Items filtered by date: Monday, 23 July 2018
Eskom suffered a net loss of R2.3bn in 2018, compared with a R0.9bn profit the previous year, the state-owned power producer revealed at its financial results presentation on Monday.
 
CEO Phakamani Hadebe said the poor results were compounded by allegations of corruption and mismanagement, challenges of governance and negative investor sentiment.
 
The power utility said its net cash from operations declined from R45.8bn to R37.6bn, as it struggled with leadership and operational challenges.
 
Eskom Chair Jabu Mabuza also said there had been R19.6bn in irregular expenditure since 2012, with much of the irregular expenditure being reported in 2018. 
 
"This was a result of us shaking the cupboard so hard that so many skeletons came tumbling down," he said.
 
"The verification and cleaning up exercise resulted in a significant increase in the number of reported irregular expenditure in 2018 (from R3bn to R19.6bn), with many of the items reported arising in prior years. Where information was not readily available, alternative methods were used where practical to identify irregular expenditure," the utility said.
 
The power utility admitted that its "transition towards financial and operational sustainability required resolute, tough and decisive leadership".
 
Its liquidity remained a going concern, with a massive R4.2bn owed to it by municipalities. 
 
"Eskom continues to face significant financial and liquidity challenges in the short term, mainly due to the high debt burden, low sales growth and increased finance costs".
 
Eskom debt has increased from R387bn to R600bn withing four years, but steps have been taken by the board to boost investor confidence, Hadebe said.
 
"We have raised 22% to date of [the] R72bn borrowing requirement for 2018/19, and have a firm commitment to increase funding to 62% of the 2018/19 borrowing requirement." He said growing investor appetite for Eskom bonds was a concern.
 
In March, Moody's downgraded Eskom's credit ratings from B2 from B1, citing an absence of concrete plans to place its business on a sound financial footing. B2 is the fifth rung of sub-investment grade debt.
 
The current wage demands by unions are also adding to the firm's financial woes, with labour unions currently discussing Eskom's latest options of 7% and 7.5% increases, which were tabled after a round of bruising negotiations.
 
The firm initially offered no increases, citing its difficult financial position. Eskom and the unions were drawn to the negotiation table by Public Enterprises Minister Pravin Gordhan in a bid to avert a crippling strike by workers.
 
In June, the National Energy Regulator (Nersa) has approved R32.69bn for Eskom's multi-year price determination Regulatory Clearing Account (RCA) applications – funds Eskom must recover due to an electricity shortfall or an escalation in operating costs.
 
 
Source: News24
Published in Economy

The Central Bank of Nigeria (CBN) on Friday sold Chinese Yuan for the first time through an auction-based system designed for Chinese Yuan foreign exchange window with the People’s Republic of China (PBoC).

According to a report by Bloomberg, CBN Governor, Godwin Emefiele, approved the auction to take place on Friday.

The CBN and PBoC had signed a three-year renewable bilateral currency swap deal worth about N720 billion or 15 billion Renminbi to facilitate trade between Nigeria and China and ensure stability in the foreign exchange market, among others.

Earlier this month, CBN acting Director of Corporate Communications, Isaac Okoroafor, while speaking at a Town hall meeting to enlighten stakeholders on the agreement between the two apex banks in Lagos, said the idea behind the agreement was to ease the pressure on the nation’s foreign exchange reserves which was occasioned by the high demands of U.S dollar for transactions.

“This is will help us build our reserves to give confidence to investors that we have the arsenal to maintain the international value of the Naira,” he said.

The CBN asked banks to bid for renminbi between 9:00 a.m. and midday, while results might probably be announced by Monday, according to the report.

A source who spoke with Bloomberg said that, the size of sale or the exchange rate was not stated by the apex bank, noted that allocations will be for businesses importing raw materials and machinery.

Recall that the CBN said it would announced the exchange rate of transactions in the Chinese Yuan window after the first auction, adding that banks are not expected to charge more than 50 kobo spread on the rate.

