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South Africa could delay carbon tax implementation beyond 2016

Comments (0) Africa, Latest Updates from Reuters, Politics

CAPE TOWN (Reuters) – South Africa will publish a draft carbon tax bill for further comment next week, keeping the door open to delay its controversial implementation for the second time beyond 2016, Finance Minister Nhlanhla Nene said on Wednesday.

The carbon tax, part of government efforts to reduce harmful emissions in Africa’s worst polluter, was postponed two years ago to 2016 after alarming industry it would further erode profits amid a global commodities slump and higher electricity tariffs.

“On any tax proposals we take the trouble of engaging with industry before we can implement,” Nene told reporters ahead of tabling his three-year budget outlook.

“So whether it will be implemented in 2016 as we announced or later, will depend on discussions we are having,” he said.

Former Finance Minister Pravin Gordhan in 2014 delayed the introduction of a carbon tax by one year to 2016, tweaking its policies to better protect industry from a proposed tax price of 120 rand per ton of carbon equivalent.

The postponement was welcomed by mining and other carbon-intensive companies, such as steel giant ArcelorMittal and petrochemical group Sasol, who have said the new tax will erode profits against a backdrop of rising electricity tariffs and sluggish economic growth.

The tax, expected to be phased in over time, was due to start on Jan 1, 2015 and is one of several green initiatives, including greater vehicles emission taxes South Africa wants to implement to reduce its carbon footprint.

Should the new carbon tax bill, which was approved by cabinet, be sent for public comment, it is unlikely that it would be made law before Nene’s budget policy speech in February, given that the legislative process at parliament was winding down already.

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South Africa to borrow $4.5 billion from international markets – Treasury

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CAPE TOWN (Reuters) – South Africa will borrow $4.5 billion from international markets over the medium term with government debt set to rise to nearly 2.4 trillion rand by 2018/19, the National Treasury said on Wednesday.

New bond issuance for 2015/16 would rise to 175 billion rand, marginally up from the 173 billion rand estimated in February.

Treasury said borrowing requirement would rise over the next three years, with borrowing for 2015/16 fiscal year revised to 176.3 billion rand forecast in February’s main budget before gradually rising to reach 186.1 billion rand in 2017/18.

Treasury said it would focus on mitigating the risk of sharp increases in loan repayments, and would continue its program of switching short-dated bonds in exchange for longer-dated ones.

“Further rand depreciation and higher inflation would push up the level of debt and debt-service costs,” Treasury said.

The rand has lost over 13 percent in value against the dollar in 2015 as combination of weak domestic factors and slowing growth globally, particularly in China, have seen the unit tumble to all-time lows.

Minister Nhlanhla Nene said the rise in government debt over the next three years would amount to 600 billion rand, while stabilizing as a percentage of GDP to 49.4 percent in 2018/19.

 

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Morocco subsidy spending to fall to $1.6 billion in 2016

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RABAT (Reuters) – The Moroccan government plans to spend 15.5 billion dirhams ($1.61 billion) on subsidies, down from 23 billion dirhams budgeted for this year, the 2016 draft national budget seen by Reuters showed.

The kingdom expects subsidies of only 14 billion dirham in 2015 – down from budgeted 23 billion – thanks to lower energy prices.

Morocco started to repair its public finances three years ago after huge deficits in 2012 when the government spent billions to calm Arab Spring-like protests.

Morocco has done more than most North African countries to make painful changes required by international lenders to curb deficits, such as ending fuel subsidies and freezing public sector hiring. The government still controls the prices of wheat, sugar and cooking gas.

In another move to step up with the subsidy reform, the government is planning to fully liberalize gasoline and diesel prices on December 1.

The government has said gross domestic product (GDP) would grow by 3 percent in 2016, down from an estimated 5 percent in 2015.

The forecast is more ambitious than that of Morocco’s planning agency, which had said the economy would grow by 2.6 percent in 2016 as agricultural output fell from an exceptional 2015.

