Powered by Asoko Insight

See all the latest news from the Business Council for Africa and from around the continent. 

2017

January 2017

30 January 2017

Rand Merchant Bank lists ‘US Dollar Custodial Certificates’ (South Africa)

By Staff Writer | Africa Global Funds

Rand Merchant Bank (RMB), a division of FirstRand Bank, has listed a new product on the Johannesburg Stock Exchange (JSE), which will enable companies and individuals to hold unlimited quantities of cash in US dollars.

US Dollar Custodial Certificates (DCCs), listed on the Exchange Traded Funds sector of the JSE on January 24, are easily tradable, dollar-denominated investment instruments that have no exchange control implications.

RMB, which created, issued and listed the instruments, will act as the market maker providing liquidity in the product.

RMB said that investors earn the return of a US Treasury note, receiving an income stream in US dollars, which is settled in Rands.

DCCs represent the first inward listing of US Treasury notes on the JSE giving investors direct exposure to the Treasury notes.

Investors’ credit exposure will be to the US Federal Reserve, giving them protection from the possible insolvency of a bank.

Ebrahim Patel, RMB’s Alternative AssetSpecialist, said: “Investors are able to invest in a global currency, therefore avoiding the potential devaluation of their rand savings and working capital.”

“DCCs will therefore benefit investors who take the view that investing in dollars may preserve their assets, while businesses can take advantage of a dollarized working capital solution,” he added.

Source: https://asokoinsight.com/news/rand-merchant-bank-lists-us-dollar-custodi...

30 January 2017

Lubricants producer Engen appoints a distributor in Mozambique

By Antony Kiganda | Construction Review Online

ENGEN, a leading producer and marketer of a wide range of fuels, lubricants and oil-based products, has appointed D.M. Distributors as official distributor of lubricants in Mozambique’s Nacala region.

Rogerio Fernandes, Engen Commercial Sales Manager: Mozambique North Region, says the company is pleased to have announced the appointment.

“D.M is an established distributor in the region with a reputation for integrity and competitiveness,” says Fernandes.

Owned by Danilo Morgado, D.M. Distributors will work within a rolling annual contract and will help spearhead Engen’s drive for growth in the commercial and retail space.

It will distribute the full range of Engen’s automotive and industrial lubricants and greases, as well as selected PETRONAS Syntium engine oils and PETRONAS marine lubricants from Engen’s Nacala Depot.

General Manager of Engen’s International Business Division, Drikus Kotze, says in addition to D.M. Distributors’ distribution strength, the partnership has strategic importance as it will increase Engen’s lubricants footprint in Mozambique.

“The port of Nacala in the north of Mozambique unlocks the economic potential of Northern Mozambique and offers an economic supply corridor to neighbouring landlocked countries,” says Kotze.

Engen Petroleum is a subsidiary of PETRONAS, the National Oil Company of Malaysia and one of the world’s leading integrated energy companies.

Source: https://asokoinsight.com/news/lubricants-producer-engen-appoints-a-distr...

2017

January 2017

27 January 2017

Japan to fund phase two of Ngong Road expansion (Kenya)

By Mugambi Mutegi | Business Daily, Kenya

The second phase of the ongoing expansion of Ngong Road into a dual carriageway will start in July to cover the stretch between Yaya Centre and Dagoretti corner.

The Kenya Urban Roads Authority (Kura) Thursday said the three-kilometre stretch will be financed by the Japanese government, which is also funding the initial phase between the Kenya National Library and Prestige Plaza.

The upgrade is expected to ease traffic on the often clogged stretch that leads to the city centre.

“The Japanese government has committed to finance the second phase as well, based on the timelines,” Kura replied to the Business Daily but did not share details about the cash involved.

The first phase runs for 2.57km and is being built by Japanese firm World Kaihatsu Kogyo (WKK) at a cost of Sh1.4 billion.

Construction started last August and is currently 23 per cent complete.

The urban roads agency expects the stretch to be complete by July. Ngong Road expansion will involve building four vehicle lanes as well as service lanes on both sides, comprising pedestrian walks and cycling paths.

The design also provides for the inclusion of a special bus lane to be used exclusively by public service buses without interacting with the normal traffic, under the rapid transit (BRT) system.

