Thursday, March 31, 2011

Botswana economy grows 7.2%

Botswana's economy grew by 7.2 percent in 2010 after shrinking 4.9 percent the year before, data from the Central Statistics Office showed.

“The main drivers to the increase was mining, trade hotels and restaurants and the contractors in the construction industry,” the statistics agency said on its website.

The Bank of Botswana last month left its bank rate unchanged at 9.5 percent, saying the domestic and external economic outlook, as well as the inflation forecast, suggested maintaining the prevailing level was consistent with bringing inflation into a 3-6 percent target band.

The statistics office said earlier this month inflation in the world's largest diamond producer quickened to 8.5 percent year-on-year in February from 7.9 percent in January.

Diamonds account for about 40 percent of the southern African country's GDP. - Reuters

Tuesday, March 29, 2011

Investing in Africa

To accompany the series of compositions commissioned from Athol Moult for our 2o10 Annual Report, Imara asked James Retief, editor of JSE Magazine, to explore Africa’s investment heritage and potential in words. This is his account.

Selected extracts:

"Now the darling of the global investment community, Africa’s long and rich trade and investment history has provided an excellent foundation for its position as a world-class manufacturer and consumer and investment destination."

... ...
"The best investment opportunities are found where perception differs from reality and Africa often fits that bill perfectly."

... ...
"Responsible investing is a significant theme in the world today with the focus firmly on the triple bottom line of people, planet and profit."

... ...
"Having for a long time been considered the delinquent continent, Africa has transformed itself into one of the fastest-growing regions in the world, featuring robust and resilient economies, a stable banking sector, strong markets, liberalising policies and undiscovered, high-quality and fast-growing companies."

... ...
"With economic growth figures of between 5% and 8%, returns on investment frequently surpassing those of developed economies and the income levels of the one billion-strong population ever rising (thanks largely to globalisation and the unabated demand for goods from countries such as China), the investment potential is huge. Investors can choose from banks, mining, retail, manufacturing and mobile phone companies, all with good prospects, healthy balance sheets and respectable price earnings ratios."
"Africa is now a global competitor and a premium investment destination. Now is Africa’s time."
Real the full piece here.

Tuesday, March 15, 2011

South Africa to invest billions in ports

Transnet will invest R20.5 billion over the next five years to improve capacity and maintain Durban and Richard’s Bay harbours, the parastatal said on Monday.

“We will put new cranes in port harbours because ships wait too long in both harbours,” CEO Brian Molefe said during a session with black professionals organised by Durban Invest.

The event was also attended by public enterprises Minister Malusi Gigaba and senior officials of state-owned enterprises.

Molefe said Transnet was working on a plan which would end congestion in Durban harbour. He said both harbours were using old cranes while Cape Town had received new cranes in the past few years.

Improvements were essential because Durban had the biggest container terminal in Africa. It was South Africa’s premier container, vehicle and liquid bulk port and also provided ship repair, cruise liner, navy, fishing and recreational facilities.

Molefe said the changing of the old Durban International Airport into a dugout port would also help increase capacity.

“We are trying to acquire the site and we will start digging,” he said.

The old Durban International Airport was decommissioned in May when the new King Shaka International Airport was opened.

Molefe said South Africa had the highest performing logistics system among upper middle-income countries. The challenge was sustaining the performance and integrating the regional freight system.

Source: SAPA

Friday, March 11, 2011

Gold output in South Africa soars

Gold output in South Africa, the world’s fourth-largest producer of the precious metal, increased the most in more than 30 years in January as prices traded near a record high amid investors demand for alternative assets.

Miners in the country produced 15.1 percent more gold during the month than they did a year earlier, according to a monthly report from Statistics South Africa today. That’s the biggest monthly increase according to Bloomberg data which goes back to the start of 1981.

South African gold production in January was skewed by exceptionally low output a year earlier, Martin Kohler, deputy director of statistics at the national directorate of mineral economics, said by phone from Pretoria today. He wasn’t immediately able to comment further.

Gold rose 22 percent to an average of $1,359.98 an ounce during the month, from $1,116.56 a year earlier. The precious metal reached a record $1,444.95 an ounce on March 7 as violence in Libya boosted demand.

Total mine production in South Africa rose 4.3 percent in January from a year earlier, Statistics South Africa spokesman Jean-Pierre Terblanche said by phone from Pretoria. Iron ore output fell 36 percent, while production of platinum group metals climbed 14 percent and copper jumped 31 percent, the statistics agency said in a report on its website today.

South Africa was the world’s largest gold producer in 2009 after China, Australia and the U.S., according to the country’s Chamber of Mines. South Africa was the world’s largest producer for much of the twentieth century.

