MENU

Latest Updates from Reuters
Category

Rwandan economic growth to slow to 6.8% in 2016

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

KIGALI (Reuters) – Rwanda’s economic growth rate will ease to 6.8 percent in 2016 from 7.1 percent in 2015, the World Bank said on Friday, noting the slow implementation of the country’s budget.

Rwanda maintained “steady growth and macroeconomic stability” for much of 2015, the bank said in a report, adding that the aid-dependent country had benefited from low oil prices.

“Downside risks have been increasing, both externally and domestically,” Yoichiro Ishihara, the bank’s senior economist for Rwanda, said in a statement. “On the domestic front, delayed execution of the budget and inadequate financing for development are of concern.”

Rwanda is one of the economies in the region that investors have hailed for solid fundamentals, including low debt and inflation.

The growth rate averaged 8.2 percent from 2006 to 2012 in the landlocked state, which has become a favourite with international investors two decades after the 1994 genocide.

 

(Reporting by Clement Uwiringiyimana; Editing by Edith Honan and Hugh Lawson)

Read more

African Development Bank approves $1.1 billion in loans to Tanzania

26 February 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

DAR ES SALAAM (Reuters) – The African Development Bank (AfDB) has approved a loan package worth $1.1 billion to Tanzania to be paid out over five years to fund infrastructure projects and improve public sector governance, it said.

The line of credit will be used primarily to support the transport and energy sectors and improve the business environment in east Africa’s second-biggest economy.

The loans would support “transport and energy to promote domestic and regional transport connectivity and improve access to reliable, affordable and sustainable electricity,” AfDB said in a statement late on Thursday.

“The second pillar prioritises strengthening of financial management and improving the enabling environment for private sector investment and finance for sustainable job creation.”

The government plans to spend $14.2 billion to construct a new standard gauge rail network in the next five years financed with external loans. It also plans to build a new $10 billion port at Bagamoyo, expand existing airports and invest in new roads.

Tanzania, like its neighbour Kenya, wants to profit from its long coastline and upgrade existing rickety railways and roads to serve growing economies in the land-locked heart of Africa.

Tanzania boasts economic growth of 7 percent a year, yet it is largely driven by state investment and poverty remains stubbornly high.

It also has natural gas reserves that are estimated at more than 57 trillion cubic feet (tcf) and the central bank believes 2 percentage points would be added to its annual economic growth simply by starting work on a plant to process that would draw in billions of dollars of investment.

“Board members underscored the need for Tanzanian authorities to ensure that the country’s high GDP growth delivers robust economic transformation, poverty reduction and improved livelihoods,” AfDB said.

 

(Reporting by Fumbuka Ng’wanakilala; Editing by Toby Chopra)

Read more

Tough year ahead for South African retailers as Massmart stalls

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

JOHANNESBURG (Reuters) – Massmart reported flat annual earnings on Thursday and highlighted the difficulties South African food retailers are likely to face this year as shoppers contend with rising prices, mounting debt and high unemployment.

The retailer, majority owned by Wal-Mart Stores Inc, earns 91 percent of its revenue in South Africa, an economy expected to grow by less than 1 percent this year.

The biggest worry this year is how inflation will affect the lowest income earners, Chief Financial Officer Hans van Lierop told Reuters.

Massmart, which also sells appliances and building materials to wealthier shoppers, supplies staples such as maize and rice in bulk to traders who sell them on to poor urban and rural consumers.

Though retailers absorb some of the cost increases, maize and sugar prices could climb by a double-digit percentage due to a severe drought in southern Africa, said Van Lierop.

Poorer South Africans spend a large part of their income on food and transport, so even when retailers do not pass on price increases they struggle to afford anything but essentials.

Massmart noted a slowdown in general merchandise sales toward the end of 2015 as business confidence sagged and the currency depreciated to new lows.

The rand has declined 20 percent against the dollar since October, offsetting gains for consumers from lower fuel prices.

“People are travelling less, less often and less far to go to shops,” said Chief Executive Guy Hayward in a presentation to analysts.

Basket sizes are smaller than a year ago, he added.

Rival Shoprite also noted the impact of transport costs on customers when it reported an 8.9 percent rise in half-year profit on Tuesday.

In some parts, shoppers increasingly prefer informal retailers to stores because it involves less travel, Shoprite Chief Executive Whitey Basson said then.

Low-income shoppers would struggle, Basson said, adding Shoprite could benefit as middle-income customers trade down.

Pick n Pay, a grocer focused on the middle and upper end of the market, on Thursday piloted a project to supply informal shops, called “spazas”.

The trial could be extended to hundreds of independent spaza owners if successful, it said.

