Items filtered by date: Wednesday, 31 October 2018
The Kenyan shilling yesterday weakened to an eight-month low against the US dollar in what market watchers attributed to excess liquidity in the money markets and demand for the dollar from manufacturers and oil importers.
 
Analysts, however, said Monday’s announcement that the Treasury is about to issue a new Eurobond is causing a recasting of positions as markets prepare for a looming jump in external debt.
 
The shilling exchanged at an average of 101.73 units to the dollar in the interbank market, a level last seen at the end of February, having weakened against the dollar by nearly one per cent this month.
 
The shilling’s performance in the market is being seen as resulting from the negative sentiments on Kenya’s debt position and the ongoing flight of foreign capital back to the US where rates are rising.
 
The International Monetary Fund (IMF) last week downgraded Kenya’s risk of debt distress from low to moderate, and many observers see the looming Eurobond issue as having the potential to spook the market even further.
 
Treasury principal secretary Kamau Thugge told Bloomberg on Monday that the external financing bit of the budget deficit will comprise of up to Sh250 billion worth of Eurobonds, and Sh37 billion in syndicated loans.
 
“The shilling may be further undermined by weaker debt metrics after the IMF’s downgrade of the country risk of external debt distress from low to moderate,” said economists at Commercial Bank of Africa in a note.
 
The bank said the government’s plan to return to the Eurobond market for the bulk of external debt financing this fiscal year risks aggravating debt sustainability concerns given the potential for higher debt servicing costs.
 
The shilling’s depreciation in recent weeks has, however, not been characterised by volatility, suggesting that it is an issue of underlying fundamentals rather than speculative actions in the currency trading markets.
 
 
Source: Daily Nation
Published in Economy
The board of directors of Nigerian Breweries Plc. has recommended an interim dividend of N4.8 billion to its shareholders.
 
The total dividend translates to 60 kobo per ordinary share of 50 kobo for the period ended September 30, 2018.
 
In a statement by the company on Monday, the interim dividend, which is subject to the deduction of withholding tax, is payable on Monday, December 10, 2018 to all shareholders registered in the company’s books at the close of business on Thursday, November 22, 2018.
 
An analysis of the firm’s unaudited and provisional results for the nine-month period ended September 30, 2018, shows that Nigerian Breweries recorded 11 percent drop in sales, indicating a decline in patronage.
 
Its profit before tax loss was N5.09 billion between July and September this year, while it paid N5.90 billion in the third quarter of 2018 on excise duty expenses up from N4.50 billion in the corresponding period in 2017.
 
Nigerian Breweries kept a positive profit of N14.76 billion for the nine-month period ended September 2018, this is about 38.4 percent drop from N23.98 billion recorded in the corresponding period in 2017.
 
Results from operating activities stood at N27.7 billion during the first nine months of the year, representing 34.4 percent decline from N42.3 billion recorded in the same period last year
 
Despite the positive record for the first nine months, it recorded a loss of N3.66 billion in the third quarter of this year.
 
The weaker results undermined investors’ sentiment, leading to the depreciation of the stock of Nigerian Breweries on the floor of the Nigerian Stock Exchange (NSE) yesterday, just as it lost 57 basis points to close at N87.50 per share.
 
Reacting to the results, the Company Secretary/Legal Adviser, Uaboi Agbebaku, explained that the new excise duty on alcoholic beverages and tobacco products introduced in June and the consequent effect of it, adversely impacted the third quarter results.
 
According to Agbebaku, the company undertook a rightsizing exercise which resulted in a substantial one- off cost during the quarter.
 
 
Source: The Ripples
Published in Bank & Finance
Australia's banks are beginning to put in motion plans to shift staff and other assets out of London after Brexit.
 
Australia's largest bank by assets, Commonwealth Bank of Australia, is moving 50 staff to Amsterdam as it readies for Brexit, according to The Financial Times.
 
Others including Macquarie, Westpac, and ANZ Bank are making plans on the continent.
Many foreign financial institutions are frustrated - like many UK businesses - by the lack of any real clarity over what sort of Brexit the UK will actually achieve when the Article 50 period runs out in March next year.
 
Australian banks with UK operations are beginning to put in motion plans to shift staff and other assets out of London as the possibility of a no-deal Brexit looms large in their thoughts.
 
According to a story from the Financial Times on Monday, Australia's largest bank by assets, Commonwealth Bank of Australia (CBA), has set in motion plans to shift 50 staff from London to the Dutch capital, Amsterdam, and has applied for a banking licence in the country.
 