Source: Bloomberg

Also: January Mining Production up 4.3%

Africa: The Last Oil Frontier

Cape Town - Fears that instability will spread further through the oil-supplying Middle Eastern and North African region in North Africa have driven the oil price above 2008 levels. The civil war in Libya has halved oil production in that country. And though the regional uprisings have not spread to Saudi Arabia, the world's most important oil producer, tensions rose when Saudi troops fired rubber bullets on street protestors last week.

These events will further hasten the scramble by both the East and the Western to carve for themselves a reliable supply of oil from Africa - dubbed the last oil frontier.

African oil comprises 13% of global supply, though proven reserves are just 9% of the world's known oil reserves. This is a fraction of the Middle East's 62%. "Africa is punching above her weight," Dr Duncan Clarke, oil researcher, consultant and CEO of Global Pacific and Partners SA, told delegates at the 5th annual Africa Economic Forum this week. "This is a modern scramble for resources in an energy hungry world."

In this scramble, Africa is increasingly important, particularly to the United States and China. They are, respectively, the world's biggest and third biggest (after Japan) importers of oil. The US, for example, wants a quarter of its crude imports to come from Africa within the next six years; already, Algeria, Angola and Nigeria combined supply almost 20%. China sources almost one-third of its imported oil from Africa, mostly from Angola, Sudan and Equatorial Guinea.

But the US and China are not the only ones eyeing Africa's oil. About 500 companies - from the oil majors, and state owned petrochemical firms like Petronas and SA's PetroSA to smaller exploration and drilling firms, are currently invested in Africa's oil industry. New entrants arrive every month. They are not all foreign owned either. According to Clarke, more and more African players are investing in the sector. "African private oil companies now number over 100 and come from 20 countries - a far cry from a decade ago," he says.

In parallel, oil is being discovered in more and more African countries. These include significant finds in Uganda, Ghana and Sierra Leone. Madagascar has discovered 15bn to 20bn barrels of heavy oil. And Niger will become an exporter of oil this year. There are also new discoveries in older oil and gas markets such as Nigeria and Angola. By 2030 there could be 40 African oil producers, from seven in the 1970s.

Though oil has been produced in Africa for 50 years, it is in the past decade that exploration and production has ramped up - as global oil consumption began to rise sharply. In the late 1980s Africa had about 60bn barrels of proven oil reserves. Today, Africa-wide oil reserves stand at about 120bn barrels - more than Russia's reserves.

"Africa stands at the beginning of a vast opportunity," says Clarke. "One that could drag her into a modern economy." Oil, far from being a curse, could actually save Africa, he says.

That is a bold statement in a continent that has failed to convert its oil wealth into meaningful social change for her people. To date no African nation has developed its people, infrastructure and economy on the back of its oil wealth. The converse is true and Nigeria is a prime example. Though that country has generated oil revenues in excess of US$350bn since independence, income has fallen by 1.5% per person per year, for the past 30 years.

Gabon, which produces 300 000 barrels per day and has one of the highest GDP rates per capita in Africa, has 60% of its population living on less than $1 per day.

Tony Hawkins, a professor at the graduate School of Management Zimbabwe, argues that oil is a "corrupting substance". Far from putting the oil wealth to effective public use, as has been done in Scandinavia, Alaska and the Gulf, Africa's oil bounty has seen her people grow poorer and their leaders richer.

An economy based purely on oil exports is not sustainable. "Eventually commodity super cycles must come to an end," he says. "African countries need to diversify their economies and grow their consumer base - the oil industry does not create jobs. "

Clarke is not ignorant of these facts. But governance is improving and democracy is spreading - even if it is haphazardly. The oil and gas landscape is changing fast. More companies enter the continent each year, and investment commitments and numbers of projects executed are rising - these generate secondary industries.

"I think competition will intensify over time as more players compete and the foreign state oil companies add to the overall portfolio."

The opportunities do not end there. Another growth area lies in gas. Clarke says with 500trn cubic feet of gas now proven in Africa, the continent's total hydrocarbon reserves stand at about 250bn barrels of oil equivalent. "The future for gas is very strong, with more reserve growth, discoveries and markets being developed, as well as exports to Europe and within Africa," Clarke says.

This bodes well for Africa's economic development - as long as the oil wealth is used constructively to develop infrastructure and unrelated industries. And if it's used to finance short-term consumption? Then nothing changes.

Source: Moneyweb

Thursday, March 10, 2011

Essar goes big in Zimbabwe

Harare - A unit of India's Essar Group will invest an initial $750-million to restart production at Zimbabwe steel firm ZISCO, in one of the biggest foreign investments in the country, Zimbabwe's industry minister said.

Essar Africa Holdings last November agreed to buy 54 percent in Zimbabwe Iron and Steel Company (ZISCO), with the government keeping 36 percent and 10 percent owned by minority investors.

“Essar will complete all work in regards to resuscitation of Zisco. The initial investment for this phase will amount to $750-million,” Industry and Commerce Minister Welshman Ncube said at a ceremony on Wednesday, when the deal was officially signed.

