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African Middle Class to Reach 900 Million by 2040

11 December 2015 Comments (0) Africa, Business, Featured

africa middle class

On October 15th, the CFAO – a specialized distribution leader and partner of major international companies – published a new, detailed study on consumption patterns in Africa. The conclusion was that the nature of the middle class is changing as it expands and that it could reach as many as 900 million people by 2040.

In recent years, the media has latched on to the notion of an increasing middle class in Africa despite there being a real lack of research in the area. This idea arose from the strong economic growth being experienced in a number of African countries. This has resulted in the construction of large shopping malls and supermarkets, increased housing ownership and increased access to information and communications technology.

Due to the size of Africa, as well as the cultural differences, religions and varied economies, defining the middle class can be quite difficult. To get around this problem the study was based on data accumulated from five countries, Kenya, Ivory Coast, Nigeria, Cameroon and Morocco.

What is the Future of the African Middle Class?

The African middle class is expected to continue growing rapidly. According to Jean-Michel Huet, one of those responsible for carrying out the survey, in 25 years the population of middle class citizens in Africa could exceed that of China and India combined. This is of huge interest to large Western countries who will see this an opportunity. If they can attain a significant share of such a large market, the revenues and profits earned could potentially be enormous. In a global economy still struggling from the economic downturn following the financial crisis, the continued growth of the African economy represents an important opportunity for Western countries and corporations.

Currently, 62% of the population of Africa is under the age of 25. As the middle class grows and access to private health care increases, it is expected that this will lead to an increased life expectancy. This increase in the average age of the population will result in an increase in the size of the workforce.

The trend in recent years in Africa has been towards urbanization and much of the middle class can be found in the continent’s cities. However, increasing numbers of middle class people can be found in rural areas. Hélène Quénot-Suarez, a doctor of political sciences in Sub-Saharan Africa for the French Institute of International Relations has said that “African rural areas are also gradually experiencing the emergence of a middle class.” This is a trend that is likely to continue into the future.

A study conducted by the consultancy firm Deloitte in 2010 found that as the middle classes in Africa grow, people will have more recreational time. This combined with a better standard and higher level of education will result in people becoming more politically assertive. This presents further opportunities to western countries. Increasing education levels will mean greater access to a skilled workforce. When combined with greater levels of political activity this could lead to stronger democracies and free market economies being formed. This would make it easier for corporations from outside the continent to conduct business.

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South Africa’s stocks extend losses after Nene sacking

11 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s main stock index slumped more than 2 percent on Friday as jittery investors continued to pull out of the market after Wednesday’s shock dismissal of the finance minister.

Banks, which are most at risk if South Africa’s credit rating is downgraded in the wake of the removal of Nhlanhla Nene, led the decliners, with Barclays Africa plummeting nearly 20 percent.

 

 

 

(Reporting by Tiisetso Motsoeneng; Editing by James Macharia)

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Zuma’s firing of South African finance minister dismays investors, ANC supporters

10 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African President Jacob Zuma’s sacking of his respected finance minister in favour of a relative unknown has shocked investors and emboldened critics who say the 73-year-old is driving the economy to ruin.

Even some supporters of the African National Congress (ANC), Nelson Mandela’s erstwhile liberation movement that has ruled since the end of apartheid in 1994, expressed dismay about Wednesday’s appointment of a Zuma loyalist to the crucial post.

Zuma gave no details as to why on Wednesday he dismissed Nhlanhla Nene, who has overseen the Treasury for just under two years, other than to say he had “done well… during a difficult economic climate”.

Markets reacted unambiguously, with the rand plunging to a record low against the dollar, losing just over five percent since Nene was removed. The Johannesburg Stock Exchange’s banking index lost 13.5 percent on Thursday.

New Finance Minister David van Rooyen acknowledged he had taken on “a colossal assignment”.

Local media speculated this week that Nene might be on the chopping block after he rebuked Dudu Myeni, the chairwoman of state-owned South African Airways and a close ally of Zuma, for mismanaging a 1 billion rand ($67 million) deal with Airbus.

