Ghana’s balance of trade is set to receive support from cocoa export and oil production revenues this year according to researchers at Standard Bank, parent company of Stanbic Bank Ghana. This was contained in the April edition of the African Local Markets Monthly report prepared by Standard Bank.
According to the report, “after strong economic growth in 2017, reaching 8.5 percent year-over-year, we expect growth to remain robust at around 7.0 percent year-over-year in 2018. The Stanbic Bank PMIs are certainly corroborating this view thus far. The overall PMI reached 55.2 in March from 54.9 in February and 53.5 in March 2017, as survey respondents suggested that output levels were rising as consumer confidence and consequently new orders rose. That being said, the oil sector will continue to underpin growth as authorities estimate that production is set to reach a peak of 290k bpd in 2018”.
The report further indicates that the Ghanaian economy is expected to remain strong due to increased cocoa export revenues. “Ghana’s trade balance should receive a boost from increased cocoa export revenues. Since beginning of the year, cocoa prices have risen by over 40 percent to around US$2,700/mt as demand-supply dynamics appear to have adjusted to the lower price environment that was prevalent in 2017. Given that imports declined last year – leading to the trade deficit swinging into a surplus – and our expectation of only a moderate rebound this year, the trade balance should remain in surplus and allow further contraction of the current account deficit.” the report said.
Commenting on the report, the Head of Global Markets at Stanbic Bank Ghana, Afua Bulley, said the rise in global cocoa prices will have an impact on the country’s Treasury. “The recent rise in cocoa prices will have a reasonably positive impact on the fiscus. Unlike in Cote d’Ivoire where the cocoa board reduced prices it paid to farmers, Ghana refrained from reducing prices – thus placing some pressure on the country’s fiscal accounts. The 40 percent surge in cocoa prices since beginning of the year should certainly reduce the implied subsidy and alleviate fears of impending fiscal strain,” Ms. Bulley indicated.
“We also expect financial reserves to remain buoyant, especially after planned Eurobond issuances which may amount to US$2.5billion later in the year. As a result, we now expect reserves to reach around US$6.8billion by year-end,” Ms. Bulley added.
The African Local Markets Monthly also predicts that prolonged disinflation and the proposed reduction in electricity tariffs by some 12% is likely to push the Bank of Ghana to cut its policy rate by another 300 bps in the course of the year. The report said: “After delivering a 200bps cut at the March MPC meeting, we expect the BoG to cut the policy rate by another 300 bps through the course of the year”.
According to the report, these developments provide a basis for further easing of the monetary policy stance by the central bank – although this is likely to be restrained by uncertainty within the banking sector as a result of the new minimum capital requirement.
“Given the trajectory for inflation and non-oil economic growth, there is an argument for further easing of the monetary policy stance taken by the BoG. Such an aggressive easing in monetary policy may well result in a substantial rise in private sector credit and may actually result in higher US$/GH¢. However, our suspicion is that said easing in monetary policy will probably be restrained by uncertainty within the banking sector, as capital requirement changes have ensured that most banks have taken a defensive posture to asset origination,” the report noted.
The African Local Markets Monthly is a monthly report issued by the Standard Bank Group and focuses on the economic and financial outlook of African countries. The report also reviews current economic situations and makes short- to medium-term predictions about the economies of African countries.
Russia on Saturday unveiled the world’s first floating nuclear power station at a ceremony in the port of the far northern city of Murmansk where it will be loaded with nuclear fuel before heading to eastern Siberia.
Built in Saint Petersburg, the Akademik Lomonosov arrived in Murmansk on Thursday where it was moored in the port and presented to the media on Saturday.
Constructed by the state nuclear power firm Rosatom, the 144 by 30 metre (472 by 98 foot) ship holds two reactors with two 35 megawatt nuclear reactors that are similar to those used to power icebreaker ships. The 21,000-tonne barge will be towed in the summer of 2019 to the port of Pevek in the autonomous Chukotka region in Russia’s extreme northeast, 350 kilometres (217 miles) north of the Arctic Circle.
The barge can produce enough electricity to power a town of 200,000 residents, far more than the 5,000 live in Pevek, Russia’s northernmost town. It will be primarily used to power oil rigs as Russia pushes further north into the Arctic to drill for oil and gas and needs electricity in far-flung locations.