China is Nigeria’s biggest trading partner after the U.S., with volumes between the two totaling $9.2 billion in 2017, according to data compiled by Bloomberg. Nigeria runs a deficit, importing $7.6 billion of goods including textiles and machinery from China and exporting just $1.6 billion, mainly oil and gas.

Source: The Ripples

Published in Bank & Finance
Nigeria’s consumer prices rose at the slowest pace in 2 1/2 years in June as food costs climbed the least since March 2016.
 
The annual consumer inflation rate was 11.2 percent from a year earlier, compared with 11.6 percent in May, the Abuja-based National Bureau of Statistics said in an emailed report Monday. The median estimate in a Bloomberg survey was for 10.9 percent. Prices rose 1.2 percent in the month.
 
The inflation rate fell even as the Nigerian government started releasing funding for its record 2018 budget of 9.12 trillion naira ($25 billion), which some analysts had anticipated would cause prices to rise.
 
Price pressures are still expected to kick in on growing election-related spending ahead of February’s federal and state vote, with President Muhammadu Buhari seeking a second mandate.
 
The central bank’s monetary policy committee will tomorrow announce its decision on its main interest rate, which it has held at 14 percent since July 2016 to curb inflation.
 
The bank targets an inflation rate of 6 percent to 9 percent and has signaled rate cuts when price growth moves closer to this band.
 
Food prices increased 12.98 percent in June from a year earlier, a seventh straight month of deceleration, the agency said.
 
Source: The Router
Published in News Economy

Zimbabwean President Emmerson Mnangagwa and the ruling Zanu-PF hope a credible victory in the July 30 election will legitimise the power (both party and state) they gained from the “soft coup” that toppled his predecessor Robert Mugabe last November.

With victory, they say, the donors and dollars will flood in to the country they have resurrected from nearly two moribund decades. Zimbabwe is now “open for business” and will thrive. Zanu-PF’s resurrection will thus be complete.

But a new survey suggests Zanu-PF should stall any premature celebration plans. The latest one showed that, in the space of one month, Nelson Chamisa’s MDC-Alliance has closed the gap with Zanu-PF. The surveys are conducted by Afrobarometer, an independent research network that conducts public attitude surveys across Africa and its Zimbabwean partner, Mass Public Opinion Institute, a non-profit, non-governmental research organisation.

If the respondents were to cast their ballot now Mnangagwa would take 40% of the votes and opposition leader Nelson Chamisa would take 37%. The still undecided or not-saying potential voters are at 20%. Split that and you get a 50/47 race.

The numbers are very close indeed. If not a victory for the MDC-Alliance, this looks like a presidential runoff. The MDC-Allaince has a 49% to 26% lead in the cities and towns and in the countryside the figures are 30% for the opposition to Zanu-PF’s 48%. In parliament Zanu-PF would get 41% to the MDC-Alliance’s 36. This is a big change from May’s survey.

Given the MDC-Alliance momentum, the post-Mugabe Zanu-PF’s hopes of a resurrection may be dashed. A great deal hangs on both parties’ ability to manage this interregnum.

Big trade-offs will be negotiated, ranging from coalition governments, which the poll shows has the backing from 60% of respondents, to amnesties for the chief crooks and killers.

Striking deals might indeed lie at the centre of whether or not the election is a success. That’s because this election is about grabbing back the core of hardwon democracy from a military dominated regime. It’s about cleansing out generations of fear.

That is a hard task at any time. It’s harder still when it took a coup to retire its prime source.

A divided Zanu-PF

Mnangagwa has been spectacularly unsuccessful at winning past elections in his own constituencies, standing for parliament three times and losing twice.

The factions in Zanu-PF that squared up against one another prior to the coup - the Generation-40 group that supported Grace Mugabe for the party and state president and Lacoste, which supported Mnangagwa – are still battling along lines more ethnically drawn than ever. Some of the losers in the Generation-40 group have left the party to form the National Patriotic Front.

