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South Africa’s Financial Minister says ratings downgrade would impact markets

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

PRETORIA (Reuters) – South Africa’s finance minister said on Wednesday that a potential credit ratings downgrade would impact markets in Africa’s most industrialised economy.

The rand remained on fragile ground against the dollar as investors fretted about a possible credit rating downgrade.

“We are always on the lookout for such. We are always on alert. If it does happen, it will have an impact on markets,” Finance Minister Nhlanhla Nene told Reuters before the South Africa-China bilateral talks in Pretoria.

By 1445 GMT the rand, which hit an all-time low of 14.4950 versus the greenback in the previous session, was trading 0.3 percent higher at 14.3925.

Traders said investors were focused on Friday’s reviews from Fitch, which rates South Africa at BBB with a negative outlook and warned of a possible downgrade in September, and from Standard & Poor’s, which has it at BBB- with a stable outlook.

“The currency situation is doing what it is supposed to do,” Nene said. “Our floating exchange rate serves as a shock absorber when it comes to external shocks and we have seen that happening. It supports our manufacturing and export industries.”

Nene backed a decision by the central bank, which raised interest rates to 6.25 percent last month, citing that the priority for monetary policy was to keep inflation within a 3-6 percent target range.

Headline consumer inflation ticked up to 4.7 percent year-on-year in October compared with 4.6 percent in September.

“It is meant to send a signal to try and deal with inflation expectations. I think it was timely,” Nene said.

 

(Reporting by Joe Brock; Editing by James Macharia)

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South Africa’s Harmony Gold pays off debt as weaker rand lifts revenue

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

JOHANNESBURG (Reuters) – Harmony Gold has repaid debt of 1.1 billion rand ($78 million) after benefiting from South Africa’s weaker rand currency, the company said on Wednesday, sending its shares rising.

Harmony has repaid $50 million on a $250 million revolving credit facility and another 400 million on its 1.3 billion rand facility, the company said in a statement, adding that its mines were performing in line with the set targets.

The company generates more than 90 percent of its revenue in South Africa, but has plans to expand into Papua New Guinea, where it jointly owns the project to develop the massive Golpu deposit with Australia’s Newcrest.

“Our hard work of the last couple of years is finally paying off, enabling us to reduce our debt, strengthen our balance sheet and provide us with even more certainty that we can fund the Golpu project,” Harmony Chief Executive Graham Briggs.

Shares in Harmony climbed 7.38 percent to 9.46 rand by 1130 GMT following the news, compared to a 2 percent rise in the Johannesburg Securities Exchange’s Gold Mining Index.

($1 = 14.3360 rand)

 

(Reporting by TJ Strydom; Editing by James Macharia)

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Most depositors in Kenya’s Imperial Bank to get cash back

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

NAIROBI (Reuters) – Kenya’s central bank said on Wednesday that almost 90 percent of depositors in Imperial Bank, which was taken into receivership in October because of fraud, would receive their full deposits back.

Governor Patrick Njoroge told a news conference the private shareholders had said they were “interested in recapitalising” the bank but had not presented a plan till now to allow it to re-open, so liquidation was still an option.

 

(Reporting by Drazen Jorgic; Writing by Edmund Blair; Editing by Duncan Miriri)

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With new central bank leadership, Egypt repays foreign investors

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

CAIRO (Reuters) – Egypt’s central bank revised the way it allocates dollars at auctions, seeking on Tuesday to reassure markets by repaying foreign investors a backlog of more than $500 million built up during a long-running dollar shortage.

The economy has been in disarray since the 2011 uprising that ended Hosni Mubarak’s 30-year rule, spooking foreign investors and tourists who are the main sources of foreign currency.

Foreign currency reserves have dropped from $36 billion before the revolt to about $16.4 billion in October, leaving the central bank with little firepower to protect the value of the tightly-managed Egyptian pound.

In February, the central bank limited the amount of dollars companies could deposit in banks to squeeze a dollar black market.

Business people say that policy backfired, making it difficult for companies to finance imports and discouraging foreign investors who feared they would be unable to repatriate profits or cash in their investments.

In the first major move by Egypt’s new governor Tarek Amer, who took up his post on Friday, the central bank said it had repaid foreign portfolio investors $547.2 million, clearing the entire backlog.

“This is a very strong signal about the change in management ideology,” said Hany Farahat, senior economist at CI Capital.

“There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.”

The central bank urged foreign investors to enter Egyptian capital markets through a pre-existing scheme set up to help them repatriate their hard currency.

Those who have used the scheme have not faced delays, the central bank said in a statement. But many foreigners have invested without using that mechanism and had struggled — until Tuesday — to obtain dollars and move them out of Egypt.