Massmart posted diluted headline earnings per share (EPS) of 508.8 cents for 2015, compared with 504.7 cents in 2014.

Headline EPS is South Africa’s main profit gauge and strips out certain one-off items.

 

(Reporting by TJ Strydom; Editing by Stephen Coates and Mark Potter)

Read more

IMF reviews Zimbabwe economy, eyes first new financing since 1999

25 February 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

HARARE (Reuters) – The International Monetary Fund (IMF) has started talks with Zimbabwe’s government to review its economic performance, stepping up engagement as Harare seeks a financial aid package after years of isolation.

President Robert Mugabe’s government started defaulting on debts to the IMF, World Bank, African Development Bank and several Western lenders in 1999 – leading to a freeze in IMF assistance – and is struggling to emerge from a catastrophic recession that ran for a decade until 2008.

Without balance of payment support or foreign credit, Zimbabwe is running its budget hand-to-mouth, leaving it with virtually no money for infrastructure.

With formal unemployment above 85 percent, Zimbabwe has since December 2013 softened previously sacrosanct policies in the hope of gaining fresh loans. [nL8N12L1Q0]

At the same time, Western countries have eased sanctions imposed over alleged human rights abuses and vote fraud, looking beyond the rule of the 92-year-old Mugabe, Zimbabwe’s sole leader since independence in 1980.

An IMF team met government representatives on Wednesday under the final phase of a Staff Monitoring Programme, Christian Beddies, the IMF representative in Zimbabwe, told Reuters.

The team will also meet central bank officials and local business leaders before March 10.

“The team is also doing the annual Article IV consultation, which is an important ingredient in the re-engagement process,” Beddies said.

 

TARGETS MET

Zimbabwe started the SMP – an informal agreement with the IMF to monitor implementation of its economic reforms – in December 2013, and has met its targets.

These include softening provisions of its black empowerment law to attract foreign investment, making it easier for firms to lay off workers, and improving government financial accountability.

A senior treasury official said Zimbabwe hoped to begin negotiations this year on new financial aid, which will require it to tackle difficult reforms such as cutting the state wage bill, 82 percent of the national budget.

A parallel programme to clear $1.8 billion in external arrears would also be undertaken. [nL8N129142]

“We are working on the structure of a new financing programme from the IMF and we will soon present to them a country strategy paper on this and the economic reforms that will support the programme,” said the treasury official, who is involved in discussions with the IMF.

The worst drought since 1992 has left 3 million people facing hunger and Zimbabwe has appealed for nearly $1.6 billion to help pay for grain and other food. [nL8N15O44B]

Zimbabwe says it expects growth of 2.7 percent this year after 1.5 percent in 2015, but the World Bank says the economy will stagnate due to drought and weak commodity prices. [nL8N15I3CV]

Beddies has already said the IMF might resume aid to Zimbabwe this year if foreign creditors accept its plans to clear arrears and implement economic reforms. [nL5N11R2YV]

 

(By MacDonald Dzirutwe. Editing by James Macharia and Kevin Liffey)

Read more

Eni steals march on East African LNG rivals with Mozambique plant approval

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

MILAN (Reuters) – Italy’s Eni said on Wednesday it has won approval from the Mozambique government to build its planned Coral floating liquefied natural gas plant.

The company, which aims to sell all the LNG from the plant to British oil company BP, is expected to make a final investment decision this year but has now overcome one of the biggest hurdles.

The pace of development of giant gas export schemes has slowed globally as liquefied natural gas prices have plummeted with oil prices, prompting many companies to delay funding decisions until business conditions brighten.

Eni is moving ahead in Mozambique despite the added challenge of using a relatively untested technology to ship the gas.

Its floating LNG (FLNG) export plant will be moored above the Coral gas field, containing 5 trillion cubic feet of gas, in resource-rich waters off Mozambique.

One of the world’s poorest countries, Mozambique is hoping to fuel future prosperity with revenue from an estimated 180 trillion cubic feet of offshore gas.

Eni’s plans include drilling six subsea wells and installing a floating LNG facility with a capacity of around 3.4 million tonnes per year.

Regional LNG rival Tanzania has struggled to match Mozambique’s pace of progress in getting its own fledgling industry off the ground, hamstrung by regulatory uncertainty and other factors.

Large latent capacity in the United States to export LNG at relatively low cost has also raised the competitive bar for what rival projects elsewhere in the world must do to attract customers, industry sources say.

LNG prices are around a quarter of what they were two years ago as a wave of new supply has overcome demand growth, depressing the market, with yet more supply on the horizon as the United States starts exporting.