ZISCO is the first privatisation under a power-sharing government formed in 2009 by bitter rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai.

The investment would come as a boost for a country struggling to attract foreign investment the government says is needed to fix the economy after a decade of decline and hyperinflation.

Once a major foreign currency earner, ZISCO is now saddled with about $240-million in debt, which Essar will take over.

Ncube later told journalists that Essar Africa would not pay for the shareholding in ZISCO, which he said had a value of $45 million.

The Zimbabwean minister said ZISCO, which shut in the last two years, is expected to produce 1 million tons of steel a year, which would be sold locally and the excess exported.

“Our intention is that in the next 10 to 15 months we start producing steel,” Ravi Ruia, Essar Group vice chairman told journalists.

The government has said ZISCO's privatisation is excluded from an empowerment law, which compels foreign-owned firms including mines and banks eventually to sell at least 51 percent shareholding to local blacks. Ruia said Essar would eventually want to build a power station to guarantee uninterrupted supply of electricity to the steel maker. - Reuters

Wednesday, March 9, 2011

An excellent slide from MTN's 2010 Annual Results Presentation

Attractiveness and challenges

• Africa seen as the last frontier of growth

• ME opportunities often focused on oil and property

• Resources remain important, but Africa is slowly diversifying, with over 60% of growth
coming from non-traditional sectors – retail, manufacturing, financial services, telecoms, real
estate, tourism etc

• Geo-political risks (events in North Africa and the Middle East)

• Doing business in emerging markets requires a long-term commitment and a steady hand as risks may appear overwhelming at times.

Interesting facts

• As most economies contracted during recession, Africa’s GDP expanded by 2% in 2009, while
GDP dropped 4% in the US, 2.8% in the EU and 1.5% in Latin America

• Emerging markets out paced the developed markets with GDP growth of at least 6%
compared to global GDP growth of about 2.5% excluding the “shadow economies”

• Urbanisation: 40% of Africans live in the cities (67% or 1 billion by 2050, creating economies
of conglomeration. 52 cities in Africa have over 1 million people, and growing

• Africa entering a ‘take-off’ phase, due largely to a positive mix of socio-political and economic
forces (Democracy, fiscal discipline)

• FDI in Africa has increased from USD15 billion to USD 80 billion in 8 years

See the presentation here.

Positioning Africa to benefit from the seismic shifts in the world economy

CAPE TOWN - There have been some seismic shifts in the world economy – shifts which were accelerated by the financial crisis and recession, but which did not begin there, said SA minister of Trade & Industry, Rob Davies on Tuesday at the Africa Economic Forum.

The recovery of eastern, western, northern and southern countries, following the recession, has occurred at differing speeds – China’s GDP is growing at 7%, the OECD at 3%, Latin America at 4% and sub Saharan Africa at 5%. “The new peaks are located in the south and the east,” says Davies. “Former sources of growth have faltered. This is a reality we have to grasp.”

Africa, he says, is the next growth story after China, India and Brazil. Of course Africa’s acclaimed mineral wealth is a key factor in the continent’s growth. But this, says Davies, is not enough. There needs to be developments alongside the growth in mining. “Too much of Africa’s mineral products are leaving the continent as unprocessed dirt from the ground. These are sold into the fast growing economies. Mineral beneficiation is a key challenge across all of Africa.”

Changing patterns of trade are also a reality that SA, and Africa, needs to adapt to. Historically the EU was SA’s largest trading partner. But this title is now reserved for Asia, which accounts for 36% of SA’s trade. Within this, China is SA’s number one export destination and source of imports. The US accounts for 10% of SA’s trade, and the sub-Saharan region accounts for 18% of SA’s trade.

While trade strategies must be oriented towards the East, long-term sustainable growth depends on the growth of domestic markets. India’s growth began with that country servicing its domestic market; Brazil was insulated from the financial crisis by the strength of its domestic market and China sees its future growth coming from its domestic market. The question then for Africa, he says is “how do we grow Africa’s domestic markets to yield the benefits we want?”

Part of the answer lies in the formation of a “grand free trade area”. Africa is not one homogenous country. It is divided into 57 countries with different cultures, languages and trade bottlenecks. “This limits Africa’s ability to grow. But on the continent we have 1,1bn people – that is potentially a formidable market.”

The SA government, he says, wants to see the country more deeply involved in Africa. “We already trade with almost every country in Africa.”

This is being taken forward.

Later this month the SA government will host talks with the three African economic communities that are planning to form the free trade area. It will extend from the Cape to Cairo and will include 26 countries, between 500m and 700m consumers and a GDP of $853bn.