Vitaly Trutnev, who is in charge of the construction and operation of floating nuclear power stations at Rosatom, said such units would “supply electricity and heat to the most remote regions, supporting also growth and sustainable development.”
He said use of such floating reactors can save 50,000 tonnes of carbon dioxide emissions per year. The barge had initially been scheduled to be fuelled in Saint Petersburg, but that work was moved to Murmansk instead due to concern in countries along the Baltic Sea.
Dangote Cement, which three years ago took East Africa by storm, is facing a hard time in the region, especially after the recent killing of three of its employees in Ethiopia. The cement maker is also struggling with unfavourable policy changes in Tanzania.
Dangote's Ethiopia country manager Deep Kamara and two of his aides were shot dead in the restive Oromia region, where the cement firm has had tense relations with the local community. At some point, things were so bad the firm was forced to suspend operations in August 2017 for a month.
Ethiopian government agencies said Mr Kamara was returning to the capital from the factory when he was ambushed by unidentified gunmen, who killed him, his driver and personal assistant.
Carl Franklin, a spokesperson for the Dangote Group, was not immediately available for comment over the killings.
The tragedy came barely two weeks after the cement maker announced a 4.4 per cent drop in its pan-African operations (outside Nigeria), largely attributed to disruptions by the civil unrest in Ethiopia and a dip in sales in Tanzania.
The firm sold 2.2 tonnes of cement in the first three months of this year, lower than the 2.3 tonnes sold in the same period last year.
"In Ethiopia, sales at our 2.5Mta factory in Mugher, Ethiopia, fell by 16.7 per cent in the three months of 2018 as a result of continuing disruption due to civil unrest in the Oromia region, as well as more local challenges we are experiencing with the communities around our mining operations in Mugher. As a result, we sold approximately 443Kt of cement in the quarter, down from 532Kt over a similar period in 2017 with a market share of 22 per cent, meaning we remain the market leader in Ethiopia," the firm said in its latest financial results update.
In response to the disruption, which cost it 10 days of shipments from the plant, Dangote Cement said it had increased initiatives to improve relations with the local community.
"With the appointment of a new prime minister, we have seen a resolution of regional political issues and roads are now clear, enabling us to deliver to all markets without hindrances. In addition, we have reached an agreement with local communities on royalties for raw materials, with the intention that they be used to support local development initiatives. The additional cost of these will be offset by increased pricing, which we introduced during the quarter. The ex-factory price across the quarter was $67 per tonne," the firm said.
Mr Kamara's killing might be an indication that all is not well with Dangote Cement's operations in Ethiopia.
The EastAfrican understands that the cement firm's Ethiopian drivers have been on strike for the past one month, which prompted Mr Kamara to head to the factory to try to find a solution, before he was killed.
It is understood that the local workers have for a long time had labour-related issues with the employment agencies hired by the cement manufacturer and this latest industrial action by the drivers was just one of them.
In 2016, protesters attacked and vandalised the factory and several vehicles and machinery.
Last year, the firm threatened to shut its operations if the Oromia authorities did not reverse an order to cement makers to cede control of some parts of their businesses to local youths. This saw the national government intervene and the matter is still under deliberation.
In Tanzania, Dangote is now banking on the country's large infrastructure projects that are driving construction activity, including the Dar es Salaam- Morogoro railway, major road and bridge projects and commercial housing.
In the first quarter of this year, the cement maker's 3.0Mta factory at Mtwara sold 123Kt of cement, which was 46 per cent lower than sales for the first quarter of 2017.
"The fall in sales was as a result of plant maintenance and shutdowns pending the commissioning of gas turbines, to avoid unnecessary losses at the plant, which stopped production for much of February and March. The factory remained reliant on diesel gensets for electrical power, which resulted in losses that weighed on pan-African margins," the firm said in its latest financial update.
The installation of gas turbines, which were to start operation in Mtwara in March, was again delayed and are now expected to begin to operate in late May or early June, meaning that the firm's second quarter results could be lower than predicted owing to the higher operation costs of diesel powered turbines.
Source: East African.