Eni CEO Claudio Descalzi said approval of the Coral POD was a historical milestone for the development of the group’s discovery of 85 trillion cubic feet of gas in the Rovuma Basin.

“It is a fundamental step to progress toward the final investment decision of our project which envisages the installation of the first newly built FLNG facility in Africa and one of the first in the world,” Descalzi said.

Eni is the operator of Area 4 with a 50 percent indirect stake owned through Eni East Africa which in turn holds 70 percent of the Area.

U.S. energy company Anadarko Petroleum plans to build an onshore LNG export scheme in Mozambique, but is expected to lag Eni’s project.

 

(By Oleg Vukmanovic and Stephen Jewkes. Editing by Francesca Landini and Susan Fenton)

Read more

South Africa announces austere budget to trim deficit, avoid downgrades

24 February 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

CAPE TOWN (Reuters) – South Africa announced an austere budget on Wednesday aimed at avoiding cuts in its credit ratings, and vowed to focus spending on priority areas after weak economic growth reduced its revenue.

The measures may appease ratings agencies, which have said they might lower South Africa to sub-investment grade after President Jacob Zuma changed finance ministers twice in less than a week in December, casting doubt over Pretoria’s commitment to prudent fiscal policy.

Still, the package of spending cuts, civil service job freezes and moderate tax hikes on property sales, fuel, alcohol and capital gains may not go down well with voters ahead of municipal elections this year in which the ruling African National Congress faces a stiff challenge from the opposition.

“We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves,” Finance Minister Pravin Gordhan told parliament.

The tax hikes should help raise an additional 18.1 billion rand in revenue in 2016/17, he said.

Asked if the budget was enough to stave off ratings downgrades, Gordhan told ENCA news channel: “That’s what I hope.”

He said the economy may expand just 0.9 percent in 2016, down from a previous forecast of 1.7 percent and compared with estimated growth estimate of 1.3 percent in 2015.

It would be the lowest rate of growth since South Africa emerged from recession in 2009 and would reflect the impact of a severe drought and a sluggish global economy.

Growth has now fallen behind the rate of population increase, resulting in declining per capita incomes, the National Treasury said in a budget statement outlining spending plans for the next three years.

“In other words, the average South African is becoming poorer,” it said.

The rand extended losses over the lower growth forecast, trading 2.5 percent weaker to the dollar on the day.

“I would say the rand weakened so much immediately after the budget was released primarily because of the lack of sufficient reforms to tackle South Africa’s economic problems,” London-based EMEA analyst at 4cast Rajiev Rajkumar said.

“Whilst the lower projections for the budget deficit are a plus, ratings agencies previously said the country’s weak economy could be cause for further ratings downgrades to junk status.”

The cost of insuring exposure to South African debt via credit default swaps rose 17 basis points (bps), indicating investors’ disappointment with Gordhan’s budget.

 

NARROWER DEFICIT

Despite weaker growth, the government would still aim to reduce its budget deficit to 3.2 percent of GDP in the next fiscal year from 3.9 percent in the current 2015/16 period by tightening spending.

Fitch and Standard and Poor’s have South Africa on BBB-, just a step into investment grade. Any further cut would label them as junk status. The third main ratings agency, Moody’s, rates South Africa at Baa2, two notches above junk.

Moody’s said last week the drought risked tipping an already weak economy into recession as rising agricultural imports feed into rising inflation.

The Treasury said a credit downgrade to sub-investment grade, or “junk” status, could trigger a sharp reversal of capital flows and precipitate recession.

“In such an event, aggressive austerity measures would likely be required to restore public finances to a sustainable position,” it said.

The Treasury said it had cut government departments’ budgets for non-essential services, would borrow $4.5 billion from global markets over the next three years, and seek a minority equity partner after merging two of its state-owned airlines.

 

(By Stella Mapenzauswa and Olivia Kumwenda-Mtambo. Additional reporting by Wendell Roelf in Cape Town and Mfuneko Toyana in Johannesburg; Editing by James Macharia and Hugh Lawson)

Read more

South Africa guarantees Eskom’s power purchase agreements

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

CAPE TOWN (Reuters) – Power purchase agreements between South African power utility Eskom and independent power producers (IPPs) are now categorized as contingent liabilities, adding about 200 billion rand ($13 billion)to government’s guarantee exposure from 2015/16, National Treasury said on Wednesday.

The government issues guarantees, which will amount to 467 billion rand at 31 March 2016, to several state-owned companies, with Eskom accounting for 74 percent of the total guarantee portfolio.

The portion of the guarantees that firms borrow against, known as the exposure amount, is a contingent liability and creditors can call on government to pay the debt should any default occur.