The bloc would only be rivalled by China and India in terms of market size and be ranked 15th in the International Monetary Fund’s list of world economies by nominal GDP, somewhere between Mexico and South Korea. “This will create the regional market we need for a strong growth push.”

The three trading blocs concerned are the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa).

There are big hurdles to overcome – just finding agreement on overcoming tariff and regulatory barriers will be difficult. “We are attending to these,” says Davies. “We have a strong common mind on how we need to approach this.”

Other problems are more fundamental. The most significant are the infrastructural inadequacies which restrict trade. “Without these improvements a common trading bloc cannot succeed,” he says. “We are addressing this through the North South Corridor, which aims to improve transport links from the Copperbelt of Zambia and the DRC, to the ports of Tanzania and SA and the Trans-Kunene Corridor which links Walvis Bay with southern Angola, over a distance of 1 600 km.

Other areas need to be addressed too, such as agricultural production. “What we are saying is that there are areas where African countries need to come together for mutual benefit.”

The conference continues on Wednesday and Thursday.

Source: Moneyweb

Tuesday, March 8, 2011

Sasol buys more Canadian shale gas assets

South African energy group Sasol [JSE:SOL] said on Tuesday it would pay $1.08bn for its second shale gas interest in Canada, in a move to expand its gas portfolio.

Sasol said it would buy a 50% stake in Talisman Energy's Cypress A acreage in the Montney Basin in Canada, where the company also bought a stake in Talisman's Farrell Creek assets last year.

The 57 000 acres of land covered by Cypress A represent an estimated contingent resource of 11.2 trillion cubic feet (tcf) of gas.

Sasol will pay an initial C$263m in cash, with the remaining C$787m in future development costs.

Sasol and Talisman are studying the possibility of establishing a gas-to-liquids plant in Canada. Sasol said the acquisition could allow for a scalability of the proposed plant.

See also: Prospecting for gas in the Karoo

Survey sees South Africa's Perceptions Overwhelmingly Positive

SA WILL attend its first meeting as a member of the Bric bloc in China next month buoyed by the results of an international poll that show the country is regarded as having a positive influence in global politics.

Positive international perceptions of SA "rose significantly" from 35% to 42%, a British Broadcasting Corporation (BBC) poll released yesterday showed.

The successful hosting of last year’s Soccer World Cup and the political role played by SA on the African continent are factors that boosted SA’s image abroad as an influential, emerging economy.

While the government has been criticised at home for not being outspoken enough on the crisis in Libya or decisive in finding a solution to the political impasse in Côte d’Ivoire, foreigners are upbeat about SA’s influence on the international stage.

The poll was conducted by US- based firm GlobeScan on behalf of the BBC. It solicited the views of 28619 people in 27 countries between December last year and February 4 .

Brazil received the most positive response, with favourable perceptions of its influence increasing from 40% to 49% over the previous year’s poll. SA was the second-best performer in terms of an increase in its ranking.

The poll found that, of the 27 countries polled on SA, 17 had positive views, two were negative and eight were divided.

There was a seven-point increase in positive ratings of SA, with 42% of all respondents reporting favourable perceptions of the country’s influence in the world.

Doug Miller, chairman of GlobeScan, said the poll showed the "growing credibility of middle powers", especially of Brazil and SA, in driving change in multilateral institutions.

"This is the story of the year," Mr Miller said.

Local analysts agreed SA was well placed to exert influence in international forums.

Catherine Grant, head of economic policy at the South African Institute of International Affairs, said the poll "reaffirms SA’s position as an important emerging-market player that can no longer be ignored".

Ms Grant said the results would also boost President Jacob Zuma ’s confidence when he meets his counterparts of the Bric (Brazil, Russia, India and China) bloc next month.

Martyn Davies, CE of emerging market consultancy Frontier Advisory, yesterday described the poll as "good news" for SA.

"We may not be a great power, but we are an increasingly confident emerging power," Mr Davies said.

French President Nicolas Sarkozy said last week that it was "scandalous" that countries like SA were left out as key decision-makers in multilateral institutions.

SA is a campaigner to reform the United Nations (UN) Security Council, the World Bank and the International Monetary Fund. International Relations and Cooperation Minister Maite Nkoana-Mashabane is meeting her counterparts from Brazil and India in Delhi today for talks on UN reform.

They are discussing the intensification of the efforts to expand the permanent and nonpermanent membership of the UN Security Council.

SA and Nigeria have ambitions of occupying permanent seats on an expanded Security Council.

The GlobeScan survey found that citizens of African countries had the most positive sentiment towards SA. Positive views were the highest in Kenya, at 73%, followed by Nigeria (67%) and Ghana (57%).

SA has spent millions of rand in post-conflict reconstruction efforts and peacekeeping in Africa in recent years. Its private sector has been one of the leading sources of foreign direct investment on the continent.

Surprisingly, citizens of fellow Bric members China and Russia held negative views of SA, the poll showed — while more Canadians and Americans were positive about the country than before.

