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Tripling of South African bond buying signals new faith in rule of law

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

JOHANNESBURG (Reuters) – A tripling of South African bond sales this year on Monday added to signs that investors’ faith in its institutions has been somewhat restored following a court ruling against President Jacob Zuma and the appointment of a former finance minister.

Securities exchange figures showed foreign investors bought a net 30 billion rand ($2 billion) worth of South African debt in 2016, compared with 10 billion in the same period last year.

The Treasury is flush with cash after a $1.25 billion 10-year bond sale this month was two times oversubscribed, and bond yields have recouped heavy losses in December after Zuma fired his finance minister, raising fears of political interference.

Benchmark yields, which spiked to a record 10.38 percent after Zuma briefly replaced Nhlanhla Nene with a virtually unknown politician, have since recouped nearly 140 basis points, a third of which was after the ruling against Zuma.

Sentiment, helped by Zuma bringing back Pravin Gordhan as finance minister, improved further after the Constitutional Court found that the president was wrong to ignore an order to repay state funds used to upgrade his Nkandla home.

“Having Pravin Gordhan back in control, and having this noise around Nkandla and Jacob Zuma, is showing the market that South African institutions are still strong,” Investec fixed income portfolio manager Vivienne Taberer said.

Analysts said markets were also cheered by a backlash against the Gupta family and its businesses. South Africa’s four big banks cut ties with a Gupta-owned investment company over criticism that the family has undue influence with Zuma.

“Government and state owned enterprises can get about their constitutionally mandated activities, less encumbered by predatory actions of (the) president and his allies,” BNP Paribus Securities South Africa analyst Nic Borain said.

“We expect markets – especially the bonds, currency and banks – to track the ebbs and flows of Jacob Zuma’s fortunes.”

Added to that, signals from the central bank and Treasury that they will pursue prudent policy have seen South African assets leading emerging market gainers, boosted by signs that the U.S. may not hike interest rates as quickly as expected.

Recent economic data out of China, a major consumer of emerging market commodities, has also lessened worries over a slowdown in the world’s second largest economy.

“If this environment, where we see the Fed not really doing much and being cautious over the balance of this year, continues and we continue to see reasonable data coming out of China … then this constructive risk environment can continue for the next three or so months at least,” Investec’s Taberer said.

The litmus test for assets will be whether credit rating agencies decide to downgrade debt. A cut from Moody’s would mean a loss of its investment grade status and possible ejection from the prestigious World Government Bond Index (WGBI).

“Such an ejection would represent possibly the most dramatic outcome of a ratings downgrade and should be South Africa’s biggest cause for concern,” Citadel chief strategist Adrian Saville said.

 

(By Stella Mapenzauswa. Editing by James Macharia and Louise Ireland)

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Dubai Islamic Bank aims to open in Kenya before year-end: sources

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

DUBAI/NAIROBI (Reuters) – Dubai Islamic Bank (DIB) plans to be operating in Kenya before the end of 2016, despite the Kenyan authorities’ moratorium on issuing new banking licences, according to sources familiar with the matter.

The largest Islamic bank in the United Arab Emirates will start operating at a time when Kenyan banks have come under closer scrutiny from the regulator because of increasing bad debts, prompting officials and analysts to conclude the sector is ripe for consolidation.

Three medium-sized and small banks have been taken over by the regulator since August last year, with the latest, Chase Bank Kenya, taken over earlier this month after a run on deposits.

In November the central bank placed a moratorium on the licensing of new commercial banks in an attempt to bring stability to an industry that has more than 40 banks.

But DIB had been in talks with the regulator before then, meaning a decision on its licence would not be affected by the moratorium, the sources said.

DIB is now awaiting the final go-ahead from Kenya’s central bank, said the sources, as it has already been granted outline approval for a commercial banking licence having planned to open in Kenya last year, only to find the process had taken longer than expected.

In a statement the central bank said on Monday it was processing an application for a banking licence from DIB Bank Kenya, without elaborating.

A separate source at the central bank said DIB was one of a couple of banks expected to start operations in the country this year.

No one at DIB responded to a request for comment.

DIB has already recruited staff for its Kenyan operation, which will initially comprise three branches offering consumer, corporate and treasury services, the sources said.

