and Moody’s, taking some pressure off President Jacob Zuma ahead of elections in August and giving policymakers more time to implement reforms to boost GDP growth.

Fitch, which rates South Africa one step above speculative grade with a stable outlook, has not said when it will publish its review. The Treasury has said it expects the review on June 8.

“We expect Fitch to affirm the rating at BBB- but change the outlook to negative, bringing them in line with S&P,” Rand Merchant Bank analyst John Cairns said.

“The announcement will be a small negative and will not fully offset the positive news from S&P.”

Three other analysts Reuters spoke to expected much the same result.

S&P said on Friday it was sticking to its BBB- rating on South Africa, one notch above non-investment grade. But it warned that its negative outlook reflected the potential adverse consequences of low GDP growth. Last month, Moody’s kept its rating at Baa2.

The rand and government bonds jumped after the S&P review, with the currency trading 0.3 percent firmer, while the benchmark bond due in 2026 and the country’s dollar-denominated bonds firmed.

Rating agencies had warned of possible cuts to South Africa’s credit standing after Zuma rattled investors by changing finance ministers twice in less than a week in December, triggering a cross-asset selloff.

In its last review, released on Dec. 4, before Zuma swapped his finance ministers, Fitch had said it expected South Africa’s economy to grow by 1.7 percent this year.

But the economy has taken a turn for the worse after scandals surrounding Zuma and a severe drought that has hit agricultural output and worsened inflation.

The Treasury currently expects GDP growth of less than 1 percent this year.

Zuma has faced calls to resign following a Constitutional Court ruling in March that he had erred by refusing to refund the state for renovation work on his house paid for by the taxpayer.

“There is always a chance that they (Fitch) change the ‘stable’ outlook on their BBB- rating to ‘negative’, although this is not a given just yet,” said Standard Chartered’s head of Africa research, Razia Khan.

“Having just downgraded South Africa and assigned the stable outlook to the rating last December, they too could give it another six months or longer before changing the outlook.”

Analysts say a downgrade to “junk” status could be on the cards later this year if policy measures did not turn around an ailing economy.

“Fitch’s decision to hold the rating outlook at stable or to adjust the outlook to negative has valid arguments on both sides, and will therefore be a very close call,” NKC African Economics’ Hanns Spangenberg said.

“However, given the deterioration in South Africa’s economic growth outlook, as well as an uptick in political risk over the last few months, our view is that the correct decision for Fitch would be to adjust South Africa’s rating outlook to negative.”

 

(By Olivia Kumwenda-Mtambo. Editing by James Macharia and Hugh Lawson)

 

Read more

King of Soto: Benin’s answer to Caribbean rum?

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

king of soto

Entrepreneur Mabel Adekambi creates King of Soto, a new take on a traditional liquor that is growing in popularity.

Inspired by a tradition of fine palm wine produced in her native Benin, entrepreneur Mabel Adekambi in 2014 launched King of Soto, a high quality rum produced entirely with local ingredients.

“When we say ‘rum’ all over the world, we know it comes from the Caribbean. Why not have a proper product in Benin?” Adekambi asked.

Adekambi’s product comes in 10 different flavors including pineapple, orange, mango, papaya, strawberry and passion fruit. King of Soto only uses natural ingredients and no chemical additives.

Rum production begins with the harvest of sap from palm trees. Rich in yeast, it quickly ferments juice called palm wine. Then the wine is distilled to produce a liquor the Beninese call sodabi, or soto for short.

The nickname inspired the name King of Soto, rum produced from sodabi, spices and fruit.

Process takes 6-12 months

Typically, rum-makers use wooden or aluminum barrels like those used in wine making. However, Adekambi found those were not available in country and would be very expensive to order. Instead she uses 20-liter gasoline cans.

The fruit, spices and sodabi are mixed together and stored cans for six to 12 months before the rum is ready for bottling.

Because sodabi is a seasonal product, it is difficult to produce large volumes of rum. King of Soto uses sodobi that has been distilled several times in order to achieve a refined liqueur.

Adekambi learned about rum production as a student in France.

Studies in entrepreneurship

After studying entrepreneurship, communication and tourism in France, she returned to Benin to work as a manager at Residences Celine Hotel in Cotonou.

King of Soto has become popular, mostly by word of mouth. Production rose from 10 bottles a month to 100 bottles within the first year of operation. The rum is sold in super markets for less than $2.

Sodabi is common liquor in West Africa, although it goes by different names in different countries: koutoukou in Ivory Coast, Akpeteshie in Ghana or Ogogoro in Nigeria.

Each region has secret methods for extracting the palm wine, which creates a variety of tastes and styles.

