Items filtered by date: Wednesday, 15 March 2017
Wednesday, 15 March 2017 17:54

Nigeria: the next chapter?

Nigeria presents an interesting tale of seemingly opposites in the African growth agenda. Simultaneously taking pole position as the largest economy in Africa in 2016 and yet suffering from its worst recession in 25 years is indicative of both the ups and downs that the country’s economy has been through.

The last 24 months, in particular, have been difficult for the nation as an exodus of foreign direct investment (FDI) and assets took place prior to and at the time of the last Presidential elections in February 2015. The country faced a liquidity crunch, with the Central Bank and Nigerian stock exchange both facing trials and the country’s reserves decreasing from over $50 billion to $20 billions.

Various other socio-economic issues additionally came to the fore; volatile commodity prices, poor production in the dominant oil sector and depressed import levels, a devalued currency, inflation, high unemployment and the continuing challenge of corruption.

In line with these developments, foreign exchange suffered a blow. What impacted on this was that Nigeria has seven official and unofficial exchange rates from the official Central Bank rate to the parallel Charles Wellermarket or street rate - leading to market speculation.

As such, keeping foreign exchange and how its rates are determined under control comes with inherent challenges - and, as is to be expected, there have been considerable swings in the rates over the past 24 months. This has been marked by exchange rates that have ranged from between N305 to the dollar and N520/$ at its lowest level on the street.

Also contributing to the crisis was overseas remittances – money sent from Nigerians living outside the country to citizens within its borders – which is the second highest source of foreign exchange in Nigeria. Twenty million Nigerians living elsewhere in the world have a significant impact on spending power, particularly when those remittances come in the form of British pounds and US dollars. However, with the banks foreign exchange crisis in late 2015 and 2016 stemming from the unavailability of foreign exchange, that value fell considerably.

Despite the undoubted hardships the Nigerian economy and trade environment has struggled through over the past 24 months, there have in the last year been marked improvements that are driving a general consensus of a more positive outlook for the country.

Unpredictable commodity prices levelled out and even saw an upswing at the beginning of 2016 that continued throughout the year – and with the return of international banks providing additional credit lines to Nigerian banks to fund trade, an increase in FDI and a number of significant capital markets transactions such as the listing of $1 billion Federal Government (FGN) Eurobond on the Nigerian Stock Exchange in March 2017, there is growing evidence of a certain optimism in the country.

Upward movement in performance in the manufacturing, energy, retail and agriculture sectors mean that there are buds of growth starting to show. Dangote Cement, the largest cement producer across the continent, for instance, has in the last year built additional manufacturing plants in the country that have seen Nigeria stop importing cement at all – and, in fact, start exporting the product to the rest of Africa. Sales from its Nigerian operations increased by 13.8% in the last year.

This development speaks directly to the trend of a fundamental and ever-increasing move to local production. In retail, significant shelf space is taken up by Nigerian products from fresh produce right down to soap and toothpicks. Shoprite Nigeria even introduced its ‘Made in Nigeria’ campaign on 1 March this year to promote local producers; according to reports, over 80% of products in the retailer are locally made and sourced. “Made in Nigeria” now has a meaning and is not just a passing comment.

The shift to local was mostly driven by the lack of availability of foreign exchange through the Central Bank, and it essentially changed the economic focus of the country from importing to local production - noticeable too in agriculture, for example, where there is a concerted push towards domestic rice production, as well as export of agri commodities. Dangote Rice – a subsidiary of the Dangote Group, which also owns Dangote Cement – has plans to produce 225 000 metric tonnes (MT) of parboiled, milled white rice in 2017 alone and moving up to 1 000 000 MT over the next five years, satisfying 16% of the domestic market.

Overall, the difficulties of the past two years have caused the country to diversify its economy, making the move away from reliance on oil to industries such as manufacturing, agriculture and retail and driving growth by increasingly investing in local producers. Nigeria has over the years proven to be a resilient country - and with improved transparency between banks and international companies, greater regulation and an increasingly inclusive economy, the Nigerian good news story is slowly but surely starting to write a new chapter.