Although the perpetrators have not been found, the blast at Zanu-PF’s Bulawayo rally in late June that killed two people and only narrowly missed a whole stage of luminaries, could suggest that the party’s wounds have yet to heal.

And the soldiers are not of one mind.

If the military side of the somewhat shaky post-coup pact in Zanu-PF fears losing an election, and thus access to more of the wealth more power can bring, the free and fair dimensions of the electoral contest would be drastically diminished. Would a repeat of mid-2008’s post-electoral mayhem, when at least 170 people were killed and nearly 800 beaten or raped, ensue?

To make matters more complex, there are no guarantees that hungry and angry junior army officers would follow their seniors’ attempts to alter the peoples’ will.

Mnangagwa could be at some of the soldier’s mercy. Some suggest that Constantino Chiwenga, the mercurial vice-president and – unconstitutionally – defence minister might be among them.

Others argue that the two leaders need each other if the régime is going to deliver on promises of a clean election

And as George Charamba, Zimbabwe’s permanent secretary for information, put it:

This election is about restoring international re-engagement and legitimacy …. It must be flawless, it must be transparent, it must be free, it must be fair, it must meet international standards, it must be violence free and therefore it must be universally endorsed because it is an instrument of foreign policy … It’s about re-engagement and legitimacy; we are playing politics at a higher level.

This is a clarion call for a free and fair poll. If the election fails to meet these expectations and its results are tight, legitimacy could be maintained with carefully calculated deals. Perhaps the unity government widely expected during the coup could reappear.

A rising opposition

Chamisa and the MDC (the alliance is made up of seven parties, most having split from the late Morgan Tsvangirai’s MDC), appear to be building on the momentum they seem to have gained by challenging the Zimbabwe Electoral Commission’s management of the contest. The alliance has challenged the commission’s neutrality and raised concerns over the accuracy of the voters’ roll.

Not all its allegations necessarily stand up to scrutiny. The 250,000 alleged ghosts may be a canard, but as Derek Matyszak, the Institute for Security Studies man in Harare, argues, the roll was not released in time for the primaries so none of the candidates are constitutionally valid.

Emboldened by the lack of police, thousands of protesters led by the MDC-Alliance marched to the commission’s headquarters on July 11, showing no fear.

If this impetus keeps building over the next week, a victory is conceivable. So is a presidential run-off. To be sure, the ruling party might win fairly, but the opposition will have to be convinced of that. The mode of politics for the next round should be peacemaking, not war.

Low bars, high stakes

The bars are low – ‘the west’, led in this case by the UK, seemed to be happy with the winners of the coup, perhaps hoping for a renewed Zanu-PF. Perfidious Albion (Treacherous England) could end its schizophrenic career in Zimbabwe with a whimper about the end of a liberal democratic dream. But the stakes are high for Zimbabweans: much higher than the reputation of a minor global power past its glory.

The people of Zimbabwe face a lot more than reputational damage: maybe the former colonial power will have a Plan B that helps more than hinders.

 

David B. Moore, Professor of Development Studies and Visiting Researcher, Institute of Pan-African Thought and Conversation, University of Johannesburg

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

Published in Economy

On 1 July 2018, South Africa, along with five other countries, became party to the African Continental Free Trade Area agreement (AfCFTA), joining the 44 existing signatories to the agreement.

AfCFTA is a treaty between consenting countries whereby a free trade area is constituted which allows member countries to conduct trade with each other without tariffs or other hindrances.Itumeleng Mukhovha

The African Union Summit that took place in July this year, saw South Africa, Namibia, Sierra Leone, Lesotho and Burundi take the total signatories to 49 of the 55 member states. However, there is still a long way to go for the AfCFTA to become a reality, as only six of the required 22 countries have ratified the agreement.