Agriculture accounts for more than 15 percent of the economy, with this year’s cereal harvest hitting a record 11 million tonnes.

The budget deficit is expected to come in at 3.5 percent of GDP in 2016, down from 4.3 percent in 2015, while inflation is seen at 1.7 percent, according to government estimates.

 

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Russia’s Rosatom says Egypt nuclear talks in final stages

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ABU DHABI (Reuters) – Russia’s state-owned nuclear firm Rosatom is in the final stages of talks for a contract to build a nuclear power plant in Egypt, a senior official of the company said on Wednesday.

Anton Moskvin, Rosatom Overseas vice president, said that the deal was expected to be signed by the end of the year.

Speaking on a visit to the United Arab Emirates, Moskvin said construction of the the first reactor of the plant at Dabaa in Egypt’s north would finish by 2022 if a contract was signed by the end of 2015. The contract would involve a loan from Russia to Egypt, he said.

“The sooner we finish the better,” Moskvin said.

“We can start site assessment work next year and then see how soon we can start real site work,” he said.

Egypt has been considering building a plant in Dabaa, situated in the Matrouh governorate, on and off since 1981.

Cairo froze its nuclear programme after the 1986 nuclear disaster at Chernobyl, but announced in 2006 it planned to revive it. Plans for a tender were being prepared when President Hosni Mubarak was deposed in February 2011.

In February this year, President Abdel Fattah al-Sisi said he had signed a memorandum of understanding with Russia for the project.

The Dabaa plant will have four reactors when complete by 2025. Rosatom is currently the only firm in negotations with Egypt over the project.

“There are some 200 people from both sides meeting every month and sometimes twice a month to discuss commercial, technical and other issues,” Moskvin said.

Rosatom is also in talks with Saudi Arabia’s nuclear government body, the King Abdullah City for Atomic and Renewable Energy, over the kingdom’s nuclear plans.

“We are in constant contact with the King Abdullah City, the latest meetings took place in September,” Moskvin said. “Our primary interest there is in a building contract.”

Saudi Arabia and Russia signed an agreement to cooperate on nuclear energy development in June. [ID:nL5N0Z5163]

In 2012, Saudi Arabia said it aimed to build 17 gigawatts (GW) of nuclear power by 2032 as well as around 41 GW of solar capacity. The oil exporter currently has no nuclear power plants.

(By Maha El Dahan, Reuters)

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Energy Subsidy Reform In Gulf Nations

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Gas price subsidies originally intended to level the playing field for the major oil producing nations now fall under heavy scrutiny for a variety of reasons. Reduction of fuel prices resulting from these subsidies leads to increased wasteful consumption and pollution. Reform policies now meet resistance from residential consumers and commercial interests. 

The six primary Gulf state producers all figure among the top 10 per capita energy consumers worldwide. While awareness is high among the producers that the subsidies desperately require reform, steps toward actual reform are gradual. Qatar, where gasoline and electricity subsidies are highest, is number one on the list, with 18,500 kg oil-energy-equivalence per capita, a level of consumption almost three times that of the USA or England.

Gas is so heavily subsidized in the Gulf States that consumers in Europe and America must find the prices shocking. Qatar, Bahrain, and Kuwait are all under $0.30 per liter as of the time of this writing. Although low fuel prices obviously bring about a trend of excessive and wasteful consumption, the big six producers’ lethargic reforms are not driven by a sense of urgency. Starting mid-2014, Qatar, Bahrain, and Kuwait raised diesel fuel prices by 50% with no fixed index, but rather with prices remaining a function of world market prices. Saudi Arabia has yet to establish any price reforms. 

