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Will Djibouti become the Singapore of Africa?

22 February 2016 Comments (0) Africa, Business, Featured

Ismail Omar Guelleh

The tiny country on the Horn of Africa hopes to use its strategic location to boost trade and diversify its economy.

The tiny nation of Djibouti has set its sights on becoming the Singapore of Africa, a trade hub that takes advantage of its location on one of the world’s busiest shipping routes.

China’s recently announced plans to build a naval base in the Horn of Africa country gave a boost to Djibouti’s ambitions. Other plans, with a price tag of $12.4 billion, include expansion of port facilities, two new airports, as well as a $4 billion rail link with Ethiopia, Djibouti’s land-locked neighbor.

“We want to follow the path of Singapore,” Dijbouti president Ismail Omar Guelleh said.

China provides significant assistance

China is playing a significant role in Djibouti’s development as the Asian nation seeks to expand its influence in the region and secure trade routes with its “One Belt, One Road” initiative. Chian is financing most of the $12.4 billion in improvements as well as the $4 billion rail link with Ethiopia.

Work is expected to start soon on the Chinese naval base, which will be located at the new multi-purpose port of Doraleh.

The two countries have agreed to a 10-year lease for the base with China paying rent of $100 million per year. The base will house about 10,000 Chinese troops and is expected to boost local employment and businesses.

The United States and France already maintain naval bases in Djibouti.

Djibouti’s plans call for development of a second port, also at Doraleh, designed to handle container shipments.

Two new airports will be built

China is also providing support for two new airports Djibouti is building at a cost of nearly $600 million. With these projects, Djibouti hopes to increase both cargo shipping and tourism, which makes up a small part of its economy.

One airport at Ali-Sabieh, south of the capital will be capable of serving 1.5 million passengers and moving 100,000 tons of air cargo annually. It is expected to begin operating in 2018.

A second, smaller airport will be built in northern Djibouti. Designed to handle more than 750,000 passengers a year, it is expecting to start operating in 2016.

Rail line to link Djibouti, Ethiopia

China also is building a $4 billion railway line that will link Djibouti with Ethiopia, one of the fastest growing economies globally, which gets about 90 percent of its imports through Djibouti. The rail line will give land-locked Ethiopia a link to the sea while Djibouti will gain access to a market of 95 million people.

Djibouti, one of the poorest countries on the continent, envisions becoming a middle-class country in two decades in its “Djibouti Vision 2035” blueprint drafted with the help of the World Bank.

Ports and trade are already at the center of Djibouti’s economy but the nation hopes to diversify.

More than two thirds of Djibouti’s gross domestic product comes from the services, primarily port and trade-related operations. The remainder is from manufacturing and agriculture. Poverty is prevalent and unemployment is 60 percent in urban areas. The literacy rate is 70 percent.

Seeking economic diversification

Djibouti seeks to further diversify its economy by becoming a regional financial hub for foreign investment, including Islamic banks. China and Djibouti also signed deals for banking and free trade zones.

“Nowadays we are shifting to a much more integrated development plan. We’re trying to diversify our economy,” Djibouti finance minister Ilyas Dawaleh said.

Dawaleh noted that his country has enjoyed strong economic growth in recent years – 6.5 percent of gross domestic product in 2015 and 5.7 percent in 2014.

He predicted Djibouti will achieve double-digit annual growth in the next three years. “This is our target with our diversification strategy we are undertaking now,” he said.

Dijbouti is one of four countries that make up the Horn of Africa and the only one that has been largely peaceful for the past two decades while its neighbors across the Gulf of Aden – Somalia, Eritrea, and Yemen, have endured conflicts. This has enabled Djibouti to emerge as the main military and maritime hub in the troubled region even though the country is largely undeveloped.

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Morocco annual inflation eases to 0.3% in January

22 February 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

RABAT (Reuters) – Morocco’s annual consumer price inflation eased to 0.3 percent in January from 0.6 percent in December, mainly due to falling food prices, the country’s High Planning Authority said on Monday.

Food inflation eased to 0.2 percent from 1.1 percent from January 2015 to January 2016. Non-food price inflation rose at 0.6 percent, from 0.2 percent in December.

Transport costs fell 0.4 percent, while hotels and restaurants were 2.3 percent more expensive, the agency said.

On a month-on-month basis, the consumer price index eased to 0.1 percent in January, down from 0.5 percent in December. Food price inflation fell 0.3 percent, while non-food inflation dropped 0.1 percent.

 

(Reporting by Aziz El Yaakoubi; editing by Katharine Houreld)

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AngloGold swings to 2015 profit on weaker currencies, oil prices

22 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Africa’s top bullion producer AngloGold Ashanti Ltd on Monday said it swung into profit in 2015 as it benefited from lower oil prices and weaker currencies in the countries from which it exports gold.