 

By Charles Weller, Head of FI Trade Nigeria, Barclays Africa

Published in Economy
Wednesday, 15 March 2017 10:01

Zimbabwe’s dying dictatorship

In 2016, as President Robert Mugabe celebrates his 92nd birthday and 36th year in power, Zimbabwe stands on the brink of another meltdown. The country’s current economic insecurity and political conflict are reminiscent of 2000–08, when hyperinflation and electoral violence were rife. This time, however, the stakes are even higher as a floundering authoritarian regime faces a leadership succession with little clear guidance on how to navigate the transition.
From its independence in 1980 to 2009, Zimbabwe was dominated by Mugabe’s party, the Zimbabwe African National Union-Patriotic Front (ZANU-PF). A strong showing by the opposition Movement for Democratic Change (MDC) in the 2008 general election led to the country’s first-ever coalition government in 2009. But that government fell with the controversial 2013 elections, which were decided in favor of the ZANU-PF by implausibly large margins. Now unrivaled once more, the ruling party has failed to offer anything in the way of economic or political reforms. But, if anything, recent electoral success has weakened the ZANU-PF by concentrating political competition within it.
As if struggles within the ZANU-PF over the succession to the presidency weren’t bad enough, Mugabe’s advanced age and failing health have also left him increasingly unable to control events. And so the country is transfixed by a macabre death watch and an internecine power struggle, and the longer they go on, the more likely that any political transition will be unpredictable, disorderly, and perhaps even violent.
HARD TIMES
After a brief period of recovery earlier this decade, Zimbabwe’s economy has sharply declined. GDP is effectively flat, manufacturing enterprises are rapidly closing, and unemployment is skyrocketing. Revenues from diamonds, platinum, and gold—mining is Zimbabwe’s most productive sector—rarely reach the national treasury. As a result, an insolvent government is unable to pay civil servants and pensioners on time (it gives priority to the armed forces and war veterans). Meanwhile, private-sector banks and their customers face acute shortages of cash. Up to nine out of ten Zimbabweans now piece together their livelihoods through petty trade, subsistence agriculture, or artisanal activities, and many families depend on remittances from relatives working in southern Africa or abroad.
Economic hardship has been exacerbated by climate change and an El Niño–induced drought. After crop failures in the south and west of the country, an estimated three million people will face food insecurity this agricultural season. International relief agencies, funded in part by the U.S. Agency for International Development (USAID), continue to help plug the food gap. Yet hungry rural dwellers are vulnerable to the ruling party’s use of food as a weapon; they must often prove their loyalty to the ZANU-PF as a condition for access to relief aid. And in urban areas, essential services—especially household water—are increasingly unreliable, although imports have largely eased electricity shortages.
The government recognizes that it has to respond to the economic decline. But its efforts to date have been lacking. The minister of finance, Patrick Chinamasa, has admitted that recovery will require international financial aid, which would come with strict conditions of debt repayment and cuts to the country’s bloated public sector. At the same time, Mugabe’s nephew Patrick Zhuwao—the minister of youth, indigenization, and economic empowerment—calls for private firms to cede majority shareholdings to “indigenous” (meaning black) Zimbabweans. Mugabe himself blows hot and cold, backing one policy faction and then another depending on pressure from political clients and the state of the government’s finances. The resulting uncertainty—reflected in recent government decisions to take over all diamond mining operations and to introduce a quasi-currency known as “bond notes,” which are used as a substitute for cash—leaves foreign investors and local consumers alike increasingly jittery.