The countries least favourable towards SA were Japan, Pakistan and Russia.

Ratings among Canadians were 45% positive, up by nine percentage points, and US citizens were 50% positive about the role SA played on the international stage — a rise of 13 percentage points.

Source: Business Day

Monday, March 7, 2011

The Fraser Institute and Mining Rankings

South Africa is ranked 61st out of 72nd in mining attractiveness, according to the Fraser Institute, a Canadian organization. I find it very amusing that a Canadian research group ranks 3 out of the top 5 jurisdictions as Canadian. Perhaps nobody thought about impartiality?

Bain: African Banking set for Growth

Africa's $107 billion financial services industry will log impressive growth for the rest of the decade.

AFRICA’S $107 billion financial services industry will log impressive growth for the rest of the decade as more banks target the continent’s emerging middle class, a study by consultancy Bain & Company found.

Retail banking will see the biggest growth, and will account for nearly 40% of the continent’s banking revenue by 2020, helped by rapid adoption of mobile phone banking, Bain said in the study released ahead of next week’s Reuters Africa Investment Summit.

The opportunities and challenges presented by this bourgeoning African market will be addressed by executives, investors and politicians at the summit, being held March 7-10 in Johannesburg, Nairobi and Lagos.

Africa is home to a billion people, vast commodity wealth and rising disposable incomes – as well as poor infrastructure and often shoddy corporate governance – making the continent both a substantial opportunity and challenge for regional and global financial firms.

“The prospects for banking on the African continent are tremendous,” said Sim Tshabalala, deputy CEO of Standard Bank, Africa’s largest bank by assets, on Thursday.

“But to be able to compete in Africa you need people on the ground who know the terrain.”

Bain Partner Andrew Tymms said the continent’s financial services industry will continue to grow at a compound annual rate of 15% to 2020, outpacing gross domestic product growth.

“Retail banking will grow faster than corporate banking ... to make up 38% of banking revenue by 2020, bringing in the previously unbanked population and shifting the experienced to sophisticated products,” Tymms said.

The study, “Financial Services in Africa: A Decade of Opportunities” reckons financial firms will make up 19% of Africa’s gross domestic product by 2020, compared with 11% in 2009.

While big Western financial firms are keen to talk about trade between Africa and Asia, and their desire to win more Africa deals, the study is also a cautionary tale for overly optimistic bankers.

The biggest opportunities will be in the “mass retail segment”, serving customers with low incomes and the rural poor, many of whom did not previously have bank accounts.

That is not a high-margin business, nor an easy one for banks unfamiliar with local markets.

Nevertheless, regional lenders such as South Africa’s Standard and Togo-based pan-African lender Ecobank Transnational are rolling out services such as kiosk banking and community lending programmes to widen their reach.

But the biggest opportunity for retail banking may be via mobile phones. On a continent where Internet access is rare and millions live in rural areas, banks are increasingly turning to mobiles to reach customers.

Africa will add an additional 224m mobile users over the next five years, Bain’s Tymms believes, bringing mobile phones to 68% of the continent’s population.

That will help spread the adoption of banking services among the hundreds of millions of Africans currently without bank accounts.

The M-Pesa mobile money transfer service from Kenya’s Safaricom has helped drive customers to more sophisticated banking products.

“With increased adoption, customers demand broader banking services,” Tymms said in the study.

“M-Pesa launched its service in March 2007 and within 18 months, customers started to demand a broader range of products.”

Source: Reuters

Friday, March 4, 2011

Carlyle to launch $750m Africa Fund; HSBC to follow

Carlyle plans to launch a $750m fund to invest in Africa, a continent long neglected by the large international buy-out firms, people familiar with the US private equity group said.

David Rubenstein, the group’s co-founder, has a reputation for being a pioneer in raising and investing money in frontier economies.

Mr Rubenstein was among the first buy-out executives to raise money in Libya and has oil money going into Carlyle funds from resource-rich African nations such as Angola.

The soon-to-be-launched Carlyle fund would be overseen by a team of three with a presence in Johannesburg, Zimbabwe and Nigeria, these people added.

Carlyle already has a significant presence in north Africa, as well as a dedicated private equity fund for the Middle East and north Africa.

Many parts of Africa are now enjoying better prospects than at any time in recent history due largely to a rush for resources led by the Chinese.

“The majority of Americans don’t pay enough attention to Africa,” one source close to Carlyle said. “It has been China that has been the catalyst for economic activity in Africa.”

Carlyle’s fundraising machine is by far the most powerful of any of the large private equity groups. But speaking at a conference in Berlin on Tuesday, Mr Rubenstein referred to a difficult fundraising environment, a complaint echoed by executives at all of the significant private equity groups. For example, in 2007, at the height of the boom, Carlyle raised $30bn, a figure it is unlikely to come close to today.