Intelligent traffic lights at major intersections are yet another special feature expected on the road.

Inviting Investors

The smart lights at junctions will allow a longer period of traffic flow from roads with most vehicles as opposed to the current analogue lights which are time-based, restricted to allowing and stopping vehicles at intervals.

Kura Thursday put a notice in the dailies inviting investors to bid for yet another stretch of the Ngong Road — between Dagoretti Corner and Karen Roundabout — to be financed by the Kenyan government.

The eight-kilometre stretch is part of the first phase but had been left out in the Japanese funding, prompting the Kenyan government to step in.

Kura communications officer John Cheboi Thursday said the tender for the project will be issued by April, paving way for construction in July which will run concurrently with the second phase.

Source: https://asokoinsight.com/news/japan-to-fund-phase-two-of-ngong-road-expa...

27 January 2017

Zimbabwe has only $300 million in circulation, government advisor urges rand adoption

By Staff Writer | The Source Zimbabwe

Zimbabwe has $304 million hard cash in circulation including $73 million in bond notes as of January 2017, about a third of optimum demand, reflecting a worsening liquidity crisis, an economist said.

Ashok Chakravarti, who also advises the Office of the President and Cabinet on improving the ease of doing business, told a Confederation of Zimbabwe Industries (CZI) symposium on Thursday that hard cash in circulation inclusive of bond notes and US dollars was five percent of total bank deposits which has contributed to the country’s liquidity crisis.

“If you look at comparative studies from other economies cash to deposit ratio should be between 10 (percent) to 12 percent. If an economy has got less than 12 percent, it faces liquidity crisis…..We need $900 million in cash to have adequate liquidity,” said Chakravarti.

Hard cash circulation in the country has dropped by 53 percent from $642 million in 2013 to $304 million currently. However, bank deposits have increased from $4,728 billion in 2013 to $6,2 billion in 2016.

At the onset of the multicurrency system in February 2009, total deposits in the banking system were $1,66 billion. Cash to deposit ratio has decreased from 35 percent in 2009 to five percent in January 2017.

The amount of cash held in Nostro accounts declined by 61,6 percent from $424 million in 2009 to $163 million as at November 2016.

“When liquidity challenges first surfaced in 2014, the RBZ reduced cash holdings in Nostro accounts from 30 percent to 5 percent of total deposits to improve the availability of cash in the economy. This decision simply led to externalisation of dollar cash, exacerbating the liquidity crisis,” said Chakravati.

To resolve the liquidity crisis in the country, Chakravarti recommended that the government should reduce wage bill, stop reissuing of Treasury Bills and borrowing from the private sector, repeal the indigenisation policy and adopt the South African Rand.

The business community has voiced its distrust of government methods of dealing with the acute cash shortage of bank notes and urged an adoption of the Rand, a suggestion the State turned down.

Chakravati has previously suggested a three percent import levy across the board which he said could raise $2 billion (annually) to incentivise exporters in real currency instead of the bond note incentive.

Source: https://asokoinsight.com/news/zimbabwe-has-only-300-million-in-circulati...

27 January 2017

Bank of Ghana justifies planned dollar auction to help stabilize cedi

By Staff | Joy Online (Ghana)

The Bank of Ghana (BoG) says its planned injection of dollars into the market is part a broader strategy to help stabilize the cedi.

The Central bank has come under serious criticism over its decision to sell some $120 million for the first quarter of this year.

Economists like Ishmael Yamson believes this strategy of releasing more dollars onto the market to halt the cedis stability is not sustainable and should be stopped.

But the Central Bank Dr. Abdul Nashiru disagrees. He believes this together with other measures, can help stabilize the cedi.

In a separate development, the Central Bank has disclosed it will no longer extend waivers to commercial banks to grant loans beyond a certain fraction of stated capital.

The move has been influenced by rising loan defaults, which could cripple some banks if this policy is not reviewed.

The Governor has also been speaking about plans to allow every Universal Banks to introduce, Islamic Banking products.

Source: https://asokoinsight.com/news/bank-of-ghana-justifies-planned-dollar-auc...