Myeni is executive chairwoman of Zuma’s charitable trust, the Jacob Zuma Foundation.

The main opposition party went on the attack. “It is clear that if you stand up to Zuma, you don’t stick around,” Mmusi Maimane, leader of the Democratic Alliance, told Reuters. “Zuma has reached new heights as a leader who puts himself ahead of his country and the economy.”

Zuma’s office did not respond to Reuters requests for comment. The ANC said in a statement it “notes and respects” the president’s decision.

 

“TOO MUCH CORRUPTION”

The sacking and the financial fallout hit a raw nerve with some ordinary South Africans. “With the rand getting battered like this, firing Nene is not the right move,” said Dominic Ratau, a 74-year-old pensioner and lifelong ANC loyalist, expressing his dissatisfaction with Zuma.

“I’ve been an ANC supporter because of the older generation who were running the party. But this guy is leading the country to disaster. He’s allowed too much corruption.”

Nene’s reluctance to rubber-stamp an ambitious plan to build a number of nuclear power stations to ease severe electricity shortages, a project that might cost as much as $100 billion, is also seen as contributing to his downfall.

His successor van Rooyen is an ANC lawmaker who sits on parliament’s finance committee.

Van Rooyen said he would implement policies aimed at creating favourable investment conditions after he was sworn in. “Mine is a colossal assignment coming at a time when the global economic outlook is not favourable, more especially for emerging markets,” van Rooyen said.

Many economists have questioned van Rooyen’s ability to steady an economy being hammered by the collapse in prices of South Africa’s commodity exports that range from coal to gold, and raised concerns that public spending could spiral out of control.

Credit agency Fitch downgraded South Africa last Friday, leaving the continent’s most sophisticated economy just one notch about “junk” status, and said on Thursday Nene’s firing “raised more negative than positive questions”.

A Reuters poll on Wednesday showed analysts expect the economy to grow just 1.4 percent this year and 1.6 percent next, 0.1 percentage points lower than last month’s forecasts.

 

WHO’S NEXT?

Nene’s removal has raised speculation about more casualties within Zuma’s team, after the axing in September of mining minister Ngoako Ramatlhodi, who investors said had done a decent job in a tough but crucial portfolio.

South Africa is gearing up for important local elections next year where the ANC is expected to be run close by the Democratic Alliance in urban areas, including the economic hub of Johannesburg. The countryside remains an ANC stronghold.

Significant erosion of ANC control in metropolitan powerbases could strengthen Zuma’s opponents, especially if South Africans blame him for the floundering economy.

“Zuma’s power is becoming more brittle and his lines of support stretched thinner and thinner,” said political analyst Nic Borain. “He is engaging in actions that parts of his party find repulsive and there is a point beyond which a system under stress can quickly unravel as the connections snap.”

A #ZumaMustFall Twitter campaign kicked off within hours of Zuma’s announcement, echoing one earlier this year calling for the removal of colonial-era statues.

 

SCANDAL

Zuma, a polygamous Zulu traditionalist with little formal schooling, has been beset by scandal throughout his career. In 2005 he was charged with raping a woman he knew to HIV-positive, but was found not guilty when the court ruled the sex was consensual.

Last year, the Public Protector, the top anti-corruption watchdog, ruled that he had “benefited unduly” from a 246 million rand state-funded security upgrade to his private home that included a swimming pool and amphitheatre.

Despite this, he has maintained his authority and standing in the ANC. His presidential term ends in 2019. Were he to be forced out early, his ex-wife and African Union head Nkosazana Dlamini-Zuma, and deputy president Cyril Ramaphosa, are the front-runners to succeed him.

 

(By Joe Brock and Ed Cropley. Additional reporting by Nqobile Dludla and Mfuneko Toyana; Writing by Joe Brock; Editing by James Macharia and David Stamp)

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Rising food prices push up Egypt’s inflation

10 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s urban consumer inflation jumped to its highest level since June, data from the state statistics agency showed on Thursday, propelled by the rising cost of food even as the state takes new measures to keep prices in check.