Confusion over land ownership also blocks recovery. Private property rights are in tatters: as a result of the ZANU-PF’s chaotic Fast Track Land Reform Program—violently launched in 2000—the state now owns most agricultural land. Large-scale commercial agriculture was not the only victim of land reallocation: small-scale producers on resettled land and subsistence producers in communal-use areas also lack secure tenure. As a result, farmers are subject to arbitrary dispossession, usually at the whim of political predators. Against this background, tentative announcements about possible compensation for dispossessed landholders hardly seem credible.
GAME OF THRONE
Overshadowing all Zimbabwe’s other problems is uncertainty about leadership transition within the ruling party. By all appearances, Mugabe intends to serve a life presidency, die in office, and have his body transferred directly from State House (the official presidential residence) to Heroes Acre (the burial ground for national liberators). First Lady Grace Mugabe has even floated the creepy idea that Mugabe might rule posthumously from the grave. The presumed indispensability of the country’s founding father lies at the crux of the ZANU-PF’s dilemma: how to make a peaceful change of leader while preserving the party’s dominance over state institutions.
Outcomes are hard to foresee in good part because the rules of succession—often obscure and untested in autocratic regimes—are especially murky in Zimbabwe. The 2013 national constitution stipulates that if the president dies, resigns, or is removed the first vice president assumes office until the end of the presidential term. In last-minute bargaining over the implementation of the constitution, however, this provision was deferred for ten years; it will only apply after elections in 2023. Until then, the vice president who last acted in the president’s absence will serve for 90 days while the ruling party determines a successor. The problem is that the ZANU-PF party constitution, which was reportedly revised in 2014 to address the party’s internal procedure for replacing its leaders, has never been made public.
The 90-day window for the party to choose a successor is likely to be turbulent. Intraparty dynamics were once understood as a struggle between two main factions: one led by Joice Mujuru, a liberation war heroine and former vice president; the other by current Vice President Emmerson Mnangagwa, a hard-line fixer and party grandee. The ZANU-PF was thus split on vertical lines between two influential barons, each with their own regional followings and presumed power bases within the security services.
But the established political balance shifted sharply in December 2014, when, following lurid accusations from Grace Mugabe of plots to assassinate the president, Mujuru and her key lieutenants were purged from the party. For a moment it seemed that the way had been cleared for Mnangagwa to be anointed as Mugabe’s successor. But, within months, Grace (her position now confirmed as Mugabe’s most influential advisor) turned her ire on the new front-runner, this time alleging that his allies intended to slay her son. Now, for the first time, the main divide within the party is horizontal; that is, across generations. It pits Mnangagwa’s old guard of liberation war fighters (known popularly as Team Lacoste to reflect their leader’s nickname of Crocodile) against the so-called G-40, an insurgent group of younger politicians, who were born too late to take part in the independence struggle and have attached themselves to the first lady’s high-fashion coattails.
In this imbroglio, the security sector is likely to be a decisive player. The army, police, and intelligence services have long been the ZANU-PF regime’s enforcers. In 2008, they pushed for Mugabe’s reinstallation after he lost the first round of presidential elections; and in 2013, “boys on leave” from the armed forces, in conjunction with war veterans and youth militias, played a key part in disciplining the electorate. Since then, however, the security sector has fallen prey to some of the same factionalism as the ruling party, and there is speculation that it might put forward one of its own as a contender for the throne. Whether it supports a civilian or acts on its own account, the security sector will be a forceful and possibly decisive contestant in the struggle to determine Mugabe’s successor.