GCC governments could once afford to subsidize energy prices and this works against reform today. When a falling oil price reduces profit there is additional resistance to subsidy reform. While in theory reducing subsidies should serve to diversify the industrial base of a country, it is not clear that this is a strong motivational force among the actual producers. After all it is a competitive force at work against reform. Awareness of other important factors is high, such as depletion of energy resources, damage to the environment, and slowed economic growth. But awareness does not lead to discipline, and energy consumption in the big six is higher than ever.

Less than $0.01 per kilowatt hour in Kuwait

Energy consumptionApproximately half of the subsidies are for electricity, and the growth rate in consumption of electricity here is approaching 10%. In Kuwait for example, the price of electricity is fixed at less than $0.01 per kilowatt hour. According to energy think tanks such levels of subsidisation and consumption are absolutely unsustainable. However with electricity consumption divided almost equally among commercial and residential interests, there is stalwart resistance to reform these programs which cap prices and keep consumers happy.

In countries like Saudi Arabia and Iran, subsidies for energy consumption are up to two to three times their expenditures for education and health care. Tempting though it may be to view this as a window on the way a society prioritizes its use of valuable resources, it is instead a residential consumer base of individuals devouring 58% of available electricity. Reduced air quality and other forms of environmental impact do not as yet serve to dissuade individual consumers from excessive use. 

UAE the first GCC country to eliminate price controls

Perhaps the most substantial step forward is United Arab Emirates’ announcement to deregulate transportation fuel prices in 2015. This makes UAE the first to eliminate price controls, and to take an extraordinary measure toward subsidy reform. This year with falling oil prices all of the GCC nations are under new pressure to institute subsidy reforms, especially in Saudi Arabia, where pre-tax energy subsidies to fiscal expenditure were more than 10% last year. 
As OPEC and IMF predict oil prices to remain below 2014 levels for at least the next five years, subsidy reform is clearly the mandate among the GCC nations. With consumption accelerating, the depletion of oil reserves and an inflationary rise in the cost of living may leave these energy-rich nations no alternative.

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Zimbabwe proposes 10% black empowerment tax

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HARARE (Reuters) – Zimbabwe plans to impose a 10 percent tax on foreign-owned firms to fund a black economic empowerment programme that is designed to bring the companies under local majority control, a minister was quoted as saying on Monday.

Some of the companies that could be affected by the new tax include the world’s top two platinum producers Anglo American Platinum and Impala Platinum Holdings, which both have operations in the southern African nation.

Under Zimbabwe’s Indigenisation and Economic Empowerment Act passed in 2008, the minister of youth and empowerment can, with the approval of the finance minister, levy a tax on any company to raise money to fund the black economic empowerment programme.

Youth and Empowerment Minister Patrick Zhuwao told the government’s Herald newspaper that he would propose a 10 percent levy on all foreign-owned firms that have not complied with the law, known locally as indigenisation.

The money raised would fund mostly rural community trusts to invest in businesses, said Zhuwao, adding that the government expected to raise $93 million annually.

“For us to be able to fund empowerment programmes in the long term, we are proposing the introduction of an empowerment levy and we are empowered by law to propose the levy,” Zhuwawo was quoted as saying by the newspaper.

Zhuwao, a nephew to President Robert Mugabe who was appointed to his job on Sept. 11, could not be reached to comment further.

Efforts to introduce the levy in 2012 failed after then finance minister Tendai Biti, from the opposition Movement for Democratic Change party, refused to sanction its implementation.

Zhuwawo’s comments come more than a month after the previous empowerment minister said the government was relaxing the law in a bid to attract foreign investment.

Zimbabwe’s economy is expected to grow by 1.5 percent this year, half the government’s initial forecast, after weak global commodity prices hit exports and a drought halved the staple maize crop harvest.

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Malawi to revise national budget after IMF suspends credit facility

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LILONGWE (Reuters) – The International Monetary Fund has suspended loans to Malawi for failing to cut its wage bill and improve revenue collection, making it less likely Western donors will resume budgetary aid, the finance minister said on Thursday.