In Benin, the name sodabi derives from the name of its inventor, who learned distilling techniques from Europeans about 100 years ago.

king of soto bottles

A staple of celebrations in Benin

Benin, especially the region of Adja, is well known for its expertise in producing sodabi, according to Professor Koblévi Aziadomé, former minister and director of the Benin agricultural research center.

Often sold in plastic bottles, the popular beverage is consumed at celebrations and festivals.

Some people add plants, spices or fruits in their sodabi to give it medicinal properties or special tastes.

Negative image

In the past, producers have failed to adequately ferment or distill the sodabi, giving it dangerous levels of methanol and creating a negative image. Both Benin and Ivory Coast have at times banned its production.

But Adekambi seeks high quality, well distilled sodabi to create rum that customers can safely enjoy.

Adekambi believes King of Soto will only grow as the quality and flavor of her product becomes more widely known.

She sees King of Soto as both a business and a patriotic effort as it grows into an export product and employs more people. “For the moment, it is not profitable. But it will become profitable and hundreds of families in Benin will benefit.”

Read more

Sasol warns U.S cracker could cost $11 bln, expects lower returns

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

JOHANNESBURG (Reuters) – South Africa’s Sasol on Monday raised its forecast for the cost of its U.S. ethane cracker by 26 percent to as much as $11 billion due to construction delays and also flagged lower expected returns from it.

The Lake Charles Chemicals Project in the state of Louisiana which includes a cracker will produce 1.5 million tonnes of ethylene a year for use in plastics and chemicals.

Shares in Sasol, which had previously forecast its cost at $8.9 billion, where down by more than 5 percent as of 0730 GMT.

The petrochemicals maker said in a statement that higher-than-expected rainfall had contributed to delays in the project.

It also said costs had been boosted by higher labour costs, building materials and bid contract prices.

The world’s biggest maker of motor fuel from coal said it now expected lower returns due to “changes in long-term price assumptions and the higher capital estimates”.

Returns will be down by as much as the company’s lower long-term price assumptions, Sasol said.

Lower oil prices have forced the company, which makes 40 percent of its revenue from the fuel, to lower its dividend, delay major projects and cut jobs.

The cracker will be funded by existing loans and cash flow without breaching Sasol’s gearing targets. Sasol has already spent $4.5 billion on the project which is about 40 percent complete.

Sasol also warned that full-year headline earnings per share, a popular measure of profit, would fall by 10 to 30 percent due to low oil prices and an impairment charge on operations in Canada.

“The volatile macroeconomic environment, in particular lower crude oil prices, has had a significant impact on earnings,” Sasol said.

 

(Reporting by Zandi Shabalala; editing by Jason Neely)

Read more

Sub-Saharan Africa’s most debt-laden nations

4 June 2016 Comments (0) Africa, Business, Featured

african-currencies

Sub-Saharan Africa’s most indebted countries are revealed in the latest figures from the World Bank and the IMF.

Recent figures from the World Bank and the IMF provide a clear picture of which of Africa’s sub-Saharan nations have the highest levels of debt. The figures illustrate national debt as a percentage of the nation’s GDP, as opposed to ranking nations on absolute debt. This is an important distinction, as it accounts for how significant the effect of a government’s debt could be to its economic future.

For example, South Africa has the largest overall debt in absolute terms – with a huge 158 billion euros worth – but it also has a much larger GDP then most African states. This larger economic base ensures that South Africa is not even in the top ten of the most indebted nations.

From the highest debt to the lowest

The ten most debt laden countries of sub-Saharan Africa (with the percentage of their GDP that debt represents in parentheses) are Eritrea (126%), Cape Verde (122%), Gambia (97%), São Tomé and Príncipe (92%), Congo (79%), Ghana (74%), Malawi (73%), Angola (70% ) and Seychelles (65%).

In contrast, the ten nations with the lowest percentage of their GDP represented as debt were Nigeria (13%), Botswana (16%), DR Congo and Swaziland (20%), Equatorial Guinea (25 %) and the Comoros (29.2%), Namibia (31%), The Ivory Coast and Burkina Faso (33%) and finally Mali (35%).

Across the entire sub-Saharan region this averaged out at a 52% debt to GDP ratio, which actually compares favorably with Europe, in which the average is 92%.

What is clearly of significance is the degree to which an economy is likely to grow, and thus manage its debt without it becoming crippling. Moreover, what is sustainable for a developing nation is markedly less than it is for a developed market. While 40% is generally seen as manageable for emerging economies it can be significantly higher for large, more established markets.

The good news for Africa as a whole is that average GDP growth is second only to South Asia. A more cautionary view would note that borrowing is also growing quickly, and unforeseen humanitarian disasters, such as the 2014 Ebola outbreak, can have huge economic fallout in developing markets.

