Items filtered by date: Friday, 19 May 2017

South Africa, a net importer of refined oil products, is looking to West Africa and the Middle East, including Iran, for potential partners on a new refinery project, energy ministry officials said on Friday.

Energy minister Mmamoloko Kubayi told parliament that the cabinet expects to decide by December whether to build the refinery that has been under consideration for almost a decade.

National oil company PetroSA has promoted the idea of building a refinery with a capacity of up to 400,000 barrels per day on the east coast, but the government was put off by the $10 billion price-tag in 2010 and a lack of equity partners.

Kubayi said the refinery was now urgent because South Africa's oil imports were increasing.

She said that a public-private partnership to develop the refinery, which would be majority owned by the government, was the preferred approach.

"By the time any new refinery is completed, the country will be importing in excess of a third of its fuel requirements," she said.

The acting director general at the ministry of energy Tseliso Maqubela told Reuters after a separate press conference that South African authorities were in talks with countries and firms from the Middle East and West Africa to build the refinery.

"At this stage no country is excluded," Maqubela said when asked if Iran was among the countries being considered.

He said there was no decision yet on the new refinery's production capacity or its construction costs.

Royal Dutch Shell, BP, Total and Sasol are among the main refinery operators in Africa's most industrialised country.

South Africa bought around 68,000 bpd of crude from Iran in May 2012, a month before it halted crude purchases as Western countries pressured Tehran over its nuclear programme.

Pretoria, which also gets oil from Saudi Arabia, Nigeria and Angola, has said it wants to resume imports from Iran since Western sanctions were lifted in 2016.

According to Thembisile Majola, the deputy minister of energy, building the refinery would help South Africa maintain some control over a vital resource such as petrol, diesel and jet fuel.

"There are some issues around sovereignty that are linked to refining capacity," said Majola.

Kubayi also said the government wants to increase the participation of black fuel wholesalers in importing crude oil, with an immediate focus on West African crude oil, which presently accounts for around half of South Africa's crude imports.

"The modalities of this strategic approach will be finalised after consultation with the major oil companies in this financial year," she said.

By Wendell Roelf (Editing by James Macharia and Susan Fenton) - Reuters

 

Published in Economy

Nigeria's record 7.44 trillion naira ($23.62 billion) 2017 budget has been received by the presidency for it to be signed into law, a government official said on Friday.

Ita Enang, senior special assistant to the president on Senate matters, said the spending plan, which is aimed at pulling Africa's largest economy out of its downturn -- had been sent to the acting president, Yemi Osinbajo. It was passed by parliament last week.

The oil producer is in the second year of a recession brought on by low crude prices, which have slashed government revenues, weakened the naira and caused chronic dollar shortages.

The budget must be signed by the president to become law. President Muhammadu Buhari is on medical leave in Britain and has handed over power to his deputy, Osinbajo, who will sign the budget in the president's absence.

"After I handed the budget, as passed by the National Assembly, to the acting president he said he would assent to it after the laid-down procedure," Enang told journalists in the capital, Abuja, after leaving a meeting with Osinbajo.

Last year's budget -- passed in May 2016 -- was delayed for months due to disagreements between lawmakers and the presidency, which froze the allocation of money for government projects and deepened the economic crisis. Lawmakers had vowed to pass the bill more quickly this year.

The upper and lower chambers of parliament agreed to a larger budget than the 7.298 trillion naira draft submitted by Buhari in December.

The 2017 budget is based on an assumed oil price this year of $44.50 a barrel, while global benchmark Brent crude is currently trading above $50. It also entails debt service for foreign borrowing of 175.9 billion naira and domestic borrowing of 1.488 trillion naira.

By Felix Onuah (Writing by Alexis Akwagyiram; Editing by Catherine Evans)

Published in Economy

Football always divides opinion. As the latest English season draws to a close and the Football League playoffs take centre stage, there will be some that grumble about the format.

They will say how “unfair” it is that a club can finish third in the league in the regular season, yet be denied promotion by a club that finished sixth after a late surge. Set that aside though, and you are left with the pure drama. It is win or bust, and prolongs the excitement of the regular season, giving more teams, more to play for in a crescendo of late season fixtures.

The playoffs concept was borrowed from US team sports where this end-of-season competition is a regular feature, attracting huge media exposure and significant commercial interest. In England, for thirty years now, the playoffs have determined the final promotion spot within each division of the Football League. Four teams first try to get to the playoff final at Wembley stadium, then face a nerve-jangling 90 minutes or more to secure a step up the football pyramid.