The measure is the latest in a series taken by the central bank since Amer’s appointment was announced in late October.

Within two weeks of the announcement, banks had supplied $1.8 billion to clear a backlog of imports that had caused an outcry among businesses.

The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.

Amer’s next move came on Nov. 11, when the central bank supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies during the crisis.

Mohamed El Sewedy, the head of the Federation of Egyptian Industries, told Reuters in a recent interview Amer had promised to cover the entire $4 billion exposure.

At the same time, the central bank strengthened the pound by 20 piastres — a surprise move given the gap with the black market rate, now hovering about 8.5 pounds to the dollar.

Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.

 

CURRENCY AUCTION

The central bank held the pound steady at 7.7301 to the dollar at its second official dollar auction under Amer, but caused confusion by supplying some banks with more of their forex needs than usual and others with nothing at all.

Egypt’s central bank holds three foreign exchange auctions a week, and the sales are the key mechanism through which it sets the official exchange rate of the pound.

Banks are accustomed to receiving a regular quota of foreign exchange at each foreign currency sale.

Bankers said some banks had bid late in the auction due to uncertainty over whether the central bank would move the exchange rate or hold it steady and had missed out. Others said some banks who bid early in the session were also refused.

The central bank said it had changed the “internal allocation process” but gave no details on the changes or whether they would apply to future forex auctions.

Amer, the well-regarded former head of commercial lender National Bank of Egypt (NBE), faces a delicate balancing act as he seeks to end the foreign exchange pressure without triggering inflation, which hurts the poor hardest, or dampening the growth needed to create jobs for its growing population.

 

(By Asma Alsharif. Additional reporting by Eric Knecht’ Writing by Lin Noueihed; Editing by Ruth Pitchford)

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Egypt’s stock exchange will allow ten companies to delay IPOs

1 December 2015 Comments (0) Australia, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – The Egyptian stock exchange will allow ten companies to delay their initial public offerings due to global market conditions, Mohamed Omran, the head of the bourse, told state news agency MENA on Tuesday.

The Egyptian exchange usually requires newly listed companies to hold an initial public offering within six months, but this period can be extended if there are good reasons, such as volatile global markets.

Omran told Reuters in November that about a dozen companies had registered a new listing on the Egyptian market in 2015, but only half of these had proceeded with an initial share issue.

 

(Reporting by Eric Knecht, editing by Louise Heavens)

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South Africa’s Edcon secures repayment deal on debt of 7.9 bil rand

30 November 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Bain Capital’s Edcon, a South African retailer, said on Monday it had secured a repayment deal on debt of 7.9 billion rand ($548 million) and access 1.85 billion rand to pay down some bonds.

The company, which is the biggest fashion retailer in Africa’s most advanced economy, completed a distressed exchange offer in July and has since issued new bonds to restructure its debt.

“The deal represents a strong statement of support from Edcon Group’s existing South African and international lenders under its revolving and term loan facilities, as well as new lenders into the capital structure,” Edcon said in a statement.

The company has also secured new commitments for a facility of 1.85 billion rand which it will use to pay down 1.0 billion rand in secured notes due in 2016 and to settle a 1.0 billion rand liquidity facility from Goldman Sachs, chief financial officer Toon Clerckx told Reuters.

Taken private by Bain in 2007 in a highly leveraged buy-out, Edcon has lost market share to other retailers as it struggled to pay its debts in a slowing economy.

Before refinancing its debt, it said it was considering selling non-core assets, but on Monday poured cold water on the idea. “There is no need to sell, you go to the market when you get the price you want or you trade your way out of it,” Clerckx said.

Most of South Africa’s largest banks hold part of the 7.9 billion rand in debt Edcon has now refinanced, he said.

Edcon said in July debt that restructuring attempts would decrease its interest payment obligations by more than 1 billion rand a year.

The retailer said on Monday its refinancing efforts of this year will lower its debt by around 4.5 billion rand.

The operator of clothing retailers Edgars and Jet, stationer CNA and homeware store Boardmans also said it had finished the final stage of the exchange offer lanched in June for a 2019 bond.

($1 = 14.4205 rand)

 

(Reporting by Zandi Shabalala and TJ Strydom; Editing by Tom Heneghan)

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Sibanye Gold says to conclude platinum acquisitions, shrugs off lower prices

30 November 2015 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Sibanye Gold said on Monday it remained committed to concluding the acquisition of two platinum assets despite lower prices as it awaited the approval of shareholders and South Africa’s anti-trust authorities.

The bullion producer said it expected a decision from the South African Competition Commission in March 2016 while shareholders are set to vote in January on the acquisition of Aquarius Platinum and Anglo American Platinum’s Rustenburg mine.