“We have seen more investment and more exits, but fundraising lags behind,” Mr Rubenstein said. Yet, he added that he expected fundraising to improve due to low interest rates and the thirst of pension funds in particular for yield. But even when the pension funds and sovereign wealth funds increase the money they give to the buy-out firms, the fees they pay are likely to be dramatically smaller, Mr Rubenstein said.

The sovereign wealth funds in particular are becoming less passive, seeking to invest alongside the private equity groups, hold separate accounts with them or invest directly and avoid paying fees.

Today, Carlyle has numerous specialised funds and has also been growing through acquisitions, bringing its total assets under management, whether direct or indirect, to almost $150bn. These new funds and acquisitions, such as its deal to acquire Alpinvest, which invests in private equity on behalf of its own investors, comes as Carlyle is moving towards a public listing, following Blackstone and KKR, and also Apollo, which will soon list.

A spokesman for Carlyle declined to comment.

Source: Financial Times

Also: HSBC launches South Africa Index ETF in Europe

Bank: China’s Africa Investment to Jump 70% by 2015.

Think China’s pumping a lot of investment into Africa? You ain’t seen nothing yet.

According to a forecast statement from South Africa’s Standard Bank, Africa’s largest bank, investment from China into Africa is likely to hit $50 billion by 2015, up 70% from 2009.

Outward investment by Chinese businesses has only started to ramp up in recent years, with capital generally flowing into the world’s second largest economy as a much faster clip than it flows out. In January the Ministry of Commerce said total overseas investment by Chinese companies in nonfinancial sectors was $59 billion last year–barely larger than Standard Bank’s 2015 forecast for Africa alone.

Meanwhile the bank forecasts China-Africa bilateral trade to double in four years to $300 billion from $150 billion last year. In the past 15 years, China-Africa trade has doubled every three years, the bank said in the statement .

It also predicts that Africa’s gross domestic product, or the total value of good and services produced in a region, is likely to double to about $3 trillion in 2015 from $1.5 trillion now.

“Trade and investment routes into Africa are being recalibrated as economic momentum shifts to the East,” said George Fang, Head of Mining and Metals, China. “Through trade and direct investment, China is broadening its resources supply base with Africa as one of its key partners.”

Mr. Fang’s enthusiasm is understandable. China’s banks have only a handful of branches between them throughout Africa. Moreover, Standard Bank is in a unique position to take advantage, with Industrial & Commercial Bank Ltd. holding a 20% stake in it. Standard Bank’s investment banking operations are already benefiting from that relationship, and it looks like they may even benefit a tad more down the road.

Source: WSJ

French sign investment agreements with Acsa, Eskom, City of Johannesburg

Two financing agreements intended to support growth, create jobs, alleviate poverty and promote sustainable development were signed during President Jacob Zuma's state visit to France this week.

The agreements were signed by the Agence Française de Développement (AFD) and two major South African partners -- Airports Company SA (Acsa) and Trans-Caledon Tunnel Authority (TCTA), AFD said in a statement on Friday.

"These are emblematic of the France-South Africa Partnership: over the last 15 years the two nations have built a close co-operation to support growth, create jobs, alleviate poverty and promote sustainable development in Southern Africa," it said.

AFD had a mandate to support South Africa's economic growth by funding large infrastructure programs, such as bulk water projects and airports.

Other projects would soon be financed with Eskom (renewable energy) and the City of Johannesburg (water).

Acsa and AFD signed a 15-year loan (including a five-year grace period) of EU200 million for refinancing short-term indebtedness incurred to upgrade Cape Town International Airport, which was Africa's 3rd largest.

To achieve the required extensions and upgrades of its airports, Acsa had developed an investment plan of R17 billion over the period 2008-2012.

During the international financial crisis, South Africa's financial market had limited availability of long-term funding in favour of short-term financing that was not well suited to investments to be carried out by Acsa.

The AFD loan would help Acsa implement its funding strategies in 2010/2011, which provided for optimising its balance sheet to match investments with longer maturity financing.

A memorandum of understanding had also been signed between TCTA and AFD for financing the Spring Grove Dam and appurtenant works on the Mooi River.

The project was intended to supplement the yield of the Mgeni system, one of the three supplying water to more than five million people in KwaZulu-Natal.

The project comprised a dam to be constructed on the Mooi River in the KwaZulu-Natal Midlands, and a conveyance system to transfer water to the Mgeni River catchment.

Once constructed, it would provide an additional 60 million m3 a year, address water delivery backlogs, and improve the security of supply.

The total cost of the project was EU225 million (about R2.1 billion).

The project would be co-financed by AFD together with its European partners KfW and the European Investment Bank, "thus illustrating the coordination between the European Union and its member states with South Africa", AFD said.