“The probability of default is low, since the regulator generally approves tariff increases that accommodate these agreements. However, significant deterioration in Eskom’s financial position may increase government’s risk exposure,” the Treasury said.

Exposure amounts are projected to increase to 258 billion rand at the end of March, from 226 billion rand in 2014/15, with Eskom accounting for most of the increase.

Africa’s most advanced but struggling economy is diversifying its energy mix away from an over-reliance on coal-power plants to include greener wind and solar projects.

A successful independent power producers program, started in 2010, is expected to provide 7,000 megawatts of energy with 47 projects fully operational by mid-2016, up from the 6,377 MW procured at the end of December.

Treasury reiterated on Wednesday that government’s plan for 9,600 MW of new nuclear power would continue “at a scale and pace that is affordable.”

Additional funding of 200 million rand was available in 2016/17 for transactional advisers and consultants on the nuclear programme.

Energy investment amounts to 70 billion rand this year and will be over 180 billion rand over the next three years as construction on Eskom’s Medupi, Kusile and Ingula power stations is completed, said Finance Minister Pravin Gordhan.

($1 = 15.3266 rand)

 

(Reporting by Wendell Roelf; Editing by Tiisetso Motsoeneng)

Read more

South Africa’s Standard Bank sees FY profit up 30%

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

JOHANNESBURG (Reuters) – South Africa’s Standard Bank said on Wednesday its full-year profit would rise by up to 30 percent higher, boosted by lower losses from discontinued operations outside Africa, sending its shares up.

Standard Bank said its diluted normalised headline earnings per share (EPS) will be between 20 percent and 30 percent higher for the 12 months to end-December from the previous year.

Headline earnings per share is the main profit gauge in South Africa and strips out certain one-off items.

Standard Bank last year completed the disposal of its controlling interest in its British unit, since renamed ICBC Standard Bank, to China’s ICBC, which also holds a 20 percent stake in the South African bank.

The previous year included the British unit’s loss of 3.7 billion rand which has narrowed substantially in the twelve months to end-2015, the company said.

Shares in Standard Bank were up 4.7 percent at 113.88 rand by 0748 GMT, compared to a 0.9 percent decline in the Johannesburg Securities Exchange’s Top-40 index.

 

(Reporting by TJ Strydom; Editing by James Macharia)

Read more

Mali economic growth to rise to 6% in 2016

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

BAMAKO (Reuters) – Mali’s economy will grow 6 percent this year, bolstered by agricultural and mining production, the ministry of economy and finance said on Tuesday, up from an expansion of 4.9 percent in 2015.

According to preliminary figures, the West African nation produced 8.04 million tonnes of grain this season, up from 6.98 million in 2014-2015, and 550,370 tonnes of cotton, an increase from 548,000 tonnes in 2014-2015.

“The prospects are good,” Oumar Diall, head of Mali’s forecasting and economic analysis division, told Reuters. “The growth performance will be particularly in agricultural cotton but also gold exports,” he added.

President Ibrahim Boubacar Keïta said last month that Mali produced 50 tonnes of gold in 2015 and hopes to produce more in 2016 as new mines comes online, though no specific forecast has been given.

The projected economic growth this year would represent a turnaround for Mali, one of the region’s leading cotton producers, whose growth slipped to 4.9 percent last year, down from 7.2 percent in 2014.

Malian government forces are embroiled in a conflict with Tuareg separatists in the north of the country. Although a peace deal was signed last June, mediators have struggled to enforce it and militants have continued to stage deadly attacks including at a hotel in the capital Bamako in November.

 

(Reporting by Tiemoko Diallo, writing by Edward McAllister; editing by Gareth Jones)

Read more

Egypt’s Midor signs $1.2 billion loan agreement

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

CAIRO (Reuters) – Egypt’s state-owned Middle East Oil Refinery Company (Midor) has signed an initial loan agreement with three banks for $1.2 billion, the state news agency said on Tuesday.

The loan represents around 80 percent of the cost of its $1.4 billion Alexandria refinery lab expansion, while the remaining $230 million will be self-financed, Midor Chairman Mohamed Abdel Aziz said.

The agreement was signed by Abdel Aziz with the heads of a banking consortium that includes French banks Credit Agricole and BNP Paribas and Italy’s CDP.

The expansion at Midor aims to increase the company’s refining capacity to 160,000 barrels per day (bpd) from 100,000 bpd.

Egypt has struggled with soaring energy bills caused by high subsidies it provides on fuel for its population of more than 80 million.

 

(Reporting by Asma Alsharif; editing by Jason Neely)

Read more