Kenya will not be DIB’s first foray overseas. It holds stakes in banks in Pakistan, Sudan, Jordan, Bosnia and late last year raised its stake in Bank Panin Syariah, the Indonesian sharia-compliant lender, to 39.6 percent, according to a presentation on the bank’s website.

It would become the third Islamic lender to operate in Kenya, where Muslims account for about 10 percent of the population of some 44 million.

 

(By Tom Arnold and Duncan Miriri. Editing by Greg Mahlich)

 

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Shell says theft from its Nigerian oil pipeline network fell in 2015

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

LONDON (Reuters) – Theft of crude oil from the pipeline network of Shell’s Nigerian subsidiary fell to 25,000 barrels per day (bpd) in 2015, the company said on Monday, roughly 32 percent less than the previous year.

The number of sabotage-related spills on the SPDC network also declined to 93 in 2015, compared with 139 the previous year, Shell said in its annual sustainability report.

It attributed the decrease to divestments in the Niger Delta and increased surveillance and security by the Nigerian government, but said theft and sabotage were still responsible for around 85 percent of spills from SPDC operations.

President Muhammadu Buhari has said theft siphons as much as 250,000 bpd of crude of its roughly 2 million bpd of production and last week promised to crack down on groups responsible for pipeline attacks.

Still, the issue has continued to plague the country. Shell currently has a force majeure in place on Forcados crude oil exports following an attack on a subsea pipeline in February, while Italian oil major ENI reportedly declared force majeure on Brass River exports late last week.

 

(Reporting by Libby George and Karolin Schaps; Editing by Mark Potter)

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StanChart eyes growth from African companies with broader horizons

15 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Growing African businesses looking to sell their products and services beyond the continent present a growth opportunity for Standard Chartered, the bank’s chairman said on Friday.

The group has operations in 16 African nations, including Kenya, and offers services via correspondent banks in 22 more markets in Africa, where sliding commodities prices have put the brakes on previously strong growth.

Rival Barclays has responded by reducing its exposure to Africa, but StanChart takes an alternative view.

“We see Africa as an opportunity to invest rather than exit or divest,” Standard Chartered Chairman John Peace told Reuters in Nairobi, adding that the Internet and other technology is linking more African companies to global trade.

“You can run a business, not just a large corporation but a medium-size business, here in Kenya and be connected to the world,” he said. “Banks, therefore, have a duty to be able to support that connectivity and that is what we are trying to do.”

The World Bank cut its 2016 growth forecast for sub-Saharan Africa this week to 3.3 percent, from a previous estimate of 4.4 percent, citing the drop in commodities prices.

Commodity exporter South Africa and oil producer Nigeria have been hit hard. But Kenya, an oil importer now enjoying cheaper crude prices, has kept annual growth around 6 percent.

Peace said that Standard Chartered’s wealth-management products were finding customers in nations such as Kenya.

“We certainly, as part of our new strategy globally, emphasise the opportunity we have in retail, the opportunity we have in private banking and wealth management, and I think that is true in Kenya and in Africa,” Peace said.

Standard Chartered has not, however, been immune to the commodities slide and has adjusted its risk profile accordingly.

“We tightened our risk tolerance, recognising that things are going to remain choppy for the foreseeable future,” said Peace, who has said that he wants to retire from his post at the end of this year.

 

 

(By Duncan Miriri. Editing by Edmund Blair and David Goodman)

 

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Shares in South African airline Comair fall 3% as strike continues

15 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s airline operator Comair’s share price fell more than 3 percent by Friday, the third day of a strike by ground staff demanding higher wages.

Shares in Comair, a franchisee of British Airways and the owner of South African low-cost airline Kulula.com, declined by 3.1 percent to 3.10 rand ($0.2) by 1050 GMT.

The share price has fallen by more than 5 percent since Tuesday, after the United Association of South Africa (UASA) said its members were preparing to strike.

The union wants a 35 percent increase over three years, while Comair is offering a 22.5 percent increase over three years, the airline said on Tuesday.

Both the company and the union were not immediately available for comment.

($1 = 14.5070 rand)

 

(Reporting by Zimasa Mpemnyama; Editing by James Macharia)

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AB InBev agrees concessions with South Africa over SAB deal

15 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Anheuser-Busch InBev will invest 1 billion rand ($69 million) to support small South African farmers as part of concessions agreed with the government to secure regulatory approval for its $100 billion-plus takeover of SABMiller, it said on Thursday.