Platinum prices sank 16 percent in November to near seven-year lows on prospects of a U.S interest rate hike and ongoing concerns of oversupply. Despite this Sibanye said it would go ahead with the transactions.

“As highlighted when these transactions were announced, whilst near-term economic headwinds and supply side factors have resulted in downward pressure on metal prices, the long-term outlook for PGM demand remains constructive,” Chief Executive Neal Froneman said.

 

(Reporting by Zandi Shabalala; Editing by Himani Sarkar)

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Egypt’s central bank saviour faces tricky balancing act

27 November 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – From bankers to carmakers, Egypt’s business community will breathe easier when Tarek Amer takes charge at the central bank on Friday, with hopes high he will revamp a monetary policy that has undermined investment and growth.

Announced last month, the leadership change unleashed anger against outgoing governor Hisham Ramez, who capped dollar deposits at $50,000 a month, starving businesses of hard currency and paralysing trade as he sought to defend the country’s pound.

Amer, the well regarded former head of commercial lender National Bank of Egypt (NBE), has already been working hard behind the scenes to inject fresh funds into a sclerotic financial system, and he is widely expected to lift the cap.

But with inflation high and the pound propped up by unsustainable central bank dollar sales, he will also need to tread a fine line between allowing the currency to settle lower while avoiding the sharp devaluation that would worsen the imbalances he is trying to correct.

“There is a belief that Tarek Amer will cancel the cap on dollar deposits at banks,” said an under-the-counter currency trader. “There is an optimistic atmosphere among clients of exchange companies and in the parallel market.”

Black market traders, bankers and businesspeople also expect Amer to work with the government to dampen demand for dollars by regulating imports and supporting exports — a source of hard currency battered by the capital controls.

Egypt’s economy has struggled since the 2011 uprising that ended Hosni Mubarak’s 30-year rule drove away investors and tourists, robbing it of foreign currency and putting the pound under severe pressure.

Fearing runaway inflation, the central bank has maintained the pound within a narrow band, but pressure has persisted.

In February, Ramez imposed the deposit caps and forced banks to prioritise food and medicine when supplying scarce dollars.

But the measures made it hard for companies to get credit to pay for imports and, as goods mouldered at ports and some factories stopped production, exports slumped by 19 percent in the first nine months.

To the business community’s relief, President Abdel Fattah al-Sisi announced in October that Ramez would not renew his term as governor when it expired on Nov. 26.

“As long as in the central bank of Egypt there are people who are managing wisely… you should never have a foreign exchange crunch,” Raouf Ghabbour, chief executive of GB Auto, told Reuters in a recent interview.

As well as cancelling Ramez’s preventative measures, Amer should also raise interest rates, he said.

BEHIND THE SCENES

A veteran banker credited with reviving state-owned NBE, Amer began meeting with captains of industry in October.

Within two weeks, banks had supplied $1.8 billion to clear the import backlog. [ID:nL8N12Y3D0]

The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.

Amer’s next move came on Nov. 11, when the central bank strengthened the pound by 20 piastres and supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies.

Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.

Mohammed al-Naggar, head of research El Marwa Brokerage, said he believed Amer could strengthen the pound again.

“The market expects the central bank to increase the value of the pound by 10 piastres in the first (dollar) auction under Tarek Amer,” he told Reuters. “There are expectations for a big surprise.”

Expectations of change received a boost on Thursday, when Farouk al-Okda was appointed to a central bank committee of government ministers and economic experts tasked with setting the monetary agenda.

Okda, who led the central bank from 2003-2013, was credited with helping stabilise the pound within a managed floating exchange rate, and helping establish an interbank foreign exchange market that helped curtail the black market.

The revival of the central bank’s coordination council has raised hopes of greater collaboration between the central bank and the government –neglected under Ramez.

“The central bank is semi-independent but in these circumstances it will have to work hand in glove with the (government)… to come up with solutions,” said Angus Blair, chairman of Signet Institute, an economic think tank.

NO EASY ANSWERS

While an eventual devaluation looks unavoidable, turning around Egypt’s monetary policy will be a tricky balancing act.

An emerging market rout has left the pound overvalued, despite a depreciation of about 10 percent this year. Yet a sharp devaluation would stoke inflation in an import-reliant country where millions live hand to mouth, fuelling the kind of street protests that helped unseat two presidents in three years.

The government announced this week it would control the prices of 10 essential commodities — a move some read as an effort to protect vulnerable Egyptians from inflation unleashed by an eventual devaluation.

In the meantime, reforms to address the ballooning trade deficit could strengthen the economy ahead of any shocks.

