NAIROBI (Reuters) – Kenya’s new car sales increased by 12.86 percent last year to 19,524 units, the Kenya Motor Industry Association said on Monday.
Rita Kavashe, who chairs the association, told Reuters in November that growth was driven by demand for light trucks used to distribute goods and carry construction materials.
(Reporting by Duncan Miriri; Editing by Hugh Lawson)
With a growing population that now surpasses one billion and an expanding middle class, Africa can expect to see air travel increase significantly in the next two decades.
The International Air Transport Association projects that the African air passenger rate will more than double from 119 million passengers in 2014 to 280 million in 2034. (source)
However, the African airline industry lags behind the rest of the global air industry and it faces significant obstacles to future growth, including lack of capital for expansion, high taxes and tariffs and a fragmented system that lowers efficiency and raises costs.
“Africa is a growing market with enormous opportunities for air transport. With an almost 1.1 billion population, it is a huge market for air transport,” said Elijah Chingosho, secretary general of the African Airlines Association (AFRAA). “However, the existing players are confronted with many challenges that are impeding their ability to take advantage of the opportunities.”
Aviation is already playing a role in the African economy, supporting nearly 7 million jobs and accounting for $80 billion in GDP. The sector, in which many airlines are government owned, grew by 5 percent in 2014, outpacing growth in Europe and America.
Currently, non-African carriers dominate intercontinental traffic to and from Africa, accounting for 80 percent of that traffic. Meanwhile, African airlines carry only 2.85 percent of all global traffic.
Chingosho said African airlines should focus on expanding intra-African and domestic travel. Currently, about 41 percent of traffic is inter-continental, 32 percent intra-Africa, and the rest domestic.
“The best opportunities for growth and expansion lie in the under-served African regional and domestic markets,” Chingosho said. He and others point to Africa’s fast-growing middle class, now about a third of the population, according to the African Development Bank, as an emerging group of potential customers.
Developing an efficient routing system within the continent is a priority.
In many cases it is easier for a traveler from an African country to first fly to Paris or Dubai and then to another African country, according to Fatima Beyina-Moussa, director general of Equatorial Congo Airlines and president of the African Airlines Association.
The African Airline Association has 33 airline members that account for 85 percent of traffic by African carriers, including the largest African airlines – Ethiopia Airlines and South African Airways.
Chingosho and other experts say the primary obstacle to expansion is lack of liberalization, or deregulation, that would open regional markets on the continent to trans-national competition.
Forty-four African nations signed the 1999 Yamoussoukro Decision designed to liberalize air travel on the continent, but implementation has been slow, according to the International Air Traffic Association. However, Chingosho offered some optimism: He said African heads of state had agreed to liberalization by January 2017.
The international association cited one 2014 study that examined the potential financial benefits of implementing the agreement and demonstrated “beyond doubt the tremendous potential for African aviation if the shackles are taken off,” said Tony Tyler, the association’s director general and CEO.
The report said liberalization in just 12 key markets studied would potentially serve 5 million more travelers and provide an additional 155,000 jobs and $1.3 billion in annual GDP.
Another obstacle to growth is lack of capital.
Only 19 African countries have ratified the Cape Town Convention, a 2006 treaty designed to make asset-based financing and leasing of aviation equipment more available by reducing creditor risk, Chingosho said.
African air carriers are small compared to international counterparts. Among the largest are: Ethiopian Airlines with 76 aircraft, South African Airways with 65, Royal Air Morocco with 53 and Kenya Airways with 45.
By contrast, Emirates has a fleet of 245 aircraft and Qatar Airways has 167. The world’s largest airline, American, has nearly 950 aircraft.
Chingosho estimated the African fleet would need 800 new aircraft to accommodate growth projected through 2030. Sixty percent of those would expand the fleet and the remaining 40 percent would replace aging aircraft. He said the bulk would be single-aisle, mid-range aircraft.
In addition, airports must be expanded and upgraded, he said.
High operating costs and inefficiencies are other factors holding the African aircraft industry back.
Jet fuel continues to be relatively expensive in Africa, about 30 percent higher than the global average. It cost nearly $120 per barrel in 2014, down from a peak of about $130 a barrel in 2012. Unpaved runways result in higher fuel consumption and maintenance costs.
Elijah Chingosho, frica Airlines Association (AFRAA) Secretary General
Adding to their costs, Chingosho said, many African airlines are using high capacity aircraft in small or mid-sized markets, which has pushed average load factors below 70 percent. This compares with an average of 80 percent globally.