As early as January 2012, the African Union (AU) decided to adopt a free trade area covering the African continent, which they hoped to have in place by 2017. Fast track to March 2018, where a significant decision was taken towards the fulfilment of the AU's mandate of a continental free trade area - 44 countries indicated their commitment through signing the agreement in Kigali, Rwanda. Two further agreements were also presented at the Kigali Summit, namely the Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, the Right to Residence and the Right to Establishment.

Two of Africa's leading economic powers, Nigeria and South Africa, however, did not sign the agreement in Kigali. Both countries had indicated support of the agreement before the Summit, however, the reasons for their reservations took two different routes.

Nigeria was largely considered as a supporter of the free trade area and was expected to play a major role during the negotiations at the Kigali Summit. However, uproar by local businesses within Nigeria led President Buhari to cancel his trip to Kigali in order to respond to complaints that their interests were not being accommodated.

At Kigali, South African President Ramaphosa expressed his country’s support for the agreement and through his signature on the Kigali Protocol, indicated South Africa’s commitment to signing in future. South Africa first had to review and consider the agreement in light of its Constitution, which requires that any international agreement be considered by legal advisors.

When he eventually did sign the agreement, President Ramaphosa said that it would create many opportunities and benefits for South Africa and moreover, would grow and diversify the South African economy through the reduction of inequality and unemployment. He indicated that South Africa’s position as a major supplier of goods and services to the continent would also be strengthened by the agreement.

Through the AfCFTA, South Africa is also expected to be benefit from an increase in foreign direct investment, a broader range of expertise and the possibility of lower governmental spending. This is because, through its implementation, there is the possibility of removal of subsidisation on local industry segments due to advantageous outcomes of the agreement. However, two disadvantages arising from the agreement could include increases in the outsourcing of jobs as a result of the significantly reduced tariffs and the possible degradation of natural resources.

The AfCFTA is expected to provide businesses across Africa with many opportunities and in so doing, it complies with Agenda 2063: The Africa We Want. Agenda 2063 is an AU goal aimed at socio-economic transformation. In addition, the Economic Commission for Africa (ECA) estimates that intra-African trade should increase by 52.3%, with the elimination of import tariffs. Currently, trading outside Africa is subject to lower tariffs than the 6.1% tariff imposed on trade within Africa. The scope of the changes AfCFTA will affect is relatively wide - businesses, traders and consumers in Africa will no longer be constrained by tariffs and mechanisms will be put in place to assist traders that are burdened by non-tariff barriers.

Further, extractive commodities including oil, minerals and metals, have traditionally been the continent’s leading source of exports, accounting for 76% of exports outside Africa. Due to the volatile nature of these extractive exports, financial assurance is not certain. It is hoped that AfCFTA will encourage a shift away from reliance on extractive exports towards more sustainable trade in Africa. Moreover, encouraging more labour intensive trade such as manufacturing and agricultural goods, will increase employment on the continent.

Currently, the Regional Economic Committees (RECs) are in place to oversee trading between the variety of regions. The implementation of the AfCFTA will not result in the disappearance of the RECs, instead they will be considered as the building blocks for the AfCFTA.

The AfCFTA will not only have an impact on the trade of goods and services in Africa, but through the implementation of Phase II, it will also see an extension of the disciplines covering investments, competitions and intellectual property. Negotiations for Phase II are expected to commence shortly.

It is without a doubt that the AfCFTA introduces a new landscape for trade within South Africa and Africa and it presents exciting prospects for trade, development and sustainability. It seeks to encompass all 55 member states, which make up a market of more than 1.2 billion people, with a combined GDP of more than US$ 3.4 trillion.

The agreement is set to greatly benefit the continent, improve intra-Africa trade, reduce unemployment, increase infrastructure and create a more competitive yet sustainable environment for trade. However, a number of steps still need to be completed for the agreement to fully take effect. An additional 16 countries are required to ratify the agreement into law. The agreement will come into force 30 days after the 22nd country has ratified the agreement.

- By Itumeleng Mukhovha, Associate, Corporate/M&A Practice, Baker McKenzie Johannesburg

Published in Opinion & Analysis
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