Those staff will be focused on the bank's European "passporting" operations - the system by which banks are able to operate across EU borders while possessing just a single banking licence. The financial passport is linked strongly to membership of the European Single Market, and the UK will lose its passporting rights as a result.
 
Commonwealth Bank said on Monday that its plan to shift staff to Amsterdam is being put in place "to ensure we can continue to provide the best service to our customers, while limiting disruption to existing business and our employees.
 
While Commonwealth Bank is the latest bank to pull the trigger on moving staff, other Australian lenders are also shifting some capacity away from the UK, with investment bank Macquarie saying in May that it plans to expand its operations in Dublin, Ireland as a protection from Brexit. Westpac and ANZ are also shifting some operations to continental Europe.
 
Many foreign financial institutions are frustrated - like many UK businesses - by the lack of any real clarity over what sort of Brexit the UK will actually achieve when the Article 50 period runs out in March next year.
 
The British government remains adamant that it will strike a deal, and says one is 95% complete, but the exact shape of that deal isn't entirely clear. There are also lingering fears that negotiations could collapse at any moment, leaving the UK facing down a no deal Brexit, seen by the businesses, and the financial sector in particular, as the worst possible outcome.
 
No deal would be particularly catastrophic for banks and other financial institutions because of the highly internationalized nature of the sector, which sees hundreds of billions of dollars flow across borders every single day.
 
Australian lenders are not alone in their desire for clarity. While most of the attention around post-Brexit job relocations out of the City has focused on American and European lenders, banks from around the world using London as a hub for their EU business have been made to decide what to do post Brexit, with Japanese banks particularly active in moving staff out of the UK.
 
Sumitomo Mitsui, MUFJ, Daiwa Securities, and Nomura are among the Japanese banks with plans in motion to shift some of their staff and physical operations out of the UK, generally to Frankfurt, after Brexit.
 
 
Source: Business Insider
Published in Business
Nigeria has ranked fourth among other African nations in the list of Foreign Direct Investment (FDI) Projects to Africa, as the United States, the single largest country investing into the continent, remained confident in the market.
 
The nation, with a total of 64 FDI projects in 2017, was ranked behind countries like South Africa with 96 FDI projects; Morocco, 96 projects; and Kenya, 67 projects occupying the first, second and third position respectively.
 
This was contained in the 2018 Africa Attractiveness report released by EY on Monday titled, “Turning tides.” The report provides an analysis of FDI Investment into Africa over the past ten years.
 
According to the report, the number of FDI projects into Nigeria increased from 51 projects in 2016 to 64 projects in 2017, accounting for 9 percent share of the entire investment into the continent for the review year.
 
In view of this, the nation rose a step higher from the fifth investment destination in Africa in 2016 to the fourth in 2017.
 
The report shows that the performance was largely driven by increase in the number of projects invested by U.S. companies into the country, launching 22 projects against 10 in the previous year, just as South African, Chinese and UK investors also increased their FDI activity into Nigeria.
 
According to the World Bank, Nigeria was among 10 economies globally with the strongest improvement in their business environment last year. The country jumped 24 places on the Ease of Doing Business index.
 
FDI projects into Africa rebounded from their lowest level in ten years in 2017 as the continent recorded a growth of 6.2 percent to 718 inward investment projects compared with 676 projects recorded in 2016.
 
The report attributed the growth to interest in “next generation” sectors such as manufacturing, infrastructure and power generation.
 
“Foreign investors committed to 718 FDI projects in Africa in 2017, a 6% increase from 2016. This brings us back to 2014 levels of FDI projects, but considerably below the 10-year average,” it read.
 
East Africa emerged Africa’s major FDI hub for the first time as the region recorded 82 percent growth in the number of FDI projects compared with 2016. Countries in the region with the strongest gains include Ethiopia, Kenya and Zimbabwe.
 
 
Source: The Ripples
Published in News Economy
The Federal High Court in Lagos has fixed December 4, 2018 for hearing in the suit filed by MTN Nigeria Communications Limited to challenge the $8,134,312,397.63 being demanded from the telecom firm by the Central Bank of Nigeria over alleged foreign exchange remittance infractions.
 