At the same time, high tariffs and cumbersome customs regulations limit development of airfreight. For example, The National Association of Government Freight Forwarders recently complained that high tariffs have forced Nigerian importers out of that country and many others will leave.
Airport charges are high, with some airports adding as much as $150 per passenger to the cost of a ticket.
The result is high fares and low profit margins.
One study found that fares on typical intra-African routes are as much as two times higher than comparable routes in Europe and as much as three times higher than similar routes in India.
Meanwhile, the African airlines operate on a profit margin of less than 1 percent, compared to 4 percent globally.
Lack of safety and concerns about terrorism and civil strife further depress demand for air travel.
Chingosho said many airlines are still below global standards but he noted that 41 African airlines have adopted international safety standards.
He said the airlines need better training personnel in all areas, including safety. He has encouraged aircraft manufacturers to provide that training.
Chingosho and others assign some of the blame for high costs to high taxes assessed by governments that see air travel as a service for the rich, who can afford to pay, rather than a means of mass transportation that is particularly suitable for Africa with its challenging topography.
RABAT (Reuters) – Morocco’s trade deficit fell 18.7 percent to 152.27 billion dirhams ($15.43 billion) in 2015 compared with a year earlier, thanks to lower import costs and higher exports, the foreign exchange regulator said on Friday.
Energy imports fell by 28 percent from a year earlier to 66.84 billion dirhams, data showed. Wheat imports also fell 32.6 percent as the local harvest hit a record high last year.
Total imports fell 5.6 percent and total exports rose 6.7 percent from a year earlier to 214.27 billion dirhams, led by a 21 percent rise in auto exports and 16.3 percent hike in phosphate sales.
Exports covered 58.5 percent of imports for the first time in 10 years, the regulator said.
Tourism receipts dropped 1.4 percent to 58.51 billion dirhams, while remittances from the 4.5 million Moroccans living abroad rose 3 percent to 61.75 billion dirhams.
Foreign direct investment jumped 6.7 percent to 39 billion dirhams.
Figures are in billions of dirhams:
Jan-Dec Jan-Dec Jan-Nov
2015 2014 2015
EXPORTS 214.27 200.80 195.29
IMPORTS 366.53 388.08 335.32
BALANCE -152.27 -187.27 -140.02
MIGRANT
REMITTANCES 61.75 59.97 56.68
TOURISM
RECEIPTS 58.51 59.31 54.66
FOREIGN DIRECT
INVESTMENT 39.01 36.55 33.96
($1 = 9.8654 Moroccan dirham)
(Reporting by Aziz El Yaakoubi; Editing by Alison Williams)
Amidst unrest and war across Africa and the Middle East, a new report on risks to business in different nations paints a sobering picture.
Only 10 African and Middle Eastern countries are considered low risk for businesses, according to the report by Control Risks, a global risk management consultancy. Nearly three times as many countries – 27 – pose an extreme or high risk to companies operating within their borders.
Globally, insurgency is reshaping political and business affairs, according the report. In both business and politics, the established order is being disrupted by forces that appear suddenly, the report said.
Nowhere is that more clear than in Africa and the Middle East, according to Control Risks’ evaluation of political risk in 68 countries in the region. The rating is based on the likelihood that instability or interference or other factors such as corruption or infrastructure could negatively affect business operations.
In sub-Saharan Africa, only three countries were given a rating of “extreme” risk: Burundi, Central African Republic, and Somalia.
Burundi has experienced widespread violence and the report predicts that the political and security environment will worsen in 2016, especially in Bujumbura, the capital. With the government unwilling the make concessions to its opposition, the report asserts that the risk of a coup will increase.
Meanwhile, Somalia and the Central African Republic are attempting to emerge from years of violence but remain unstable, the report said.
Violence in Burundi
It said a return to high levels of piracy off the coast of Somalia is unlikely in 2016.
The report said anti-piracy measures off the coast of Somalia have been effective, reducing the amount of activity to just one percent of its peak in 2011. But that might not last.
“Governments and shipping companies face the challenge of responding to the diminished threat without unraveling the work that helped to curtail the problem,” the report said, noting the paradox that the success of anti-piracy efforts could well lead to their being diminished.
However, the report cautioned about continuing offshore kidnappings and high jacking off the coast of Western Africa.
On the terrorism front, the report predicts that U.S. president Barack Obama, in the final year of his term, will be more assertive internationally, including lending more support to counter-terrorism efforts in sub-Saharan Africa.
Boko Haram, the Nigerian militant group, is coming under more pressure from multiple governments and is likely to be forced to relinquish territory and instead rely on hit-and-run attacks, according to the report.