The figure rose to 11.1 percent in November from 9.7 percent in October, CAPMAS said, compared with 11.4 percent in June.

Egypt said in November it would control the prices of ten essential commodities and use its state grain buying agency to import a broader array of goods in an effort to curb inflation.

However, November core inflation, which excludes volatile items such as fruits and vegetables, rose to 7.44 percent from 6.26 percent in October, the central bank said.

The higher inflation figures might influence the central bank’s decision on interest rates at a monetary policy committee meeting scheduled for next week, Capital Economics said in a research note on Thursday.

“For now, with the domestic economy struggling, we suspect that interest rates will be left on hold next week. But today’s figures … mean that there is a growing risk that the (central bank) will be spooked and decide to hike rates,” the note said.

 

(Reporting by Eric Knecht; Editing by Louise Ireland)

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Early, intense Harmattan winds worry Ivory Coast’s cocoa exporters

9 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

SAN PEDRO, Ivory Coast (Reuters) – The early arrival of intense seasonal Harmattan winds in Ivory Coast’s cocoa growing regions have raised concerns among exporters, who were already harbouring doubts over the size and quality of this season’s main crop in the world’s top producer.

The Harmattan’s dry, dusty winds blow down from the Sahara each year and can, when strong, lead to reduced bean size. The prolonged overcast conditions they create also make it difficult for farmers to properly dry and ferment harvested cocoa, reducing quality.

Farmers reported the arrival of the seasonal phenomenon in Ivory Coast’s growing regions in early December, weeks earlier than expected.

“Output was already down. We already knew that. But the fact the Harmattan has arrived so early and is so strong is really going to complicate the overall picture for the harvest,” said the director of an Abidjan-based export company.

Following a strong start to the 2015/16 season, arrivals to ports in Abidjan and San Pedro have declined gradually in recent weeks and fell behind last year’s levels according to exporters’ most recent estimates.

In San Pedro, Ivory Coast’s main export hub for cocoa, exporter warehouses visited by Reuters were half-full.

“Arrivals will increase a bit but will remain below last year’s volumes. We’ll have 50,000 to 60,000 tonnes per week until January and around 30,000 tonnes in January,” said a San Pedro-based purchases manager.

Ivory Coast brought in a record harvest of around 1.8 million tonnes last season. However, the International Cocoa Organization (ICCO) already predicted in October a global supply deficit of around 96,000 tonnes this season, partly on the back of a significant drop in Ivorian production.

Exporters said that if the currently harsh Harmattan conditions persist, or even worsen, that deficit could grow.

“If this carries on, we risk an even greater impact on the harvest, but on quality as well,” said a second exporter.

The bulk of Ivory Coast’s cocoa is produced during the October-to-March main crop, with the most intense harvesting typically taking place in November and December.

“The Harmattan’s effects will be harsh from December until the end of January and that will clearly have an impact on bean quality. We worry about high (free fatty acid) content and poor fermentation during that period,” a third exporter said.

 

 

(By Ange Aboa. Editing by Joe Bavier; Editing by Elaine Hardcastle)

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The central banker Kenyans trust with their cash

9 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya’s central bank governor has yet to complete six months in the job but he has done what few of his country’s officials ever achieve: he has made people feel their money is safe in his hands.

This is less because of Patrick Njoroge’s success in stabilising the plummeting shilling and more to do with his shunning the fleet of luxury cars and the plush villa that come with the post, the kind of perks widely seen as motivating most public servants.

In Africa, people are more used to “Big Men”, who are in office for personal gain. Kenyans use the term “eating” to describe how officials and their kin gorge from the trough of public funds, until they have to hand over to the next guy.

In a nation where many live in villages without mains electricity or proper roads, members of parliament are paid about $94,000 annually, dwarfing the average Kenyan’s $1,290 a year.