Adjusted headline earnings, which exclude certain one-off items, were $49 million versus a year-earlier loss of $1 million.

“The results for the fourth quarter and full year 2015 show the combination of a strong ongoing focus on cost and capital discipline, as well as the operational leverage the company has to weaker currencies and lower oil prices,” AngloGold said.

 

(Reporting by Ed Stoddard)

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Morocco’s first solar power plant opened by King Mohammed VI

21 February 2016 Comments (1) Business, Featured, Middle East

Ouarzazate solar

King Mohammed VI switches on Morocco’s first solar power plant that is set to provide over a million homes with power.

The edge of the Sahara desert, just 12 miles outside of the city Ouarzazate is now home to a glittering spectacle that is set to be the world’s largest solar power plant.

After beginning construction on May 10th, 2013 the project has succeeded in completing stage one of its epic operations. Covering a spans the size of 35 football fields, the 800 rows of 500,000 crescent-shaped solar mirrors make up Noor I. This is the first of a complex of four linked solar power plants that once completed in 2018, will finally occupy a site larger than the country’s capital, Rabat, which is home to 1.4 million people.

Instead of utilizing the more familiar photovoltaic panels that are now a common sight on rooftops around the world, ‘the door of the desert’ site uses mirror technology which despite being less common and more expensive, has the advantage of continuously producing power even after the sun has gone down.

As NASA’s Kathryn Hansen explained, “The system at Ouarzazate uses 12 meter-tall (39 foot-tall) parabolic mirrors to focus energy onto a fluid-filled pipeline. The pipeline’s hot fluid is the heat source used to warm the water and make steam. The plant doesn’t stop delivering energy at night time or when clouds obscure the sun; heat from the fluid can be stored in a tank of molten salts.”

Royal inauguration

ouarzazateOn Thursday 4th February, 2016 the plant welcomed royal guest King Mohammed VI to inaugurate the countries first ever solar power plant. The ceremony was attended by the head of government, members of the government and foreign officials, including French Environment Minister Ségolène Royal who said it inspired, “great hope to all countries with a lot of sun and desert” to produce solar energy.

As the opening took place construction works commenced on the plants Noor II and Noor III sites, while for Noor IV, a call for tenders was opened. Once completed the full complex is expected to provide 1.1 million homes with power.

The king is said to be confident in the immense capacity his country has to offer renewable energies, from the Atlantic wind to the Saharan sun.

Solar superpower

It is hoped that for a country who has no claim to fossil fuel, this will be its opportunity to become self-sufficient. Additionally it plans to enter onto an international platform, providing fuel for countries worldwide. No small fry for a country that has been the biggest importer of fuel in North Africa, the venture will bring both economic and geopolitical value.

As Morocco’s Minister of the Environment Hakima el-Haite recently highlighted, “We are not an oil producing country. We import 94% of our energy, which has serious consequences for our state budget. We also have the weight of fossil fuel subsidies, so when we heard about the potential of solar power, we thought, why not?”

The country has pledged that 42% of its electricity will come from renewable energy by 2020. By 2030 they vow to have decreased their CO2 emissions by 32%, a commitment made as part of the climate conference in Paris (COP 21) that Morocco is determined to honor.

Raising the bar

As the official hosts of this year’s COP 22, Morocco is setting a precedent with the huge investment into renewable energy. However, they are by no means new to the fight against climate change. In fact since the 1960’s Morocco has shown a firm dedication to protecting the planet with a dams, agriculture and water strategy, followed more recently in 2008 by the energy strategy.

By investing in what it has, Morocco is investing in the future of its people and more far reaching, in the future of the planet. The added bonus being that by extricating itself from major financial outgoings it allows money to remain within the country and the possibility of exporting becomes very real, as more and more countries look for alternatives to fossil fuels. Could Morocco become one of the world’s biggest suppliers? Only time will tell but one thing is for certain, as Thierry Lepercq, CEO of the Paris-based Solaire Direct, acknowledged, “Solar is a true revolution,” and Morocco is at the forefront of that revolution.

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Egypt will launch the Middle East’s first commodities exchange

19 February 2016 Comments (0) Business, Featured, Middle East

egypt exchange

As the nation seeks to become a global trade center for grain, it will open an exchange focused on agricultural products this year.

Egypt plans to launch a commodities exchange focused on agricultural products, the first of its kind in the Middle East as part of the nation’s goal of developing a major trade and processing hub for grain on the Mediterranean coast.

According to Egyptian Minister of Supply Khaled Hanafy, the government plans to begin operating the commodities exchange by the end of this year.

Meanwhile, Hanafy has also been courting international investors for a $2 billion initiative to turn Egypt into a global grain-trading hub.

