Items filtered by date: Thursday, 31 May 2018

MTN’s Ghana business is seeking to raise 3.47 billion cedis ($743 million) in a 35 percent initial public offering.

In what is expected to be the West African country’s largest IPO, telecoms operator MTN will sell about 4.63 billion shares in MTN Ghana at 0.75 cedis per share, the sources said. The public offering, which closes at the end of July, is one of the requirements MTN agreed to with Ghanaian regulators in 2015 to allow for the introduction of its fourth generation, high-speed mobile data network.

If successful, MTN Ghana will be the most valuable company listed on the Ghana Stock Exchange, analysts said. MTN is the leading mobile operator in Ghana with 17.8 million voice subscribers as of September, ahead of AirtelTigo, Vodafone and Nigeria’s Globacom.

Last December MTN signed a 510 million cedi ($112 million) syndicated loan from nine banks and was oversubscribed by 590 million cedis.

Published in Telecoms

Coffee prices at the Nairobi auction declined marginally this week, reversing the 11 per cent rise that was registered in the previous week’s sale.

On average, the price of a 50 kilo bag dropped from Sh11,400 to Sh11,211 in the latest sale held on Tuesday at the Nairobi Coffee Exchange (NCE). The value of the Kenyan coffee has generally depreciated in the last couple of months after registering impressive results between January and February due to high quality coffee supply from farmers.

According to the NCE, the quality of beans offered this week declined compared with the previous sale, pushing the price of the commodity down. “There was a slight decline on quality in this week’s trading compared with the previous one, a move that pushed down the price marginally,” said the NCE.

Coffee trading at the auction has been coming in from the main crop season in Central Kenya, which is now coming to an end with quality expected to pick in July with arrival of short crop from Eastern Kenya.

Kenya’s earnings from coffee dropped by Sh1.3 billion between October and March compared with the same period last year, on account of low international prices and reduced volumes at the auction. The low prices are also set to affect listed agriculture firms dealing in coffee.

Earnings dropped by Sh1.4 billion in seven months to April compared with the same period last year, on account of low prices for Kenya’s Arabica at the international market.

In Summary

  • On average, the price of a 50 kilo bag dropped from Sh11,400 to Sh11,211 in the latest sale held on Tuesday at the Nairobi Coffee Exchange (NCE).
  • The value of the Kenyan coffee has generally depreciated in the last couple of months after registering impressive results between January and February due to high quality coffee supply from farmers.
  • According to the NCE, the quality of beans offered this week declined compared with the previous sale, pushing the price of the commodity down.

Source: Daily Nation Kenya

Published in Agriculture

In recent months we have seen some confidence return to our market’s and a mood of optimism reflects in everyday life as we vision a new dawn under the leadership of President Ramaphosa.

A dark cloud still looms overhead in the form of wasteful expenditure and struggling State Owned Entities (SOEs) that have emptied the coffers of South Africa and continue to require funding from the government to remain going concerns. Ultimately, this will need to be funded and a large part of this will need to come through taxes.

In releasing the budget in February this year, government took a brave step to increase the VAT rate, that will have far reaching consequences for both rich and poor. Although this has been positive from an investor perspective, is this something the consumer can afford along with other sin taxes including a newly released sugar tax?  

Much has been said about the budget, but not much time has been spent in quantifying the impact on consumers at different income levels. In a society like South Africa with high disparities between rich and poor, income elasticity plays an important part where any increase in price has an almost immediate impact on buying behavior, with consumers especially at the lower levels switching to cheaper products of possibly inferior quality or stopping buying products from that category at all.

In analyzing buying behaviour it is important to understand consumption patterns across different socio- economic levels, as this defers significantly. This is summarized below:

SA Canback graphic 1

                                                                               Source: ILO, C-GIDD, Canback Consulting

The marginalized population (Average Annual income below R26,000), making up more than 50% of SA society, spend about 35% of what they earn on food and beverages. Over 50% of their income is spent on basic goods. The graph above highlights the great disparity between rich and poor in buying behavior, driven by income levels and affordability.

In further analyzing the impact of the budget, using Stats SA data for consumption expenditure, further breakdown through our analysis into the socio-economic classes we concluded that in percentage terms the average impact across all levels is about 5.6%. This is a further 40% increase to the impact of inflation (4%) data released for February 2018. The impact across socio-economic levels is highlighted in the table below:

SA Canback Graphic2

                                                                           Source: Canback Consulting

The increases, at the lower end is less than the upper end mainly attributable to a larger consumption of basic foods with a portion of that being zero VAT rated and lower % of expenditure branded goods, including alcohol, tobacco and sugary drinks.

Although it seems the impacts are similar in percentage terms, we should keep in mind that a R55 increase to a consumer for every R1,000 spent for those spending more then 50% of their income on basic needs is far greater than a R 61 increase to a consumer on every R1,000 spent at the higher end where only 12% is attributable to food and beverages

Reducing the impact by removing the Vat impact makes for interesting reading. This is illustrated in the table below:  

SA Canback graphic3

                                                                                Source: Canback Consulting

This will reduce the impact by about 10% of the total impact, or excluding an inflation increase it will reduce the impact on the consumer by one third (33%). This highlights its significance in the budget impact. Coupled with the recent price increase on fuel, with prices over time being passed on to consumers we can expect 2018 to be a tough year for the consumer, that would impact an already stuttering economy trying to get going again.

Lower to medium end consumers will struggle to absorb the latest budget and further increases may have dire consequences for them. South Africa can not afford any more slip ups and expect to pass on this cost to the consumers through budget increases.

For this to materialize policy changes is necessary. This includes a commitment to improving education at all levels and ensuring accessibility to grow the workforce, a firm commitment from government that it will not fund inefficiencies by acting as lender and guarantor of last resort to State owned Entities (SOEs), reducing the public sector wage bill with salaries for government employees at 35% of expenditure, , improving governance and fiscal discipline within the public sector and at SOEs, instituting reforms across SAs most important sectors to drive investment and transformation; and creating a business conducive environment within the private sector to ensure ease of doing business mainly for small to medium enterprises (SMEs).

The governments inability to address these items in future will further impact confidence and the economy and drive up tax rates for consumers.  

Published in Economy
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