Egyptian Federation of Industries head Mohamed El Sewedy told Reuters recently he expected the government to implement an indicative pricing mechanism for imports before the end of the year, curtailing the common practice of avoiding customs duties by undervaluing imports on bills.

“If I regulate trade, the appetite for dollars … will become more orderly,” said El Sewedy, adding that Amer had promised to cover the remaining $3 billion of banks’ credit exposure.

Egypt’s benchmark overnight lending rates are already high at 9.75 percent, but with foreign reserves languishing at $16.4 billion – enough for just three months of imports – economists believe borrowing costs will have to rise further to avert inflation and dollarisation. The victim of high rates could be much-needed growth.

“It’s a lot to do for a new central bank governor,” said Blair. “I don’t envy him but it is a great shame he wasn’t appointed earlier.”

 

(By Lin Noueihed. Additional reporting by Nadia El Gowely and Ehab Farouk; editing by John Stonestreet)

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Nigeria’s Oando plans $350 mil gas processing plant

27 November 2015 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigeria’s Oando plans to build a gas plant for up to $350 million as it focuses on integrating gas production with its supply business, the head of the gas and power unit said on Thursday.

Bolaji Osunsanya, Managing Director of Oando Gas and Power said the plant, with a capacity to process 300 million standard cubit feet a day (scfd), will take 24 months to complete and cost $300 million to $350 million.

He said Nigeria had room to ramp up gas plants as current capacity was around 2 billion scfd, adding that its project was at the development stage to be launched in the first quarter.

London-listed Nigerian firm Seplat is also boosting gas capacity. It plans to increase gross output from around 120 million to 400 million scfd by 2017, as demand grows.

“We have done transport in the past, we are getting into (gas) processing right now,” Osunsanya told Reuters in an interview. “We are working ourselves up the chain.”

Oando’s gas and power unit reported a net income of $19 million for the nine months to September, down from $22 million the previous year.

Lagos-listed parent Oando, with interests in oil exploration, terminals and oil trading, has said it was seeking approvals to sell its gas and power investment to cut debt and raise up to 80 billion naira from shareholders.

Two years ago, Africa’s biggest economy broke up its monopoly on power generation and distribution by privatising the sector, hoping to attract foreign investors.

But the amount of power produced has stagnated since, failing to reach a 2012 peak of 4,500 megawatts of electricity due to gas constraints, plant outages and tripped circuits, according to Transmission Company of Nigeria.

Osunsanya estimated Nigeria will need around $55 billion over the next seven years to develop gas infrastructure to meet growing demand, which would include building new pipelines, processing plants and drilling of new wells.

He estimated demand at 5 billion scfd, of which 3.5 billion was needed for power and the rest for other uses. However, half the 7.5 billion scfd gas generated was flared or reinjected into the ground due to inadequate pipelines for distribution.

 

(By Chijioke Ohuocha. Editing by David Evans)

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Glencore sees Tripoli-based NOC as sole legal seller of Libyan oil

26 November 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – Commodities trader Glencore said on Thursday it recognises Libya’s Tripoli-based National Oil Corp. (NOC) as the sole legal marketer of the country’s oil, after securing an export deal earlier this year with the state-run company.

The NOC has said it operates independently of either the rival government that controls the capital city or the internationally recognised government based in the east of the country, which earlier this year set up a separate NOC.

“International oil companies and the international community fully support NOC’s position,” said Alex Beard, head of oil at Glencore.

“They have made it very clear there is no alternative to the NOC at its legal address in Tripoli as the only recognised marketer of Libyan oil,” he said in a statement.

Bloomberg reported last week the government in the east would prevent any tanker operated by Glencore from loading oil at Libyan ports if it did business with the Tripoli-based NOC.

Under the arrangement with the existing NOC, which began in September, Glencore loads and finds buyers for all the Sarir and Messla crude oil exported from the Marsa el-Hariga port near the country’s eastern border with Egypt.

While Libyan oil exports peaked at 1.6 million barrels per day, battles between rival factions seeking to control the country, as well as strikes and blockades by local tribes, have kept production under 0.5 million bpd for most of the past year.

Mustafa Sanalla, the chairman of the Tripoli-based NOC, on Thursday reiterated comments told to Reuters in an interview earlier this month, that Libya’s oil partners and the international community fully backed the company, despite attempts by the recognised government in the east to set up a parallel oil payments system.

“The NOC, at its legal address in Tripoli, remains the only legally empowered oil contracting authority of the Libyan state,” Sanalla said.

“It remains the seat of contracts for all the production, transportation and sale of Libyan oil. The board of NOC is committed to protecting the integrity and viability of the NOC.”

 

(Reporting by Dmitry Zhdannikov, writing by Amanda Cooper; Editing by David Evans)

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