A WOUNDED CIVIL SOCIETY
The political opposition, meanwhile, has imploded. The humiliating defeat in the 2013 elections caused an already fractured MDC to splinter even further: leading party critics of mercurial MDC President Morgan Tsvangirai—such as Tendai Biti and Elton Mangoma—have founded boutique party offshoots. A new element emerged in early 2016 when Mujuru, now exiled to the opposition wilderness, established Zimbabwe People First, whose ZPF acronym parodies (and thereby implicitly claims the true mantle of) the ruling ZANU-PF. The fragmented opposition, however, neither inspires the public nor frightens the governing party. With the exception of the Tsvangirai wing of the MDC, all opposition entities remain marginal or untested. Yet in a step forward, most now acknowledge—at least rhetorically—that they will have to come together before the next elections in 2018.
Zimbabwe’s civil society was also wounded by the country’s reversion to one-party dominance. Western donors, fatigued by a decade and a half of seemingly ineffective democracy promotion, have withdrawn or reduced assistance to activists. Surviving organizations within the pro-democracy camp have been forced to reconstitute and reposition themselves, including by taking on broader charitable or developmental tasks. The trade union movement, once the backbone of opposition organizing, is reportedly bankrupt. The churches—always reticent and increasingly led by preachers of a gospel of personal prosperity—remain uninterested in politics. And a once vibrant and critical academia has now either been co-opted or closed down. In search of a strategic vision, some civil society groups are now encouraging popular debate about the 2013 constitution, in particular about legal reforms to protect basic rights and freedoms.
The involvement of Zimbabwean citizens in the political process is central to any transition to a more democratic regime. But getting them to join in won’t be easy. Because rulers do not hesitate to violently suppress dissent, citizens are risk averse and acquiescent. According to Afrobarometer, an independent survey of public opinion, nine out of ten Zimbabweans say that they must be “very careful what [they] say about politics,” the highest level recorded across 36 African countries in 2014.
Yet, as economic conditions deteriorate and the ruling elite devours its own, some citizens are waking up. Sidewalk vendors resist expulsion from city centers, disaffected youths occupy Harare’s Africa Unity Square, and a Baptist minister’s patriotic poem (#ThisFlag) trends on Twitter. Civil servants threaten to strike over delayed salary payments, and protests over police roadblocks and new import restrictions have turned violent. Most significantly, Tsvangirai recently led mass rallies in Harare and Bulawayo to condemn immoral and incompetent government. They were attended by thousands. Growing poverty and official corruption (and the connection between the two) were powerful rallying tools for a pro-democracy movement in Zimbabwe in the late 1990s and early 2000s. Today, plummeting living standards and failing social services are again prompting a downwardly mobile citizenry to act.
INTERNATIONAL RESPONSE
After years of strained relations with the outside world, Zimbabwe is now seeking to mend fences. For instance, in a bid to reenter the international financial system, the country is currently attempting to repay almost $2 billion that it owes to the International Monetary Fund, World Bank, and African Development Bank. In return, the government hopes to receive medium-term loans to keep Zimbabwe’s ailing economy afloat. Any assistance from international financial institutions, however, will be conditional on difficult economic reforms—such as public sector payroll cuts and the privatization of state-owned enterprises—that prominent elements within the ZANU-PF are known to oppose. Successful implementation of these reforms will be difficult.
Zimbabwe’s move toward financial responsibility is welcome, however tentative it may be. Yet contrary to the position taken by the European Union, which has moved to normalize relations, the United States should remain guided by the requirements of the 2001 Zimbabwe Democracy and Economic Recovery Act (ZDERA). This legislation promises to restructure the country’s debt and to support an equitable land reform program in exchange for clear political and constitutional conditions, including free and fair elections, an end to political violence, and the subordination of the armed services to elected civilian authority. This last requirement is critical. If Zimbabwe’s security sector remains unified, it will be a force for order but also for continued authoritarianism. If it divides into armed political factions, however, a much more volatile transition looms.
Although the victims of drought and HIV/AIDS should still receive international humanitarian aid, now is not the time to ease restrictive measures against the corrupt officials and human rights abusers at the pinnacle of Zimbabwe’s ruling party. In particular, Western governments should be cautious about embracing the siren song of so-called reformers within the ZANU-PF. As some of the richest people in the country, these political and security elites stand to benefit personally from greater access to the global economy. But, since their goals include the maintenance of the ZANU-PF’s dominance after Mugabe’s inevitable demise, their commitment to political reform is highly questionable. The United States and like-minded allies should make it clear that any leadership transition that fails to follow the rule of law or to meet popular aspirations will not be considered a transition at all. – Foreign Policy