The world’s biggest brewer said the concessions, which also include a five-year freeze on layoffs, were agreed with the South African Ministry of Economic Development.

“It is expected that the agreement on terms between government and the merger parties will expedite the merger proceedings before the South African competition authorities,” AB InBev said.

“The commitments made by the company are the most extensive merger-specific undertakings made to date in a large merger. In our view, they meet the requirements of the competition legislation,” Economic Development Minister Ebrahim Patel said.

South African Competition Commission this week extended its scrutiny of the deal, saying it needed at another 15 days to complete its investigation. It has already extended the deadline four times.

South Africa has a history of taking its time over approving takeovers partly because competition authorities have a public interest mandate to safeguard jobs, in addition to an anti-trust mandate to protect competition.

In 2011, the regulator told U.S. retailer Wal-Mart Stores not to cut jobs for two years following its acquisition of South African retailer Massmart, delaying implementation of the $2.4 billion deal by at least two months.

The Commission investigates deals for any anti-trust issues and submits its views to the Competition Tribunal, which makes a final ruling on whether a deal should go ahead

Ab InBev has already told European regulators of its plan to sell SABMiller’s premium European brands to try to secure approval for its deal.

($1 = 14.5350 rand)

 

(Reporting by Tiisetso Motsoeneng; Editing by Jane Merriman)

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Nigerian lawmakers to question presidency over long-overdue budget

14 April 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

Nigerian President Muhammadu Buhari

ABUJA (Reuters) – Nigerian lawmakers said on Wednesday they planned to hold talks with the presidency over the 2016 budget bill, which has yet to be signed into law by President Muhammadu Buhari after being passed by parliament last month.

The announcement suggests further delays before the legislation takes effect in Africa’s biggest economy and top oil producer, which is going through its worst crisis in years brought on by the slump in global crude prices.

Buhari withdrew his original budget bill in January because of an unrealistic oil price assumption and flaws in the draft. Lawmakers approved an amended proposal last month but only submitted headline figures rather than the whole document to the president’s office.

That prompted Buhari, who is currently in China, to say he would only sign the bill after checking it thoroughly.

Following closed-session talks by lawmakers in the lower house of parliament, a spokesman for politicians in that chamber said media reports about the contents of the budget submitted to the president last week had caused concern.

“We agreed as a chamber, as a House delegated the Speaker to please go ahead and engage the executive to identify the areas of concern,” said House of Representatives spokesman Abdulrazak Namdas.

He said there was particular concern about media reports that a proposed rail project linking the southwestern commercial capital, Lagos, with the eastern city of Calabar had been removed by parliament as part of their amendments.

Namdas said it “was not among the projects submitted by the President to the National Assembly”.

“Our own area of concern is that people say this thing was in the budget and we removed it. That is why we asked our speaker to liaise with the executive,” he said.

Last month Lai Mohammed, the information minister, said there was no rift between the executive and legislature over details of the budget.

 

(By Camillus Eboh. Writing by Alexis Akwagyiram; Editing by Hugh Lawson)

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World Bank set to provide Egypt with first $1 billion of $3 billion loan

13 April 2016 Comments (0) Latest Updates from Reuters, Middle East, Politics

CAIRO (Reuters) – The World Bank will provide the first $1 billion tranche of a $3 billion loan to Egypt after parliament approves the government’s economic programme, World Bank vice president Hafez Ghanem said at a news conference late Tuesday.

Parliament is expected to pass the program in April.

Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolt and ease a dollar shortage that has crippled import activity and hampered recovery.

The lender had agreed to provide the first $1 billion in December but is waiting for the government’s economic programme, which outlines the broad strokes of its reform plans, to be passed by parliament.

The government presented a programme to parliament in late March that aimed to reduce the budget deficit while protecting the poor.

The World Bank told Reuters in December that the first tranche was focused on “10 prior actions for policy and institutional reforms” already implemented. The second and third tranches are linked to additional reforms the government plans.

A long-delayed Value Added Tax (VAT) that has yet to be implemented but was included in the government programme was one of the reforms agreed to as part of the first tranche, Ghanem said.

Ghanem said that there would not be specific conditions placed on future tranches but highlighted certain changes the lender would like to see, such as a shift in food subsidy policy away from reduced prices to direct cash transfers for the poor.