Nigeria was one of 16 countries that received a “high” risk rating. The report said the pending end of a program of amnesty for militants, and falling oil prices could worsen tensions.
Other countries with a high risk rating include: Chad, Comoros, Congo, Democratic Republic of Congo, Cote d’Ivoire, Equatorial Guinea, Eritrea, Gambia, Guinea, Guinea-Bissau, Lesotho, Niger, South Sudan, Sudan, and Zimbabwe.
These 23 countries were given a medium risk rating: Angola, Benin, Burkina Faso, Cameroon, Djibouti, Ethiopia, Gabon, Ghana, Kenya, Liberia, Madagascar, Malawi, Mali, Mozambique, Rwanda, Sao Tome, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Uganda, and Zambia.
Only six countries – Botswana, Cape Verde, Mauritius, Namibia, Senegal, and Seychelles – received a low risk rating.
The report also reflects political unrest and war in Northern Africa and the Middle East, where only four countries were rated low risk.
Three war-torn countries – Iraq, Syria, and Yemen – were rated extreme risk.
High-risk countries were Algeria, Egypt, Iran, Libya, and the Palestinian Territories.
Medium risk countries were Bahrain, Jordan, Kuwait, Lebanon, Mauritania, Oman, Saudi Arabia, and Tunisia.
Israel, Morocco, Qatar, and the United Arab Emirates were rated low risk.
By comparison, the United States is ranked low risk while China and Russia are ranked medium risk.
Globally, Control Risks said, the risk outlook is the worst it has been in the past decade. It cited, terrorism, instability in the Middle East, cyber-risk and Chinese economic problems as factors creating a “potentially more volatile world in 2016.”
TOKYO (Reuters) – U.S. crude oil futures fell in Asian trade on Friday, heading lower after posting the first significant gains for 2016 in the previous session, as the prospect of additional Iranian supply looms over the market.
West Texas Intermediate (WTI) was down 48 cents at $30.72 a barrel at 0345 GMT. On Thursday the contract rose 72 cents, or 2.4 percent, to settle at $31.20. It hit a 12-year low of $29.93 earlier this week.
WTI is on track to post a third consecutive weekly loss, down more than 6 percent. The contract is down nearly 18 percent from a 2016 high on January 4.
Brent crude was down 20 cents at $30.68 a barrel. The global benchmark settled up 72 cents, or 2.4 percent, at $31.03 a barrel on Thursday, after falling to $29.73, its weakest since February 2004.
Over the previous eight sessions, Brent had lost about $7 a barrel, almost 20 percent.
Western sanctions on Iran are expected to be lifted within days, potentially paving the way for more crude oil exports from the country, under a landmark agreement on Tehran’s disputed nuclear programme.
“This is three or four months ahead of what the market was thinking last year, so it just adds fuel to the fire,” said Tony Nunan, Oil risk Manager, Mitsubishi Corp in Tokyo.
Iran has removed the sensitive core of its Arak nuclear reactor and U.N. inspectors will visit the site on Thursday to verify the move crucial to the implementation of the atomic agreement with major powers, state television said on Thursday.
Any additional oil from Iran would add to the glut that has pushed oil prices into a deep slump since the middle of 2014.
“It is the wrong time for Iran to be returning to the oil market, both for the market and likely also for Iran,” Phillip Futures said in a note on Friday.
“It would have been so much more ideal for Iran to return to the oil scene if prices were soaring at $100,” it said.
(By Aaron Sheldrick. Reporting by Aaron Sheldrick; Editing by Richard Pullin)
LAGOS (Reuters) – Nigeria’s share index tumbled 3.4 percent on Thursday and hit its lowest point in almost 3-1/2 years, spooked by the weak outlook for the currency, traders said.
The share index, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, has fallen for five straight days, sliding below the psychologically important 25,000 point line not seen since September 2012.
At the market close, the index was down 3.4 percent at 24,239 points. The index has dropped 12.4 percent in the first nine days of trading this year.
Currency and stock markets in Africa’s biggest economy have been hit hard by the fall in the price of crude oil, Nigeria’s main export, which has slashed government revenues and triggered an exit of foreign investors.
“From what foreign investors are telling us, when they have confidence in the naira/dollar exchange rate they can then make investment decisions,” Oscar Onyema, CEO of the Nigerian Stock Exchange told Reuters.
The naira has dived 34 percent on the black market compared with its official level of 197 after the central bank stopped dollar sales to retail currency outlets. The move has intensified speculation that Africa’s top oil producer will have to formally devalue its currency soon.