“The ‘Big Man’ syndrome – in which the only way to show who I am is by flaunting all the possessions that I have – is kind of dangerous,” said Njoroge, 54, a member of Opus Dei, a Catholic group that encourages those who join to live saintly lives in their everyday work.

For much of an interview with Reuters at the central bank on Tuesday, the Yale-educated banker who was appointed in June rattled off explanations of how monetary policy was anchoring inflation, steadying a currency that was “dropping like a stone” and laying the basis for sustained economic growth.

But he politely and carefully fielded questions about what he called his “simple life”, which has fascinated Kenyans more used to a daily diet of stories about corruption in high office.

“At least we can trust him because he is not there for personal gain,” said James Mwangi, 27, a car salesman, chatting over a beer in a Nairobi bar. “I believe our money is safe.”

When parliament grilled the former International Monetary Fund adviser for the job, questioners focused mostly on his celibacy – a commitment a fellow Opus Dei member says he made on joining the group – and other aspects of his lifestyle.

“The perception that he can’t be bought and, yes, turning down the perks was impressive to Kenyans,” said John Githongo, one of Kenya’s most prominent anti-corruption campaigners.

But Githongo said it was too early to judge his policies. “He’s ex-IMF, not an institution associated with success in Africa,” Githongo said, referring to the Washington-based body’s reputation among critics for pushing liberalising policies in Africa that they say hurt the poor the most.

 

PROMPT ACTION

Yet Njoroge has won praise from many in Kenya’s finance community. “The tone he has set has been remarkable,” said Aly Khan Satchu, a private investor and financial analyst.

As well as raising interest rates to curb inflation expectations and helping to stabilise the currency, he ordered the liquidation of a small bank and put another lender, mid-tier Imperial Bank, into receivership when massive fraud was uncovered. He did this less than four months into the job.

“Flexibility, being nimble is essential,” the governor said.

When tight monetary policies appeared to starve smaller banks of funds after the Imperial Bank case, the governor reversed course by providing the money markets with more funding, a move welcomed for its promptness.

“Policy makers here … tend not to adjust quickly enough,” said Satchu, alluding to Njoroge’s predecessor who was blamed in 2011 for failing to raise rates quickly enough as inflation rocketed to almost 20 percent and the shilling plunged.

Heavy rains sent food prices soaring and pushed Kenyan inflation to 7.32 percent in November, but it remains within the government’s preferred band. Njoroge said core inflation was slipping, which suggested the headline rate would fall.

“I wish I could say something about controlling the weather,” said the governor.

He joined thousands on a rainy day last month for Mass celebrated by Pope Francis on his first tour of Africa, which began in Nairobi. Njoroge enjoyed one privilege of office: he was in a tent with dignitaries, not under the open skies.

But he has shunned other benefits. Entitled to a Range Rover, Mercedes and VW Passat as governor, Njoroge turns up at events in the cheapest, the VW. “Why not stick to one car?” the governor said, without mentioning the model.

Instead of moving into the governor’s official residence in Nairobi’s smart Muthaiga district, he lives with other members of Opus Dei and donates a portion of his salary to charity, said Andrew Ritho, who works in Opus Dei’s communications office in Kenya.

“You live the way you want to live,” Njoroge said. “Whether the people see it or not, that is secondary.”

 

(By Edmund Blair and Duncan Miriri. Writing by Edmund Blair; Editing by Giles Elgood)

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South Africa preparing for “worst-case” maize import scenario

8 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa is laying the groundwork in case it needs to import as much as 4 million tonnes of maize after successive seasons of drought threaten the crop in Africa’s top producer of the grain, which is usually a net exporter.

Siyabonga Gama, chief executive of Transet, South Africa’s state-run ports and rail company, told Reuters in an interview on Tuesday the company’s talks with the industry indicated that 4 million tonnes was the “worst-case scenario”.

“The rail side is not the issue. We have the capacity there to absorb that much maize,” he said.