27 January 2017

EU considers spending $196 million to boost Mombasa Port projects (Kenya)

By George Ngigi | Business Daily, Kenya

The European Union is considering investing at least $200 million (Sh20 billion) on Mombasa Port projects including modernisation of berths.

The European Investment Bank (EIB) has already received a request for funding from the Kenya Ports Authority (KPA), which is being processed as a loan, while a grant is also in the pipeline.

TradeMark East Africa (TMEA) country director Ahmed Farah said although a final decision had not been reached, there are high level negotiations going on and was optimistic the funding will come through.

“At the moment what we could say is that a loan of $180 million (Sh18 billion) is being processed while a grant of $20 million (Sh2 billion) is being considered.

“TMEA is assisting with the processing procedures and we expect a decision will be made soon,” Mr Farah.

He spoke during an interview with journalists on Wednesday at the Galaxy Restaurant, Mombasa, after he led a team of EU Delegation to Kenya on a tour of Mombasa Port projects being supported at the TMEA.

Modernising Berths

“The funds will be used for the ongoing modernisation of berths 11 to 14. We are also working closely with the Kenya Revenue Authority (KRA) in a project that will involve replacing the Simba cargo clearance system with a new one,” he added.

Head of the EU Delegation Alessandro Tonoli said the economic bloc, through the EIB, was interested in supporting projects at the port aimed at increasing efficiency and facilitating trade.

“Mombasa Port is the gateway to East Africa and runs the economy of the region with a population of over 200 people and efficiency at the facility is critical and to achieve this we have identified projects for which funding is being processed,” Mr Tonoli said, adding that the finances may be channelled through TMEA.

The other major project being funded by TMEA is the construction of the cruise terminal that will cost Sh100 million.

The terminal is expected to provide services to cruise tourism sector that has started to show signs of recovery after improvement of security in the Indian Ocean.

“TMEA also plans to focus on other areas within the Coast region and not only the port and will support projects that in sectors with a quick economic transformation among the residents,” Mr Farah added.

Source: https://asokoinsight.com/news/eu-considers-spending-196-million-in-loan-...

2017

January 2017

26 January 2017

Bolloré Logistics secures cement plant projects in Nigeria and South Africa

By Antony Kiganda | Construction Review Online

Bolloré Logistics teams have recently secured two key cement plant construction projects in Nigeria and South Africa with one of the largest cement plant production companies in China.

Unicem Nigeria is a joint venture between Lafarge Africa PLC, Holcim, Dangote and Flour Mills to construct and operate a 6,000 tonne per day clinker and cement line in South West Nigeria, near the Calabar Port.

With the shipment of 12 break bulk vessels to the Calabar Port, completed by more than 5,000 truck round trips from the port to the construction site, the Unicem project involved the movement of 500 TEUs and 150,000 freight tonnes of project cargo, which was successfully managed by Bolloré Logistics teams in China and in Nigeria. However, the project also entailed the transport of out of gauge cargo – cement mills – weighing 125 metric tonnes each. Two multi-axle hydraulic trailers were used to transport these 14 pieces of cargo in one shipment. A preliminary road survey and subsequent adjustments to the road infrastructure quality were critical to make this transport a success.

“Bolloré Logistics’ global presence, backed by its experience, infrastructure and relationships in Africa, along with our commitment to growth on the continent, is what provides our customers with cost-effective and reliable end-to-end logistics solutions,” says Jean-Christophe Tranchepain, country head of Bolloré Logistics Nigeria.

PPC, the leading supplier of cement in Southern Africa has entrusted to the same Chinese company the supply of EPC services. This project involved the construction of a 3,000 tonne per day clinker production line, located in Lichtenburg, in South Africa’s North West province. This operation which started in August 2015 is expected to be completed within 25 months.

Bolloré Logistics secured the break bulk sea transportation and inland transport of the construction material and cement plant equipment cargo. To date, 200 TEUs have been moved to the site and 45,000 freight tonnes of cargo have been transported from Jingtang and Tianjin port to the plant site in South Africa.

Source: https://asokoinsight.com/news/bollore-logistics-secures-cement-plant-pro...

26 January 2017

Uganda’s economy to grow by 6% – IMF boss

By Njirani Muchra | Daily Monitor, Uganda

What brings you to Uganda and what is your message to the country?