The inspiration from US sports is important. Put aside the passion, excitement, disappointment and any sense of injustice for a moment. The playoffs can be of huge importance financially. A playoff victory can have the power to stabilise a club’s financial position, clear debts and allow significant investment in players. The pot of gold at the end of this rainbow has largely been filled with TV money. The most recent domestic deal was signed for £5.14 billion. Add in the international rights and this swells to £8.4 billion.

Lower down the leagues, the money on offer is not eye-watering. Our conservative estimates put the prize at around £500,000 for promotion from League Two to League One and around £7m for promotion from League One to the Championship. However, the prize on offer for promotion to the Premier League is staggering and has led to the Championship playoff final being labelled the “richest game in football” with a value of around £170m-£200m. Huddersfield, Reading, Fulham and Sheffield Wednesday are facing off for the jackpot this time around.

Revenue generator

The often-quoted £200m figure is a little misleading as it takes into account so-called parachute payments which only kick in if a club is relegated the following season. Clubs will receive a minimum uplift of £120m though, which can be triple or quadruple their turnover. In fact, the chart below shows that when Bournemouth was promoted in 2015, the club saw a six-fold increase in revenue, essentially driven by additional Adapted from Deloitte Annual Review of Football Finance and TransferLeague.co.uk, Author provided (restricted)broadcasting fees.

When the prize is so very shiny, straining to reach for it presents a strategic dilemma for clubs. The boost to revenue from promotion can stabilise a club financially, just like it did for Blackpool in 2010, helping it to (theoretically) secure a long-term future. In Blackpool’s case, however, on-field performance was destabilised and supporters became disenfranchised. Seven years later, Blackpool now hope to be promoted back to League One this season, via the playoffs.

Promotion can also increase the level of expectation and create pressure to retain a position in the world’s richest league. The club can get excited and the board can sanction acquisitions that fall outside a reasonable budget and seriously threaten the short and even long-term financial future of the club. This recalls the experience at Queens Park Rangers, which somehow accumulated £143m of losses despite generating about £250m in revenue during their stay in the Premier League. QPR managed to spend a startling £285m on wages and £114m on player purchases, while their level of debt surged to a peak of £194m.EPL Revenue Stream

Prepare to fail

The third option is to rein in your ambition, develop a strategic plan, grow incrementally and accept that you may become a yo-yo club like Burnley, or survive by the skin of your teeth like Stoke City.

Either way, the club builds a longer term future at the top table which benefits everyone. Survival through this approach means that a club receives at least another £120m so can build still further and become a stable Premiership club. But even failing and being relegated means a club will still have money to spend, receive a parachute payment (of another £45m or so) and spend a season in the Championship with turnover in excess of three times that of a standard team. This provides a significant competitive advantage over your rivals as Newcastle United showed this year – the Magpies spent big and gained promotion at the first attempt.

Ultimately, the direction of travel comes down to owner objectives, which can differ depending on their background and motivations. One thing that is clear: spending beyond your means does not always guarantee success.

The chart above allows us to examine a club’s transfer spending in the year following promotion. It is a confusing picture, but the red bars show those clubs which were relegated the following season, and demonstrate clearly that spending big is no guarantee of survival. This chart doesn’t show the starting point for each club in terms of player quality, but how you spend it is plainly crucial, and the chart shows too that you can survive without throwing the kitchen sink at player acquisitions.

There is broader evidence that the most successful clubs, with the most money, do tend to outperform, but the trade-off between financial and sporting performance is hazardous. Many clubs now choose to chase multiple and escalating objectives: recall the devastating failure at Leeds United in 2003, when creditors were owed almost £100m after the club chased the dream of playing in the Champions League. You chase that dream at your peril is the warning; plan carefully, and spend wisely is the advice to your board. Relegation doesn’t have to be a trapdoor, but promotion can be a trap.

 

Rob Wilson, Principal Lecturer in Sport Finance, Sheffield Hallam University and Dan Plumley, Senior Lecturer in Sport Business Management, Sheffield Hallam University

This article was originally published on The Conversation. Read the original article.

Published in Opinion & Analysis

Key global consumer themes are now also evident and relevant in Africa. Combined with new technologies this presents Africans with a real opportunity to participate – as producers and suppliers of consumer products – in the world’s rapidly evolving and expanding consumer market.

For too long Africa has been viewed as an exciting new market for a narrow range of globally produced and marketed consumer products. Today, however, the full range of global consumer themes – including health and wellness, convenience, indulgence, low/no calories and food protection - are now also major themes in Africa. This not only presents global marketers with a wider market, but also, “provides Africans with an opportunity to participate in the global consumer sector – as producers and suppliers - of new and innovative products that speak to global consumer trends,” says Brendan Grundlingh, Executive, Consumer Client Coverage Standard Bank.