He said South Africa’s ports were designed mostly to export grain rather than import it, but this hurdle could be overcome.

“The issue is the import silo capacity so there are a few things that we will need to tweak. It could still be done.”

Other industry scenarios see a need to import perhaps 2.5 million tonnes or even as little as 700,000 tonnes, depending on rainfall patterns for the rest of the season.

The outlook is not good as an El Nino weather system is exacerbating a scorching start to the growing season, following drought conditions in the previous one which shrivelled the crop by a third to 9.94 million tonnes, the lowest since 2007.

This is helping to fuel inflation in Africa’s most advanced economy as the white variety of maize is a staple that provides much of South Africa’s caloric intake.

South Africa’s central bank has repeatedly voiced its concern this year about the impact of drought and food prices on the inflation outlook.

The March maize contract climbed over 2 percent to an all-time high of 3,662 rand ($247) a tonne on Tuesday after forecast rain over the weekend in the western part of the maize belt failed to meet expectations.

The December contract is fetching 3,705 rand a tonne, up 75 percent so far in 2015 and within striking distance of its record high of 4,000 rand reached last year, according to Thomson Reuters data.

“Initial indications are that it is going to be a very big import year. We will firm up the actual demand by January or February and we will have a plan at the correct time,” Gama said.

He said aside from the main grain facilities at the ports of Durban and East London, South Africa can also use Port Elizabeth and Cape Town and could even use Richards Bay, mostly used for coal exports, in a pinch.

 

(By Ed Stoddard. Editing by James Macharia and David Evans)

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Rising food prices push Tanzania inflation higher to 6.6% in Nov

8 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

DAR ES SALAAM (Reuters) – Rising food prices pushed Tanzania’s year-on-year inflation rate to 6.6 percent in November from 6.3 percent the previous month, the statistics office said on Tuesday.

The National Bureau of Statistics (NBS) said month on month inflation rose by 0.8 percent in November from an increase of 0.1 percent in October.

“The increase of the inflation rate in the year to November was mainly caused by faster rises in the price of food items such as rice, maize, meat, fish, beans… and sweet potatoes,” Ephraim Kwesigabo, a director at state-run National Bureau of Statistics, told a news conference.

The food and non-alcoholic beverages inflation rate increased to 11.2 percent in the year to November from 10.2 percent in October.

 

(Reporting by Fumbuka Ng’wanakilala; Editing by Drazen Jorgic)

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OPEC Rejects Oil Production Limits Despite Falling Prices

8 December 2015 Comments (0) Business, Featured, Middle East

OPEC Meeting

In spite of growing climate concerns and plummeting oil prices, the world’s largest oil cartel has rejected limits on pumping crude oil in the coming year.

The move by the Organization of Oil Producing Countries (OPEC) virtually guarantees a continuing glut of oil along with low prices at the gas pump. Low prices could further undercut U.S. production shale oil production in 2016.

Meeting December 4, 2015 in Vienna, Austria, representatives of OPEC’s 13 member countries debated whether to cut crude production, currently about 31.5 million barrels a day, in an attempt to prop up prices.

Growth in demand is cited

In a statement following the meeting, OPEC acknowledged the oversupply but emphasized potential growth in demand next year.
“ The Conference observed that global economic growth is currently at 3.1% in 2015 and is forecast to expand by 3.4% next year. In terms of supply and demand, it was noted that non-OPEC supply is expected to contract in 2016, while global demand is anticipated to expand again by 1.3 mb/d (million barrels per day),” the OPEC statement said.

OPEC ministers divided

The failure to impose limits followed a fractious discussion within OPEC. The Vienna meeting, scheduled to last four hours, was extended to seven as members debated whether to continue a year-old policy of oversupply.

The prevailing faction, led by Saudi Arabia, the cartel’s largest producer, wants to pump at current levels despite the risk of even more price reductions. Other members, such as Venezuela and Algeria, want to cut production in an attempt to bolster prices.