Egypt has delayed a number of difficult reforms, from a VAT that would increase government revenues and a civil service law that would trim the country’s public workforce, to an ambitious plan to wean the country off costly energy subsidies that has since been scaled back.

Egypt’s economy is currently growing at around 4.2 percent with a budget deficit of about 11.5 percent, the prime minister said last month.

Saudi Arabia, along with other Gulf oil producers, have pumped billions of dollars, including grants, into Egypt’s flagging economy since the army toppled President Mohamed Mursi of the Muslim Brotherhood in 2013 after mass protests against his rule.

But Egypt has said it would rely less on grants from its neighbours moving forward and would focus instead on attracting foreign investment that could relaunch its dollar starved economy.

Last week it signed an agreement with Saudi Arabia to set up a 60 billion Saudi riyal ($16 billion) investment fund among other investment agreements including an economic free-zone to develop Egypt’s Sinai region.

 

($1 = 3.7488 riyals)

 

(Writing by Eric Knecht; Editing by Toby Chopra)

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Nigeria’s inflation rises to almost 4-year high in March

12 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigeria’s annual inflation rose to a near four year high of 12.8 percent in March from 11.4 percent in February, driven by a rise in food prices, the National Bureau of Statistics said.

Africa’s biggest economy is facing its worst economic crisis in decades fueled by the collapse in crude prices, which has slashed government revenues, weakened the currency and caused growth to slow. The economy grew 2.8 percent last year, its slowest pace in decades.

Food prices, which account for the bulk of the inflation basket, rose by 1.4 percent points to 12.7 percent in March, the bureau said on its website.

“The higher price level was reflected in faster increases

across all divisions,” the bureau said in a report.

The NBS expects inflation to end the year at 10.16 percent, above the central bank’s target upper limit of nine percent. The price index ended at 9.55 percent last year.

 

(Reporting by Ulf Laessing; Editing by Tom Heneghan)

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Bank of Ghana governor plans to fight inflation, boost growth

12 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

ACCRA (Reuters) – Ghana’s new central bank governor said on Monday his top priority was to fight inflation, but he also wanted to pursue new policies to boost local business growth.

In his first interview since being named Bank of Ghana governor last week, Abdul-Nashiru Issahaku pledged full commitment to an International Monetary Fund (IMF) programme aimed at stabilising the economy.

“My focus is to work assiduously to achieve our core responsibility of ensuring price stability,” Issahaku said.

Consumer inflation in the West African country, an exporter of gold, cocoa and oil, eased to 18.5 percent in February from 19 percent in January.

But it remains above the government’s upper target of 15.7 percent, while the central bank’s benchmark 91-day Treasury bill rate stood at 22.7713 percent on Friday.

At the same time, gross domestic product growth has fallen from around 14 percent in 2011 to 4.1 percent last year, in part because of a global slump in commodity prices.

President John Mahama promoted Issahaku from deputy governor when his predecessor, Henry Kofi Wampah, stepped down last month ahead of what is expected to be a closely fought election in November when Mahama will run for a second term.

Issahaku takes over at a crucial time for the bank, one year into the IMF programme. Some fear the election will put pressure on policy makers, including the central bank, which is independent, to loosen financial controls.

It also comes as the bank’s main lending rate stands at 26 percent, leading to complaints by many in the business community that it is stifling growth.

Issahaku, a member of the government’s economic management team, said he would work with the Finance Ministry and other agencies to maintain spending limits. “Elections or no elections, I remain committed to the programmes and we cannot afford to derail,” he told Reuters.

But he said Ghana had to begin immediately to “start to think out of the box about propelling growth of local businesses and creating employment.”

Ghana was one of Africa’s economic stars for years. Since the 2012 election, however, it has been tackling a budget deficit, high levels of public debt, inflation and a currency that fell sharply in 2014 and 2015.

Ghana’s cedi currency withstood a seasonal first quarter pressures to rally against the dollar in a sign of the impact of the IMF programme and bank policies.

Issahaku said he wants to sanitize the financial sector, especially micro finance firms, and enhance the regulator’s transparency and capacity. To boost growth, he would consider options to provide incentives to banks to offer credit to strategic sectors at reasonable rates. The governor has worked with the World Bank and the African Development Bank and holds a PhD in International Affairs and Development from Clark Atlanta University.

 

(By Kwasi Kpodo. Editing by Matthew Mpoke Bigg and Richard Balmforth)

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