As Africans adapt and combine technologies to service both local and global consumer opportunities, a world of new consumer product, service and support opportunities are emerging on the continent.

There is huge opportunity, for example, for existing digital and new speech technology to utilise algorithms around discounting a basic basket of goods - targeting lower income households in Africa, for example. Innovation in e-commerce focussed on digitally acquired consumer insights combining new distribution models, including, perhaps, delivery of goods or even medicines via drone to remote locations, is also presenting huge opportunity in Africa’s direct-to-consumer space.

The fact that global consumer trends are increasingly favouring the niche and the local over the global and the general presents Africa with further opportunity. While this is part of a broader trend towards sustainability and social and economic justice in production and consumption, it has meant that increasingly – and in Africa too – larger multinationals that previously dominated the personal care sector, for example, are either losing out to smaller local players, “or are being forced to buy out and incorporate the offerings of local champions into their brands,” says Mr Grundlingh.

As such, looking ahead in Africa there is scope for smaller niche players - at home with ethnic and cultural diversity, for example - to win market share from larger multinational companies by using, “the smart, the small, and the local, to scale products though innovation - or bring new technologies to delivery and service,” he explains.
Africa’s large, growing and increasingly urbanised millennial population has a high expectation of integrity from brands, products and services. This is also likely to drive rapid change, and innovation, in how Africa’s consumer sector understands and meets holistic wellness themes in food and lifestyle.

With health and wellness emerging as strong consumer theme in Africa over the last five years, food providers that previously provided a handful of products now have an opportunity to develop an integrated range of healthy food products – across the full human life cycle. With people living longer, for example, there is also a greater focus on, “early life and medical nutrition, healthier water and plant based beverages, sustainable foods, zero net carbon food production technologies, trusted origin and sustainable agriculture,” adds Mr Grundlingh.

Given Africa’s natural agricultural advantages - 60% of the world’s unused arable land, abundant water supply in many parts of the continent, and 80% of Africa’s population already involved in agriculture – the scope for innovation in food production, beneficiation, supply and distribution through the adaptation and application of new technologies is vast. Add to this innovation in adapting to climate change – sustaining food production through drought or other extreme weather events - and the scope for new product and service development in the agricultural sector gets even wider.

Food production and supply innovation also play well to Africa’s strong medical consumer themes. The bulk of Africa’s heath challenges are related, directly or indirectly, to food and nutrition.

Globally, obesity kills three times more people than malnutrition. In sub-Saharan Africa, 70% of South African females for example are obese and approximately one in three people are undernourished. HIV/AIDS, respiratory infections and diarrhoea remain Africa’s biggest causes of death. All are partially combated or exacerbated by diet. Again, “the nexus between food and health, combined with disruptive technologies, presents broad opportunity for Africa to adapt, evolve and service new consumer themes – and markets - in these areas,” says Mr Grundlingh.

Understanding that in today’s consumer environment change is a constant – to be worked with, not resisted – will also allow Africans to leverage existing and innovate new consumer opportunities. Much of this change in Africa is driven by the same global sustainability and health and wellness concerns evident in the rest of the world. For example, Kenya has become the latest African country to ban plastic bags due their negative environmental impact.

Soon the kind of change that global reactions to sugar have driven in food and beverage evolution will very soon drive change in Africa too. For example, large soft drink multinationals - many of them with products unchanged for almost a century - are rapidly developing entirely new product ranges, marketing philosophies and distribution technologies as, increasingly, global populations turn away from sugar.

There is no doubt that the global themes that have shaped consumer trends in the rest of the world are also present in Africa today. What is different in Africa, however, is that these themes are evolving in a very different demographic, cultural, spatial and infrastructural environment, “amongst populations that have proved much quicker at successfully adopting and adapting new mobile technologies,” says Mr Grundlingh. “As a bank present in over 20 African economies, we are able to recognise – and support – the huge consumer opportunity that is currently unfolding across Africa,” he adds.

The most exciting aspect of this evolution is that beyond the continent’s rapidly evolving domestic consumer landscape, “Africa is, today, evidencing a strong ability to absorb consumer themes from the rest of the world, adapt these locally, and export new consumer combinations to the rest of the world,” says Mr Grundlingh. “This is likely to make Africa an important global player in the world’s consumer landscape, not only as a recipient market - but also as a global originator, producer and exporter of consumer products and services.”

 

- Brendan Grundlingh, Executive, Consumer Client Coverage Standard Bank.

Published in Business

  1. Opinions and Analysis

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