OPEC member countries produce about 40 percent of the world’s crude oil and their exports represent about 60 percent of the total oil traded internationally, which has enabled the cartel to influence oil prices, according to the U.S. Energy Information Administration.

That was evident as the U.S. benchmark rate for oil declined 2.7 percent to $39.99 a barrel on the day of the OPEC meeting.

Action could undermine U.S. producers

Saudi Arabia says it wants to protect its market share. But some analysts say Saudi Arabia wants to pump more oil in order to slow down shale oil production in the United States, leaving OPEC producers to fill the vacuum as demand grows. Shale oil is significantly more expensive to produce so these producers are even harder hit by lower prices.

A U.S. slowdown is already happening. According to Baker Hughes North American Rig Count for the week of December 4, 2015, there were 737 active rigs in the United States compared to 1,920 rigs a year earlier.

Oil production may increase

Meanwhile, OPEC production is likely to increase beyond the current 31.5 billion barrels a day.

In Vienna, Iran said it would double production to 4 million barrels a day, the amount it was producing before international sanctions were imposed. Iran’s production dropped sharply in 2012 as a result of the sanctions, which are being lifted as a result of the Iran nuclear deal. Iraqi oil production also has increased to about 4 million barrels a day.

A new reality for OPEC

The decision to keep pumping underscored the cartel’s weakened ability to collectively sway prices.

“Effectively, it’s ceilingless,” Iranian Oil Minister Bijan Namdar Zangaeh said. “Everyone does whatever they want.”

Iraqi Oil Minister Adel Abdul Mahdi noted that other producers do not operate with production limits. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”

Historically, OPEC has been able to bolster prices by squeezing production. But in November 2014, Saudi Arabia blocked calls from poorer OPEC members to cut production in hopes of halting the slide in prices. At that time, the price of oil was slightly more than $71 per barrel.

“It is a new world for OPEC because they simply cannot manage the market anymore. It is now the market’s turn to dictate prices and they will certainly go lower,” Dr. Gary Ross, chief executive of PIRA Energy Group, said at the time.

Indonesia rejoins OPEC

OPEC also welcomed the re-entry of Indonesia into the cartel after a six-year absence. The country is the fourth smallest producer of OPEC’s 13 members.

A net importer of oil that also exports, Indonesia rejoined OPEC hoping to gain greater access to crude oil supplies.

Climate change concerns

While declining to set limits on crude production, the OPEC ministers did discuss the United Nations Climate Change Conference that was ongoing in Paris at the same time.

The discussions “stressed that climate change, environmental protection and sustainable development are a major concern for all of us,” the OPEC statement said.

Efforts to reduce carbon emissions could place large oil producers in even more of a bind if governments in the climate talks move to reduce dependence on oil in favor of sustainable energy sources.

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South32 to cut more than 400 jobs at South African manganese mine

7 December 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Australian-listed South32 plans to cut 447 jobs at a South African manganese mine, the National Union of Mineworkers (NUM) said on Monday, in the latest in a slew of layoffs in the embattled industry.

The union, which is the country’s largest mining labour body, said it had received notice from South32 that the company planned to cut the jobs and called on the mines ministry to “intervene to halt” to prevent the layoffs.

NUM said over 1,000 workers are employed at the Hotazel mine in Kuruman, about 550 km (341 miles) south east of Johannesburg.

South32 spokeswoman Lulu Letlape said the company was consulting with employees through unions on job cuts. Voluntary redundancies and early retirements were being considered to minimize the impact on workers, she said.

South32 produces manganese, silver, nickel and coking coal, some of the industrial mainstays that have been hardest hit globally in the wake of China’s economic slowdown.

South32, which was spun off from BHP Billiton in May, said its review of its South African manganese operations would be completed by December and said its mines were unlikely to restart until January.

Mining companies in South Africa are under pressure from rising costs and falling prices, forcing companies to close shafts and cut jobs to survive, angering unions, which have opposed the layoffs.

 

(Reporting by Zandi Shabalala; Editing by James Macharia and Louise Heavens)

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