Onyema said the bourse expected 2016 to be challenging for the market after the index shed 17.4 percent last year with losses continuing into this year, as oil prices plunged and the domestic economy faltered.
Foreign buyers, who accounted for 54 percent of trading volumes, were on the sidelines owing to the lack of clarity on Nigeria’s forex policy, highlighting naira weakness as a deterrent to a market rally in 2016, he said.
The index of Nigeria’s top 10 banks fell 4.69 percent to lead the bourse lower. Top decliners included Seplat, Oando, Guaranty Trust Bank and FBN Holdings all down more than 9 percent.
“With crude oil prices down, accretion to FX reserves is out of the question … putting investors on red alert. The central bank may not be able to meet all the demand for FX even if it were to devalue,” said Ayodeji Ebo, head of research at Afrinvest.
(Reporting by Chijioke Ohuocha and Oludare Mayowa; Editing by Hugh Lawson)
Investment in real estate can be a fickle mistress. The ebb and flow of the cyclical patterns of real estate values can be hard to read at times, and investments, particularly in residential real estate, can lead to decreases or stagnation of your original investment. But some sectors are relatively safe, especially for experienced players who look at the patterns established over many years. Foremost of these ‘safer investments’ are the areas of commercial and hospitality real estate which can both offer big returns when the correct choices of properties are made. And of course, the old adage of any investment in real estate is ‘location, location, location’ and that is especially true when you are looking at the higher end of the market, be it commercial or residential.
Recent research by CBRE, the world’s leading commercial real estate company, highlights rising levels of outward investment in commercial real estate from Middle Eastern countries, and showed that in the first half of 2015 around US$11.5 billion was spent on commercial property worldwide. This far surpasses the previous high of US$9.6 billion recorded in the first half of 2007. Much of this investment comes from sovereign wealth funds (SWFs), particularly those of the United Arab Emirates and Qatar. Of the US $11.5 billion coming out of the area, US$8.3 billion (or 72%) of that came from SWFs.
From a macroeconomic perspective this increase in real estate spending by Middle Eastern investors is not surprising. Oil prices sit at seven year lows and investment bank Goldman Sachs predicts that this situation will not improve any time soon, especially with increases in supply and reductions in demand an ongoing issue. So, with potential revenue decreasing at a steady rate, the fund managers of the Middle East are looking at the best options to invest and receive a high level of return.
The real estate industry globally has generally managed to weather the recent recessions better than some other sectors. This is partly due to increased activity in Asia which has offset any declines in other areas. Higher disposable incomes and relatively low rates of unemployment in many economies has also been a factor that has protected the real estate industry. Forecasts of the 10 year period from 2010 to 2020 predict that industry value added may increase by 4.5% per annum – well ahead of predicted global GDP growth in the same period. With annual revenue of over US$3 trillion and a global workforce of over 11 million, this is a sector that will continue to grow and adapt to the cyclical patterns of individual markets and economies.
As mentioned, location is a crucial factor, and it comes as no surprise that some of the world’s major conurbations are the primary beneficiaries of this surge in spending. London leads the field, with US$2.8 billion spent on commercial property in the first 6 months of 2015, with Hong Kong (2.4 billion) and New York (1.1 billion) following in its wake. It is worth noting however that if we examine total real estate investment rather than just that originating in the Middle East, New York is leagues ahead of its English rival with a staggering US$40.1 billion of investment in real estate over the first half of 2015 compared to London’s 19.4 billion and Los Angeles’ 19.3 billion.
As well as the dramatic increase in total investment from the region, there is another distinctive factor in Middle Eastern spending on real estate. In every year from 2007 to 2014, the bulk of investment has been aimed at the office market. As this has reached saturation point in many cities, characterized by empty units, falling rents and an increase in incentive packages to attract tenants, the fund managers and individual investors have shifted their focus to the hospitality sector and to hotels in particular, which offer attractive long-term revenue streams. Of the US$11.5 billion spent in the first six months of 2015, $6.8 billion was invested in the hotel industry, with $2.5 billion being spent on hotels in London and $2.4 billion in Hong Kong. Given that this sector only attracted $1.8 billion for the whole of 2014, this is a significant increase and emphasises the increasing diversity of investment strategies by Middle East based investors.
This increase in real estate spending, and indeed the change in focus, does not look like it will abate in the near future. Investment in the Americas looks like it will continue to increase into 2016 as Middle Eastern money looks for new opportunities outside the energy industry and outside its traditional comfort zone of Europe. While Asia appears to be a market that has so far eluded investment from the Middle East – mainly due to the dominance of China in many of the developing economies – one cannot rule out astute investors continuing to cast their net over a wider geographical area.