Let me start by thanking you for this interview with Daily Monitor. This is my first visit to Uganda and I welcome the opportunity to see firsthand the progress that Uganda is making and to focus on the challenges ahead.

I look forward to engaging with President Yoweri Museveni, your policymakers, business leaders, legislators, women leaders, and representatives of civil society. I want to share the IMF’s views, but first and foremost, I am here to listen.

There are several important issues I wish to discuss during my visit. What is Uganda’s growth strategy? How can it address domestic issues such as poverty and inequality?

There is also the challenge of having to carefully balance spending on infrastructure and on social areas, such as health and education.
These are issues that are also faced by other countries in the region and, indeed, globally.

IMF Relations with Uganda

Uganda has had Policy Support Instrument (PSI) programmes with the IMF since 2006.

These programmes aim to support low-income countries that do not need IMF financing, but want close engagement with us via monitoring and policy support.

Uganda has made significant progress in a number of areas under the current programme.

For example, the tax-to-GDP ratio has increased by 2 per cent of GDP over the last three years along with improvements in the collection and administration of taxes.

This helps pay for the increased investment in infrastructure and will contribute to keeping public debt at a manageable level.

Moreover, the programme has helped to provide a framework for economic policies and reforms that can boost medium-term growth.

The PSI also integrates IMF capacity development and training in support of these efforts.

This includes visits by teams from IMF headquarters and our Africa Regional Technical Assistance Centre in Dar es Salaam (East AFRITAC), as well as participation by Ugandan officials in training courses in Washington and at our Africa Training Institute in Mauritius.

Some of the areas in which we have provided this type of support include public finance management and inflation targeting to help guide monetary policy.

IMF’s Growth Outlook for Uganda

Uganda is a vibrant and diverse economy. It has experienced impressive growth and poverty reduction over the last three decades.

Robust and finely balanced macroeconomic policies have enhanced the collection of more domestic revenue, kept inflation in check, and facilitated more spending on key sectors such as energy and transport.

We forecast growth will be about 5 per cent in 2017, broadly similar to the last few years.

Over the medium term, we expect growth to accelerate to over 6 per cent, as the ongoing infrastructure developments bear fruit, investments in the oil sector pick up, and integration in the East African Community creates new opportunities.

It is essential that there be sufficient money allocated for high-quality social spending so that Uganda can make further progress on reducing poverty, raising living standards for all its citizens, and creating more jobs for its young people. This will be crucial in the country’s efforts to achieving the Sustainable Development Goals.

Uganda’s Infrastructure Spending

Based on the fiscal framework that the government outlined in December, our assessment is that Uganda remains at low risk of debt distress. This means that Uganda’s debt is projected to remain at manageable levels, even in the case of shocks.

Over the next few years, Uganda’s debt-to-GDP ratio will continue to rise as the government carries out large infrastructure investment projects. But once these projects are completed and contribute to growth, exports, and fiscal revenues, the debt level is projected to decline again.

Uganda needs to borrow to raise funds for key projects and can afford to do so as long as this external financing is at low interest rates, and preferably on concessional terms (low interest rates and long maturities).

The financing available domestically is not sufficient for the government and the private sector to carry out the necessary investments in a reasonable timeframe.

External borrowing thus allows for higher rates of investment than otherwise possible. It is important that the investment projects that are being financed are implemented in a cost-effective manner, and chosen to generate the biggest possible return in terms of higher growth while keeping debt at manageable levels.

Lastly, how can we ensure that recently-found oil resources benefit all Ugandans?

The oil price movements over the last few years underscore how important it is to have a sound fiscal framework for managing oil revenues.

An effective framework should allow the sustainable use of oil revenues without exposing the government to the risk of having to adjust spending dramatically from year to year, depending on whether prices are up or down.

Strong institutions are critical, and along with prioritisation in the budget process, can help ensure that oil resources, just like all other resources available to the government, benefit all Ugandans, including future generations. The IMF stands ready to work with the government in this area.

Source: https://asokoinsight.com/news/ugandas-economy-to-grow-by-6-imf-boss

2017

January 2017

23 January 2017

EABL puts up ex-Mombasa brewery for sale at $7 million (Kenya)

By Brian Ngugi | Business Daily, Kenya

Beer maker East African Breweries Limited (EABL) has signalled its intention to continue with the sale of prime assets, with the invitation of bids for a disused brewery and a prime piece of land in Mombasa.