Thursday, March 3, 2011

Zimbabwe tops Africa's literacy rate

HARARE, July 14 (Xinhua) -- Zimbabwe has overtaken Tunisia to become the country with the highest literacy rate in Africa, according to statistics from the latest UNDP Digest.

Tunisia had held pole position for years with Zimbabwe second- best and number one in Sub-Saharan Africa.

But according to the UNDP Digest, Zimbabwe's literacy level jumped to 92 percent, up from 85 percent while Tunisia remains on 87 percent.

The achievement is despite the country's education sector suffering from brain drain and lack of resources over the past decade.

A senior government official told the Herald on Wednesday that the increase in literacy levels is due to government's heavy investment in education over the years.

Permanent Secretary in the Ministry of Higher and Tertiary Education Washington Mbizvo said the government has promoted conventional and open distance learning in its quest to achieve education for all.

"The latest statistical digest was published last month and shows our country surpassing all African countries. This is because we have been able to make all people access education including those in resettlement areas. "

" Despite hardships, education facilities are present in most parts of the country," he said.

While acknowledging that education infrastructure has deteriorated, Mbizvo said the quality and culture of education in the country has improved."

"Zimbabweans have always been eager to learn," he said.

"The government has expanded the number of teachers' colleges to 13, producing 2, 500 teachers per year," he said, adding that other countries in Africa produce between 200 and 400 teachers annually on average.

"This has seen other countries like Namibia requesting us to train teachers for them and this shows that we are well-recognized on the continent," Mbizvo said.

Global Investors Confident in South Africa

The success of South Africa’s bond issue on international capital markets, late on Tuesday, is a sign of investor confidence in the economy, according to analysts.

The National Treasury said yesterday that the $3 billion (R21bn) in bids received amounted to four times the value of the $750 million, 30-year global bond deal. And the 6.25 percent interest rate government would pay was only 180 basis points higher than the rate on 30-year US Treasury’s benchmark bonds.

That all this was achieved in a three-hour teleconference with investors is a sign that investors “know who we are”, according to Trevor Barsdorf, a market analyst at Econometrix Treasury Management.

The spread or gap between US treasury bonds, seen as risk-free, and all other bonds is a measure of the risk attached to them. Ian Cruickshanks of Nedbank Capital said the narrow spread reflected that South Africa’s risk “is rated very low”.

As was the case last year, the Treasury has completed its offshore borrowing programme ahead of the fiscal year – which starts next month.

The interest rate, technically known as the coupon, compared favourably with the coupon of the 10-year global bond issued last year at 5.50 percent – a rise of only 75 basis points for a bond with a longer term to maturity. Because the bonds only mature in 30 year’s time, the issue makes South Africa’s financial position even more stable.

Barsdorf said South Africa’s growth outlook and the revenue this was likely to generate for state coffers was among the attractions for investors in government bonds.

Cruickshanks said the reason South Africa was seen as a good risk is that it had achieved a track record for “fiscal discipline”, which allowed it to remain relatively underborrowed.

Though the Treasury last month projected that South Africa’s gross debt, as a percentage of gross domestic product (GDP), would rise from 37.1 percent of GDP currently to 43.1 percent over the next three years, this ratio is still much lower than those of the major economies. The US ratio is about 100 percent and Japan’s more than 200 percent.

Cruickshanks said the bond issue would not directly affect the rand. “It could take as long as a month for the money to come in and then it won’t flow into the market. The Treasury will place it directly into its account with the Reserve Bank.”

However, the favourable sentiment, along with the strong gold price, is likely to support the local unit, which has firmed on dollar weakness over the past week. The unit gained more ground yesterday, closing at R6.8918 to the dollar.

The Treasury noted: “Like last year’s bond issuance, this deal was not preceded by an extensive roadshow. The deal benefited from the initiatives by the National Treasury over the years to maintain sound investor relations.”

Giving details, the Treasury said it was “done in one day, with the book only opened from 5pm South African time and closing three hours later on Tuesday evening”. It said 156 investors placed orders, with 68.6 percent from the US, 1.62 percent from South America, 18.2 percent from Europe and 11.6 percent from Asia.


Tuesday, March 1, 2011

SA Tourism in Record 15.1% rise for 2010

CAPE TOWN (Reuters) - Boosted by the soccer World Cup, South Africa saw a record 15.1 percent increase in tourist arrivals in 2010 although the total of more than 8 million was not an all time-high, the tourism minister said on Tuesday.

"We are delighted with these strong growth figures, particularly as it comes so soon after a global economic recession," Marthinus van Schalkwyk told journalists.

South Africa was the first African country to host the World Cup, the world's most-watched sports event, and the month-long tournament passed off smoothly despite fears of organisational chaos and high levels of crime.

Van Schalkwyk said the year-on-year growth meant Africa's biggest economy outperformed the global market by more than 8 percent as it registering increases in tourist numbers from all its markets.