At Tuesday proceedings in the case, MTN was represented by Chief Wole Olanipekun (SAN), who led 14 other lawyers, including Prof. Fabian Ajogwu (SAN), Mr Damian Dodo (SAN), Mr Adeniyi Adegbonmire (SAN) and Mr Bode Olanipekun (SAN).
 
On the CBN legal team were Messrs Seyi Sowemimo (SAN) and Ademola Akerele (SAN).
 
The Attorney General of the Federation and Minister of Justice, Mr Abubakar Malami (SAN), who was joined as the 2nd defendant in the suit, was absent and was not represented in court.
 
While adjourning the suit till December 4 for the hearing of all pending applications, Justice Saliu Saidu directed that hearing notice should be served on the AGF.
 
In the suit marked: FHC/L/CS/1475/2018, MTN is seeking a court declaration that it is “not liable to refund $8,134,312,397.63 to the coffers of the 1st defendant (CBN) premised on the decisions reached in the 1st defendant’s letter of 28/8/2018.”
 
The telecommunications giant is urging the court to declare that that “the 1st defendant’s decision in its letter of August 28, 2018 with Ref. No. GBD/GOV/COM/DGF/118/121 addressed to the plaintiff and titled, ‘Investigation into the remittance of foreign exchange on the basis of the illegal capital importation certificates issued to MTN Nigeria Communications Limited’ was reached in breach of the plaintiff’s right to fair hearing.”
 
The firm wants Justice Saidu to hold that the CBN “lacks the power to determine the civil obligations or penal liabilities of the plaintiff.”
 
It is urging the court to declare that the CBN acted ultra vires its statutory powers when it wrote the August 28 letter to it demanding a refund of $8.1bn.
 
The firm wants the court to hold that the $8.1bn demand is illegal, oppressive, abusive, unauthorised and unconstitutional.
 
It also wants the court to void the September 3, 2018 letter written to it by the AGF demanding $8.1bn as penalty for the offence of “infraction of forex remittances.”
 
MTN is seeking a court order restraining the 1st and 2nd defendants from giving effect to the decisions, demands and directives in their letters of August 28,2018 and September 3, 2018, respectively.
 
However, the CBN, in its statement of defence and counter-claim, urged the judge to dismiss MTN’s suit, insisting that the telecommunications giant must refund $8.1bn to the Federal Government.
 
The Attorney General of the Federation on his part has yet to file any defence.
 
The dispute over $8.1bn repatriated funds started when the CBN alleged that MTN used improperly issued certificates of capital importation to transfer funds out of Nigeria after the telecom giant converted shareholders’ loans in its Nigerian unit to preference shares in 2007, but MTN denied the allegations.
 
The apex bank said MTN’s banks failed to verify that it had met all the country’s foreign exchange regulations.
 
 
Source: The Punch
Published in Telecoms

The launch of the Chibuto heavy sand exploration project is set to move ahead and its impact will radically change the quality of life of the population, the director of Mineral Resources and Energy of the Mozambican province of Gaza.

Castro Elias also told Mozambican state news agency AIM that Chinese company Dingsheng Minerals has already installed a sand processing plant with the capacity to process 10,000 tonnes of material a day.

He added that the Chinese company is currently preparing to install nine more platforms by mid-2019 to allow for the daily processing of 100,000 tonnes of sand.

The agency also reported that studies are underway to determine how best to distribute the ore extracted from the sands, and the construction of a port in the Chongoene region, about 15 kilometres from the city of Xai-Xai, the provincial capital of Gaza.

The initial project envisaged the construction of a railway line from Chibuto to Lionde in the Chókwè district from where the ore would be disposed of at the Matola terminal in Maputo province.

The source said that following more in-depth studies, the conclusion was that the construction of a port at Chongoene was more feasible, and the process is moving ahead in order to secure space for setting up that project at a very advanced stage.

The Chibuto heavy sands project will initially occupy an area of ​​10,000 hectares that in the future, depending on the growth of the project, could extend to another 15,000 hectares.

 

Credit: Macauhub

Published in Business

To some observers, South Africa’s recent investment summit led by the president Cyril Ramaphosa, seemed like much ado about nothing. Several of the projects announced had been incorporated into companies’ plans for some time. And, combined with the fact that the summit had a showbiz style about it, it’s tempting to see the event as little more than smoke and mirrors.

But the summit could be more than the sum of its parts. It could be an important step forward to reviving economic growth in South Africa.