This is the second time the Fund has suspended the program within a period of three years. It was halted in 2012 when the Malawi government failed to devalue its currency, the kwacha, and reform public financial management.

“Things are now out of hand because this completely jeopardises our chances of getting back budget support suspended under the Joyce Banda administration,” Finance Minister Goodall Gondwe told Reuters.

Gondwe said the Treasury was already working on revising the $1.5 billion budget, which was passed in July this year.

“We welcome the observations from the IMF and we already planned to reduce the budget by cutting down on total expenditure during the mid-term budget review meeting of parliament in February next year,” he said.

Budget assistance from Western donors worth millions of dollars has been withheld for two years now after revelations of corruption under ex-President Banda. Such aid has historically accounted for about 40 percent of the national budget.

The IMF said the loan facility would remain suspended until Malawi’s government met certain targets.

“The extended credit facility is off-track because Malawi failed to meet set targets by end-June 2015 and we have discussed a number of measures to bring it back on track starting with a revised budget,” said Oral Williams, the IMF mission head to Malawi.

“Fiscal slippages equivalent to about 2 percent of GDP emerged during the second half of the 2014/15 fiscal year, in part because of overspending on the wage bill, and these were exacerbated by revenue and external finance shortfalls.”

Williams said the mission reached an understanding on measures to bring programme back on track, including “a revised fiscal framework sufficient to meet the end December 2015 program target on net domestic financing and a tight monetary stance to maintain positive real interest rates.”

The IMF said Malawi had met targets on net international reserves and net domestic assets.

The IMF said on Wednesday that Malawi’s economic growth would slow to 3 percent this year from 5 percent in 2014, reflecting a decline in the maize harvest and weak private- sector investment and consumption.

Floods in January destroyed more than 60,000 hectares of crop fields cutting output for the staple maize by 27 percent.

(By Mabvuto Banda, Reuters)

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Tentative Optimism as Cote D’Ivoire Heads Into First Election Since 2010 Violence

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By Sheldon Mayer, Managing Editor

In the first step towards their landmark election, nine candidates have formally announced that they will run in the October election against incumbent Alassane Ouattara.

While the official campaign season does not begin until October 11th, just two weeks before the election on October 25th, the announcement by the Constitutional Council is an unofficial green light for candidates to begin their campaigning.

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Sudan’s finance ministry scraps subsidy for wheat imports

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Khartoum (Reuters) – Sudan has scrapped a special U.S. dollar/Sudanese pound exchange rate used for wheat imports, effectively removing a subsidy, the finance ministry said on Monday.

The subsidy removal is part of a government plan to liberalize wheat imports during a time of low global wheat prices, allowing the government to save money on importing wheat while also avoiding politically-sensitive price hikes.

The rate changed from 4 Sudanese pounds to 6, bringing it in line with the official exchange rate.

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Ibe Emmanuel Kachikwu Takes on Corruption at Nigeria’s State Oil Company

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by Enu Afolayan, Contributor

The President of Nigeria, Muhammadu Buhari, is committed to fighting corruption in his country. On June 26th, immediately after being elected, he ordered the dissolution of the board of the Nigerian petroleum company NNPC. Nigeria extracts two million barrels of crude every day, which makes it the largest producer of black gold in Africa. By attacking the petroleum sector, Buhari made a brave attempt to solve the country’s most serious mismanagement and corruption problem.

In 1970s, Buhari was the Minister of Oil and oversaw the birth of the NNPC. Corruption began to spread in the corporation as early as 1978, when it failed to repay the Treasury of Nigeria. Now, the “Father of the NNPC” is determined to put an end to the widespread corruption. He appointed Ibe Kachikwu as the new head of the petroleum corporation to take on this challenge.

Kachikwu arrived at the helm of NNPC right after the publication of an independent analysis by the Resource Governance Institute (NRGI). The analysis unveiled that over $32 billion in oil revenue was lost by Nigeria due to money laundering at the NNPC.

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