The Egyptian government wants to make the country a major center for processing and re-exporting wheat, maize, soy, and other commodities. Grain is a significant crop in Egypt but it is also the world’s largest wheat importer.

Development of Damietta as major port

The government is proposing a mega-development in the port of Damietta on the Mediterranean coast, including new piers that could receive giant tankers and ships.

The plan was approved by President Fattah al-Sisi in October and the project is to be finished in two years.

Hanafy cited Egypt’s strategic location with access to markets in Europe, Africa and the Middle East, with 1.6 billion consumers as well as its access to the Suez Canal, as key advantages of the initiative.

Currently, major trade routes for grain are across the Pacific and Atlantic oceans and the western Mediterranean. Major exporters, including Russia and the United States, have direct access to markets in Asia, Latin America and Europe.

Egypt’s proposed hub could also find competition in plans to develop nearby Suez Canal ports such as Djibouti into global trade hubs.

Damietta

Damietta

Egypt seeks investors

Hanafy has met with officials and investors from Russia, the United States of America, the United Arab Emirates, Sudan and Slovenia.

He said the Egyptian government is working in cooperation with the Egyptian Exchange market and the Egyptian Financial Supervisory Authority, the government regulating agency, to launch the commodities exchange.

The commodity exchange will include commodity producers, a spot market for buying and selling securities, and storage and grading hubs.

Farmers can use mobile application

Egyptian farmers will be offered a mobile application that will enable the market to track their output, electronically linking their crops to the exchange, according to Iman al Mutlaq, chief executive of Sigma Investments, which is working on the project.

Mutlaq said it would begin with six agricultural commodities plus oil and gold. She said a small number of commodities would help promote high volumes.

The government is working on guidelines for pricing and products, which will need to be in place before the exchange opens. It also will begin issuing certificates of origin.

Agricultural production needs to increase

The government believes the commodities exchange will boost development of Egypt’s highly fragmented agricultural lands, Hanafy said.

Egypt wants to reduce grain imports while improving domestic production that is approaching $100 million to supply a rapidly growing population.

Egypt increased agricultural production by 20 percent between 2004 and 2014. Sisi recently called for  increased production by 2030 through modernization and support for small farmers.

Lack of silos results in waste

The nation has struggled to make agricultural operations efficient. Lack of modern storage facilities is part of the problem. The country stores much of its wheat in open lots, causing an estimated loss of 30 percent. The United Arab Emirates recently agreed to provide funding to Egypt for two dozen silos.

Limited land available for agriculture is another challenge. Only about three percent of the land in the country is suitable for agriculture.

Agriculture experts say in the future, production in the Euphrates and Tigris river basins could increase enough to support a regional grain market in the Middle East. For now, however, war in Iraq and Syria has disrupted grain production.

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South Africa’s MTN shares slump 13% on profit warning

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

JOHANNESBURG (Reuters) – Shares in MTN Group slumped more than 13 percent on Friday, a day after the South African mobile company flagged it would report at least a 20 percent drop in annual profit.

Shortly after the market closed on Thursday, MTN said the expected fall in profit was due to underperformance in Nigeria, where it faces a $3.9 billion fine for failing to cut off more than 5 million SIM card users by the set date.

Africa’s biggest mobile phone company said the profit warning did not include the penalty because it was still in talks with regulators about the final size of the penalty.

“There remains some uncertainty as to the final quantum (amount) of the Nigerian fine, should an out of court settlement be reached,” the company said.

MTN was handed a $5.2 billion penalty in October, prompting weeks of lobbying that led to a 25 percent reduction to $3.9 billion but the company was still not prepared to pay the lower fine, which equates to more than twice MTN’s annual average capital spending over the past five years.

 

(Reporting by Tiisetso Motsoeneng; Editing by Alexander Smith and Adrian Croft)

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Nigerian red tape prompts South African retailer to exit

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

JOHANNESBURG (Reuters) – South African retailer Truworths has pulled out of its Nigerian business citing import restrictions, its chief executive said on Thursday, a sign President Muhammadu Buhari’s attempts to boost local industry are hurting foreign investment.

As well as being unable to fill its shelves, the clothing retailer said it was struggling to pay its rent and get access to foreign exchange which has dried up due to a collapse in oil prices. Nigeria is Africa’s biggest crude exporter.

“We were unable to operate the stores properly any longer because we were unable to send merchandise to the stores because there’s regulation preventing that,” Michael Mark told Reuters in telephone interview.

In an attempt to boost local manufacturing and prop up the ailing naira, Buhari has effectively banned the import of almost 700 goods, ranging from rice to toothpicks, bread and soap.

Even non-banned items are difficult to import due to dollar shortages.

Buhari won an election a year ago on promises to end a brutal Islamist insurgency in the northeast and wean Africa’s biggest economy off oil.