One notable outcome was that, in one crucial respect, Ramaphosa nailed his colours firmly to the mast. After the confused and confusing sophistry of the era under Jacob Zuma’s presidency, Ramaphosa committed his government to a market economy, where obstacles to private investment would be removed, where possible.

This moment is reminiscent of 1980 in India. That year, Indira Gandhi committed the Indian Congress Party to business-friendly policies. Reforms were slow, picking up a little under Rajiv Gandhi a few years later. And the major structural economic reforms only took place in 1991 under India’s new Prime Minister P. V. Narasimha Rao and the new Finance Minister Manmohan Singh.

Yet, India’s growth spurt clearly began after Indira Gandhi’s signalling and Rajiv’s initial tinkering. It didn’t wait for Rao and Singh’s dramatic reforms a decade later.

This is consistent with contemporary analysis of economic growth. Recent thinking by renowned Harvard-based economist Ricardo Hausmann and colleagues suggests that what stimulates significant growth acceleration is often not major structural changes – it can be significant incremental shifts.

The economists found that major structural reforms seldom preceded significant growth accelerations. As his colleague Dani Rodrik put it recently:

in economies that suffer from multiple distortions, small changes can make big differences.

The small change made in India was a clear shift by the dominant political party towards business-friendly policies.

Could the same be true for South Africa? Has South Africa reached it’s own Indira Gandhi moment?

Signals at the summit

Amid a great deal of fanfare, an audience of 1300 business and government leaders, and one of the globe’s most successful entrepreneurs Chinese internet commerce magnate Jack Ma, Ramaphosa announced R209 billion worth of investment at the summit.

It was important for the president to meet expectations by announcing concrete outcomes. But what was possibly more important was that he used the opportunity to send out a number of signals.

To please his own constituencies in the African National Congress (ANC) and the unions, he referred to the end of the “investment strike”; some critics of business had said they were holding back their investments as a deliberate policy.

More significantly, most of his messaging was aimed at reassuring the business community. He talked about how their investments and property were safe and how their factories were protected from expropriation by an independent judiciary and the rule of law.

Land reform would continue, he said. But it would be “fair and equitable”. Transformation would continue:

while providing certainty to those who own land, those who need land, and to those who are considering investing in the economy.

Perhaps the most telling signal was the apparently off-the-cuff remark he made dismissing the concept of “white monopoly capital”. At the dinner which followed the conference he said:

We have become accustomed to … treating our entrepreneurs and business-people (badly) and called them all sorts of names. We’ve treated them like enemies and… (called them) white monopoly capital – that must end today.

The term “white monopoly capital” is an accurate approximation of the distribution of economic power under apartheid, and much of the imbalance in economic power remains. In the Zuma era, the term was popularised by the now defunct public relations firm Bell Pottinger under contract to the Gupta family and was used by some as a cover for looting government and its agencies.

Ramaphosa, who became a successful capitalist after he left Parliament in the mid-1990s, has now signalled that he wants to build trust between government and white owned businesses. This won’t be easy. There are still elements in the ANC that reject capitalism while others want to continue using the term “white monopoly capitalism” as a battering ram.

Credibility gap

South Africa’s disadvantage is that the country’s credibility has been damaged. After 15 years of transparent social democratic policies – from 1994 to 2009 – the country lurched into confusion under Zuma’s presidency. The ANC government became opaque, volatile and unpredictable.

The consequence was a loss of credibility in the Zuma era. Ramaphosa’s biggest challenge therefore is to recover credibility.

Ramaphosa and his advisors will be asking what can we do to rebuild credibility fast?

The answer seems simple: those involved in state capture must go, looters must be punished, and constructive policies must be carefully prepared and implemented with authority and urgency. These include fixing the state owned enterprises as Finance Minister Tito Mboweni repeatedly pointed out in his recent budget speech , better regulation for the network industries (energy, telecommunications, water) and sorting out public transport systems. In addition, honest leaders need to be appointed to the criminal justice institutions.

These all have been promised since Ramaphosa’s first State of the Nation Address in February.

The trickier, and implicit question that investment decision-makers will be asking is, is Ramaphosa’s sway over government as strong as that of Indira Gandhi’s in India in 1980? Or is the president yet to demonstrate complete control over the ANC?

The answer, unfortunately, is probably that an election has to be reasonably convincingly won before he can win the credibility he so badly needs.The Conversation

 

Alan Hirsch, Professor and Director of The Nelson Mandela School of Public Governance, University of Cape Town

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Opinion & Analysis
  1. Opinions and Analysis

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