By Michael Bratton and Eldred Masunungure

Published in Opinion & Analysis

As part of our just released ‘South Africa 2017 Wealth Report’, we rated the 10 greatest business men and woman in SA history.

Criteria for ratings included:
• Impact on South Africa and the world.
• Innovation.
• Jobs created.
• Ability to overcome obstacles.

As reflected, Sol Kerzner tops the list.

1. Sol Kerzner
Sol Kerzner’s impact on South Africa has been massive. Most of the top luxury hotels and resorts in the country were built by him. Some notables include: Sun City, the Lost City, Sandton Sun, the Beverley Hills Hotel, the Elangeni and the Beacon Island Hotel. 

What is interesting about these hotels is not so much their success, but rather the impact they have had on the surrounding areas.

For instance, when the Beverley Hills Hotel was built in 1964, Umhlanga was a tiny resort town that most people had never heard of. However, the hotel’s success drew large numbers of wealthy people to the Sol Kerznerarea and Umhlanga eventually became the main holiday hotspot for wealthy Joburgers in the 1970s, 1980s and 1990s. Then in the 2000s, Umhlanga overtook Durban to become the top prime area in Kwazulu Natal for wealthy people to live and work.

The Beacon Island in Plettenberg Bay (“Plett”) is a similar story. When the hotel was built in 1972, Plett was still a small village. However, after its success the town took off and Plett now ranks as the top second home hotspot for the super-rich in South Africa. 
Last, but not least, is ofcourse Sun City. The resort, which was built by Sol Kerzner in 1979, set the benchmark for casino and golf resorts worldwide. The resort includes the spectacular Lost City, which was added in the 1990s.
Since his success in South Africa, Sol Kerzner has built several successful hotels worldwide including: Atlantis Bahamas, Atlantis Dubai, the One & Only Mexico, the One & Only Australia, the One & Only Mauritius and the One & Only Bahamas.

2. Donald Gordon
As the founder of Liberty Life, Donald Gordon will always be remembered for what surely remains his greatest achievement - the shopping centre that set the benchmark for luxury and class worldwide. The shopping centre that the greatest city in Africa is now built around. The Monolith. Sandton City.

3. Richard Maponya
Despite the many obstacles of the Apartheid government, Richard Maponya became a beacon of hope to the people of Soweto, starting several successful business in the area (predominantly in the retail and property space). He recently helped to develop Maponya Mall, which is one of the largest shopping centers in the country.

4. Harry Oppenheimer
Harry Oppenheimer led South Africa’s two biggest companies (De Beers and Anglo America) through their most successful years and created more jobs than any other South African businessman in history.

Harry Oppenheimer and his wife Bridget were also keen horse breeders. They bred Horse Chestnut, which is arguably the most exceptional race horse ever bred in South Africa. Horse Chestnut was known for winning races his by large margins – he won the J&B Met by over 8 lengths.

5. Pam Golding
Pam Golding formed Pam Golding Properties in 1976 and turned it into the largest estate agency in the country. Her company has since gone onto transform the luxury residential landscape in South Africa, especially in Cape Town’s Atlantic Seaboard.

6. Adrian Gore
Adrian Gore founded Discovery Health in 1992. His company went onto change the health insurance space in SA forever with innovative products such as Vitality. Many insurance companies overseas have now begun to copy the Discovery model and Discovery themselves have taken their products abroad with good success.

7. Nthato Motlana
Dr. Nthato Motlana is ‘the renaissance man’ of South Africa, with successful careers in politics, medicine and business. He was the founder of NAIL and a mentor to many of the top business leaders in South Africa today. He is considered by many to be the father of economic empowerment in South Africa.
Patrice Motsepe
8. Patrice Motsepe
After a successful career as a lawyer at Bowman Gilfillan, Motsepe founded ARM (African Rainbow Minerals) in 1997 and turned it into one of the largest mining and mineral groups in the world. He has since diversified into a number of other key sectors.

9. Anton Rupert
Dr. Anton Rupert founded the Rembrandt Group in the 1940s. After initially focusing on the tobacco industry (Peter Stuyvesant), his company soon moved into industrials and luxury goods. Rembrandt has since been split into Remgro (an investment company with financial, mining and industrial interests) and Richemont (a Swiss-based luxury goods group).

Rupert was also a founding member of the WWF (World Wildlife Fund) in the 1960s. His son Johan has since turned Richemont into one of the largest luxury goods companies in the world.

10. Douw Steyn
Douw Steyn founded Auto General Insurance in 1985 and turned it into one of the largest insurance companies in South Africa. He has since started similarly successful businesses in the UK (Compare the Market, Budget Insurance). He recently helped to develop Steyn City in Johannesburg, which is one of the most impressive residential estates in the world.

Published in Business

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