The property, which sits on a six-acre piece of land in Mombasa’s Shimanzi Industrial Area, is on sale for a base price of Sh700 million.

“We have been instructed to seek offers in the region of Sh700 million, exclusive of value added tax,” property manager Knight Frank says in the sale documents.

This is the fifth year in a row that EABL is selling assets to help shore up its bottom-line.

The brewer is selling the Mombasa property as it moves to exit a leasehold agreement it has had with the Kenya Railways Corporation (KRC) for more than 60 years.

EABL, which is 50.02 per cent owned by UK’s Diageo, has recently sold several parcels of land, go-downs, its glass-making subsidiary as well as its Nairobi head office building in lucrative transactions that have helped spice up shareholder earnings.

The Mombasa facility, which was commissioned by colonial governor of Kenya Sir Evelyn Baring in February 1952, was one of two breweries (alongside the Kisumu plant) that EABL operated outside Nairobi.

The two factories were closed down to centralise production and distribution operations at the company’s Ruaraka headquarters in Nairobi.

Knight Frank described the Mombasa property as ideal for mixed-use development consisting of offices, retail outlets and logistics centre, manufacturing plant or roadside retail centre.

The property is located on Mombasa’s Makande Road – 1.5km from the Kilindini Port. Key facilities in the same locality include the National Cereals and Produce Board (NCPB) depot, Grain Bulk Handlers and other depots belonging to oil marketing companies.

Knight Frank says in the sale notice that the property is developed with an office block, a former brewing complex, bottling halls, workshops, warehouses and gate houses all measuring approximately 160,000 square feet.

“The property is currently vacant save for two base stations located within its precincts, one for Safaricom and the other for Airtel,” says the sale notice.

The property is currently held under a leasehold title from the KRC for a term of 72 years from January 1, 1977, meaning that there are 33 years left. EABL pays the railway firm Sh10 million in rent annually.

EABL management declined to comment on the transaction, insisting that the sale plan had entered a “closed period” pending release of half-year financial results later this week.

Source: https://asokoinsight.com/news/eabl-puts-up-ex-mombasa-brewery-for-sale-a...

23 January 2017

Treasury reopens 2007 bond seeking $289 million to plug budget deficit (Kenya)

By Charles Mwaniki | Business Daily, Kenya

The government has set the target for its first bond issue of 2017 at Sh30 billion as it moves to plug a gaping budget deficit amid huge debt maturities in quarter one of this year.

The Treasury has opted to reopen a 15-year bond initially issued in 2007, meaning it effectively has a five-year tenor (its maturity is in 2022).

It is earmarked for budgetary support, with the government still needing to plug a deficit of Sh516 billion for the 2016/17 fiscal year.

The paper is offering a fixed coupon rate of 13.5 per cent, similar to the average rate on offer for five-year bonds in the past two years.

An investor will therefore earn 6.75 per cent every six months when the interest income is normally calculated and paid.

“We opine that the CBK settled on the bond, which has a five-year tenor, on account of the shilling’s weak outlook in the near term causing most investors to employ a short term duration strategy. The five-year yield on the curve has averaged 13.49 per cent within the last two years,” Genghis analyst Churchill Ogutu said in a fixed income note.

It is on sale at a time when liquidity in the market has tightened due to a CBK mop-up in partial support of the volatile shilling.

Indicative of the tight market, the interbank rate has climbed to nine per cent, its highest level in six months with banks transacting Sh217 billion on the platform since the beginning of the year.

The Treasury has so far kept off borrowing from the international market despite a Sh287 billion target for external debt.

It is, however, facing heavy maturities in February (Sh106 billion) and March (Sh91.5 billion) that will need to be rolled over through new borrowing, possibly straining the domestic market and putting pressure on yields.

At the same time, the government has been rejecting expensive bids in recent issues, given that it is ahead of the pro-rated target for domestic borrowing for the fiscal year.

Source: https://asokoinsight.com/news/treasury-reopens-2007-bond-seeking-289-mil...