Changes to old debt and shaping the future

The single largest impact on the once debilitating debt levels in Africa occurred with the 1996 Heavily Indebted Poor Countries Initiative (HIPC). The internationally developed program was managed by the World Bank, in conjunction with the IMF and the African Development Bank. The initiative was further bolstered by 2005’s Multilateral Debt Relief Initiative, which was managed by the same trio, and led to 35 sub-Saharan nations eradicating over $100 billion of external debt.

While this allowed many nations to invest in social infrastructure, for others it simply meant writing off overdue debt, but did not create new streams of revenue for investment. Whether a nation wrote off old debt, or managed to put new resources into development, all of the affected nations profited in one key area.

According to Marcelo Guigale, a World Bank director, this universal benefit was that governments learnt “discipline” in spending, and had to have clear plans on reducing poverty. As such, Guigale stated African governments had “more money to spend and new offers to borrow—this time from private bankers.”

The concern in some quarters is that borrowing in some nations is outpacing growth, and this could lead to a return to pre HIPC levels of financial burden. An article in The Economist warned that, although Africa’s economies were growing quickly, “growing fastest of all is debt—personal, corporate and government.”

However, a trio of The World Bank’s own economists feel confident that “overall, governments have been borrowing responsibly”, and the IMF have ensured that guidance is being provided to help nations manage their debt constructively.

It is important for nations to be prudent with their borrowing, but even with some worries over rising debt, most experts feel genuine progress has been made.

Todd Moss, a senior fellow at the Washington-based Center for Global Development summarized the nature of Africa’s debt situation, saying, “Despite misgivings about certain countries, Africa is still in a fundamentally different place than it was 20 or 30 years ago when old debts were taken on.”

Read more

Higher South African rates leave households saddled with crushing debt

3 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Rate increases by South Africa’s central bank have left at least 10 million people crippled by debt in a country where many people buy on credit.

The result may be a further slowdown in South Africa’s slumping economy, which is now expected to grow just 0.9 percent in 2016. That would only aggravate the problem for those struggling with debt.

South Africa’s unemployment rate is already at a record high of nearly 27 percent. Food prices are soaring as a drought afflicts southern Africa.

Consequently, many households are borrowing to put food on the table. But inflation exceeds the central bank’s target of 3 to 6 percent, leading it to raise interest rates by 200 basis points in the past two years.

Inflation slowed to 6.2 percent in April, but commercial banks have raised their lending rates. Home loans now average around 10.5 percent, up from a low of 8.5 percent in 2012.

“Almost 75 percent of the income of the average household in South Africa is spent towards credit providers, to pay debt, so at the end of the day they don’t have enough money left to pay for their living expenses,” said Neil Roets, chief executive of Debt Rescue, a local company that helps clients manage debt.

“It’s had a devastating effect on consumers, especially because of the fact that a lot of consumers already find themselves in a situation where they are over-indebted,” he said, referring to the rising rates.

Industry officials say about 47 percent of the consumers that buy on credit are in debt arrears. About 10 million people, or a fifth of South Africa’s 52 million people, buy on credit.

The TransUnion South Africa consumer credit index, a gauge of consumer credit health, fell to a three-year low in the first quarter of this year. Debt defaults, defined by three months of arrears, rose 1.8 percent year-on-year during the quarter, after shrinking 5.3 percent in the fourth quarter of 2015.

Analysts said South Africans are still paying the price for unbridled lending that fuelled a consumer frenzy. That helped the economy grow an average 5 percent a year in the five years before 2009, when a recession wiped out nearly a million jobs.

Households are now reluctant to take up new debt. Private sector credit grew in April at its slowest rate since late 2013, central bank data showed.

Retailers are feeling the pinch across the board, with consumer demand for non-essential goods in particular dropping. New vehicle sales fell 10.3 percent in May from the same month last year, the sixth consecutive contraction.

“Both consumer and business confidence is unlikely to improve significantly in the short term, given the poor economic outlook and the poor job market,” Nedbank analysts Johannes Khosa and Dennis Dykes said in a note.

“Credit growth is likely to remain contained in the months ahead as the economic environment remains weak.”

 

(By Stella Mapenzauswa. Editing by James Macharia, Larry King)

Read more

KFC quits Botswana after two decades as economy struggles

3 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – KFC will shut its 12 outlets in Botswana next week as they are no longer viable, closing its doors after operating in the southern African nation for 20 years, its owners said on Friday.

Botswana’s economy has been hurt by a commodities downturn and a drought, which has put thousands of jobs at risk.

Proprietors of the Botswana KFC franchise, VPB Propco, said in a statement KFC Botswana will cease operating next week, with all stores closed by June 5.

KFC has restaurants in 14 countries in Africa.

 

(Writing by TJ Strydom; Editing by James Macharia)

Read more