However, Boko Haram militants continue to launch regular attacks and economists have questioned the logic of Buhari’s shock therapy reform tactics, particularly because of the knock-on effects of the slump in oil prices.

 

(Reporting by Tiisetso Motsoeneng; Writing by Joe Brock; Editing by Ed Cropley)

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Tunisia, IMF hold talks on credit, economic reforms

18 February 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

TUNIS (Reuters) – The IMF began talks with Tunisia on Thursday over a new credit programme, tied to measures to strengthen its economy and finances and likely to be worth at least $1.7 billion over four years, a central bank official told Reuters.

Tunisia’s economy has struggled since the 2011 uprising against autocrat Zine El-Abidine Ben Ali that sparked the Arab Spring revolutions across North Africa. Two attacks last year by Islamist militants hurt its tourism industry.

Protests to demand work last month turned violent, underscoring the fragility of the economic growth that Tunisia needs to underpin its democratic transition.

Amine Mati, the head of the IMF delegation in Tunisia, met the Central Bank Governor Chedli Ayari to discuss the details of the credit programme on Thursday.

“The programme will be in accordance with new economic reforms in Tunisia this year and during the three next years,” an central bank official told Reuters after the meeting.

Mati will also meet the prime minister’s adviser in charge of economic reforms.

Tunisia is about to get a loan of 500 million euros ($550 million) from the European Union to support the economy, and former colonial ruler France last month pledged 1 billion euros in aid over five years.

The new IMF programme will follow on from a two-year deal totalling about $1.74 billion that was agreed in 2013 and extended last year by seven months to buy time for Tunisia to put banking and fiscal reforms in place.

Under the programme, Tunisia also agreed to keep its budget deficit under control and make the foreign exchange market more flexible.

 

(Reporting by Tarek Amara; Editing by Ruth Pitchford)

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Rwanda’s economic growth to slow to 6.3% this year

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

KIGALI (Reuters) – Rwanda’s economic growth is likely to slow to 6.3 percent this year from an estimated 7 percent last year, mainly due to smaller expansions in the agriculture, construction and services sectors, the central bank chief said on Thursday.

Governor John Rwangombwa told a news conference the slower rate of expansion was partly due to the effects of El Gino rains.

“Agriculture has a big hand in that slight reduction from 7 percent to 6.3 percent,” he said, putting growth in the sector, one of the main drivers of the economy, at 5.1 percent this year compared with a projected 5.5 percent last year.

Rwangombwa said the service sector was expected to expand 7.1 percent this year after growing 7.3 percent in the first three quarters of last year.

He added the construction sector was also seen slowing compared with last year.

He said inflation was expected to remain within the 4.5 and 5.5 percent range during the year.

Rwanda’s urban inflation rate, a key indicator for the central bank, was unchanged at 4.5 percent in January compared with the previous month.

 

(Reporting by Clement Uwiringiyimana; Writing by George Obulutsa; Editing by Hugh Lawson)

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South32 considering buyout of Anglo American manganese unit

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

SYDNEY (Reuters) – South32 could be among the first to buy assets placed on the block this week by South Africa’s Anglo American, with the Australian company saying it was interested in its manganese unit.

The two companies share a manganese mining and smelting business located in Australia and South Africa, with Anglo American owning 40 percent of the division.

RBC last year valued South32’s stake in manganese at around $1.8 billion, though that was before the metal halved in price.

“As a JV partner with a deep understanding of their value, we would be a buyer if the price is right,” a South32 spokeswoman said in an emailed statement, confirming a report in the Sydney Morning Herald newspaper website.

News of the interest from South32, the diversified minerals group spun out of BHP Billiton last year, comes as Anglo American turns to widespread divestment to shore up a heavily indebted balance sheet.

South32 indicated negotiations had already started to acquire Anglo American’s manganese business.

“We have a good relationship with our joint venture partner and they’ve communicated their intentions,” the statement said.

Manganese can be found in drink cans to improve resistance to corrosion. Ahead of Anglo American unveiling plans this week to cut net debt in half, South32 had been mentioned as a potential buyer of Anglo American’s niobium business.

Anglo American on Feb. 16 detailed a drastic plan to hack and slash its sprawling empire of mining assets, paring it back to diamonds, copper and platinum.

Any acquisition, though, would come at a tough time for manganese producers.

Weak prices for the metal have already led South32 to suspend mining at its Hotazel mining division in South Africa This has removed around 700,000 tonnes of manganese ore production from the global supply chain.

South32 shares were nearly 5 percent higher at A$1.26 in late trading on Thursday, double the gains of the wider market. But the stock has still lost nearly half its value since listing in May.

 

(By James Regan. Reporting by James Regan; Editing by Muralikumar Anantharaman)

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