NAIROBI (Reuters) – Kenya’s economy is expected to grow 6.1 percent in 2016 and the government wants to trim ballooning budget and current account deficits to steady the economy, its finance minister said on Thursday.
Kenya, East Africa’s biggest economy, set a budget deficit target of 8.7 percent for the 2015/2016 fiscal year starting July, unnerving some investors who were also uneasy about Kenya’s current account deficit, which stood at above 8 percent.
The current account deficit was fuelled by a growth of imports like oil and consumer goods which was not matched by growth in exports. The budget deficit swelled due to increased spending on infrastructure projects and local government units created in 2013.
Officials and investors say the government has to deal with the deficits to boost investor confidence and stave off instability in the currency and borrowing rates. The shilling lost 11 percent against the dollar in 2015, but faired better than most African currencies.
Finance Minister Henry Rotich said the global slump in the price of crude oil had helped the country’s current account deficit to improve due to a lower import bill.
“With the measures we are taking to cut the fiscal deficit, the twin deficits will obviously go down,” he told Reuters by phone.
“We are aiming at around 6.5 percent (current account deficit) and also getting our fiscal deficit, including grants, coming down to about 4.5 percent.”
The Treasury wants to start attaining those targets from the next fiscal year and into the medium-term, Rotich added.
He said Kenya was reviewing all government ministries’ expenditure plans for this fiscal year with a view to cutting unnecessary items and reducing borrowing.
“By the end of this month we will have known what savings we are likely to achieve from the exercise,” he said, adding the measures will be contained in a supplementary budget to be taken to parliament for approval.
Growth was expected to be 6.1 percent this year, slightly up from last year’s projection of about 5.8 percent. Rotich said growth will be driven by public investments in infrastructure, a recovery in tourism and farming.
“We are still seeing infrastructure supporting the growth. Construction remains strong. We see recovery of tourism boosting that. With the favourable weather, we see agriculture will also be strong,” he said.
The government is investing in a Chinese-built 327 billion shilling ($3.2 billion) modern railway, tarmac roads and power plants. Tourists have started to return to the country’s beaches and game reserves after key Western markets like Britain lifted travel warnings.
The warnings had been put in place after a string of attacks by al Shabaab militants from neighbouring Somalia.
Rotich said the main risks to Kenya’s growth outlook were global developments including any slowdown in the Chinese economy, the direction of the oil price and U.S. interest rates.
“The risks continue to be external developments. It has become difficult to get a full feel of forecasts for global economic developments,” he said, adding the main risk at home was any adverse weather like poor rainfall.
(By Duncan Miriri. Editing by Drazen Jorgic)
ABUJA (Reuters) – Nigeria’s government has approved a $200 million loan from a World Bank agency to develop infrastructure in Lagos state, its commercial hub, the minister for works, power and housing said on Wednesday.
The loan was the second tranche of a total of $600 million lent by the International Development Association to the Nigeria government for Lagos state since 2010, Babatunde Fashola said.
Lagos, a mega-city of 21 million people in the state of the same name, is the commercial engine of Africa’s biggest economy. Its gross domestic product accounts for about a third of Nigeria’s overall GDP.
Fashola, who did not give details of any projects for which the loan would be used, said the money had been intended for distribution in three tranches each of $200 million to end in 2013 but had been delayed.
“It suffered delays as a result of partisan political differences in the last dispensation. After the first tranche was disbursed there was a freeze on the second tranche,” he told reporters.
Fashola said the loan was to be repaid over 25 years at an interest rate of 2.5 percent.
(Reporting by Felix Onuah; Writing by Alexis Akwagyiram; Editing by Chijioke Ohuocha, Larry King)
KAMPALA (Reuters) – Uganda’s shilling extended losses on Wednesday as banks sought to cover short dollar positions amid uncertainty before next month’s presidential election and traders also cited an excess in local currency liquidity.
By 0948 GMT, commercial banks quoted the shilling at 3,475/3,485, compared with Tuesday’s close of 3,450/3,460. The shilling has lost nearly 3 percent of its value against the dollar so far this year.
“There’s general uncertainty being generated by the coming election so there’s a lot of speculation-driven demand by banks to cover short positions,” said Shahzad Kamaluddin, a trader at Crane Bank. He also noted a lot of shilling liquidity.
The presidential election is due on Feb. 18, and some analysts are concerned about possible vote-related violence.
(Reporting by Elias Biryabarema; Editing by Edmund Blair)