Arrivals from central and South America jumped a 109.2 percent as fans from soccer heavyweights Brazil and Argentina flocked across the Atlantic. Europe, the main source of visitors, registered the least rise with 8.1 percent.

Great Britain, the United States, Germany, the Netherlands and France remained the top five overseas source markets, although India, China, Brazil and Nigeria showed considerable growth.

"From a tourism perspective we stand to gain tremendously from our recent inclusion in the BRIC partnership and we are aligning our planning and strategies accordingly," Van Schalkwyk said.

A new economic growth path, which aims to create 5 million jobs in South Africa by 2020, has identified tourism as one of six key sectors.

Tourism's contribution to the economy has increased to 7.7 percent in 2010 from less than 5 percent when South Africa held its first democratic elections in 1994 at the end of white-minority apartheid rule.

Eric Sampson: South Africa's Steel Baron

SA's self-made tycoon presides over a company with a bigger sales turnover than De Beers

Eric Samson showed signs he would make a great businessman while still at school. After a cake sale at Parkview Junior , the principal announced that Samson had raised the largest amount of money ever from selling biscuits and sweets - £19, 9s, 6d. That was nearly 60 years ago. Since then the Macsteel Holdings co-chairman has applied his entrepreneurial skills to building a formidable empire in steel manufacturing and trading, and shipping, with a global footprint. He now presides over the biggest unlisted company in SA - bigger by sales even than De Beers.

Samson's success is an extraordinary story of a man who started his business life at the age of 19 - armed with no more than a matric certificate from Parktown Boys' High - selling wire and steel products for his father. Today he runs a company with turnover of almost US$9bn (De Beers had sales of $7,1bn last year). This puts Macsteel in the same sales league as listed companies Bidvest and Sasol and makes it twice the size of Pick ' n Pay or Sappi and four times the size of Nampak.

Macsteel's products are used across SA industry. Every SA company that makes anything out of steel is likely to be supplied by Macsteel. That goes for steel roofing, fencing, construction companies, or even washing machine manufacturers.

"He has built a gigantic, world-class business without going public. No other SA businessman has done that. I can't think of a better businessman," says Cyril Ramaphosa, a member of Macsteel Holdings' board.

What makes Samson's story all the more remarkable is that he has built his empire
below the radar. He has kept out of the public eye, mainly because Macsteel is an
unlisted company...

Link to Full article

China is South Africa's Largest Trade Partner... by far

A breakdown of foreign trade last year shows China was South Africa’s biggest trading partner with total trade between the countries worth R143.3 billion.

The second biggest global economy, China bought R59.3bn worth of South Africa’s goods, of which more than R52bn were in the sectors that include base metals, coal and iron ore.

The data are from the SA Revenue Service.

South Africa’s imports from China were valued at R84bn, of which R37bn went on machinery and appliances. This left South Africa with a R23.7bn trade deficit, bigger than the previous year’s gap of R23.1bn.

The deficit has proved politically controversial, as has China’s focus on resources. A year ago a Chinese official signed a trade agreement saying China would attempt to increase its imports of “beneficiated, high-value products from South Africa”.

There are hopes that South Africa’s entry to the exclusive Bric club of Brazil, Russia, India and China at its heads of state meeting in Beijing next month could boost trade with these major emerging markets.

But there are challenges. Trudi Hartzenberg, the executive director of the Trade Law Centre of Southern Africa, said the Bric countries had similar priorities in terms of industrial development and were competing for space in the same global markets. Examples are the clothing and automotive industries.

She said there might be opportunities for South Africa in some niche markets in the clothing sector; and possible demand for processed agricultural goods, like canned fruit and fruit juice in China. But it seemed likely demand for South Africa’s products would remain concentrated on resources.

Demand from India was mainly mineral products worth R14.8bn out of total exports worth R21.7bn. South Africa imported R6.2bn of the same category of goods out of a total of R20.8bn. Total trade between the countries amounted to R42.5bn.

Trade with Brazil was worth only R15.1bn and with Russia R2.9bn.

After China, the traditional partners – Germany, the US, Japan and the UK – led in South Africa’s trade stakes. Motor vehicles and automotive equipment figured in exports, while imports were dominated by machinery and equipment.

Trade with Germany, South Africa’s second-largest trading partner, is relatively diversified. Of total exports to that country worth R42.7bn, the biggest category – R9.8bn – includes vehicles and transport equipment.

The National Association of Automobile Manufacturers of SA (Naamsa) expects export numbers to rise this year.

In January exports of vehicles rose 11.5 percent year on year and Naamsa said exports “were expected to improve substantially from February onwards in light of a revival in demand in foreign markets”.

Imports from Germany were worth R66.1bn, leaving South Africa R23.4bn in deficit. Once again, the biggest import was R16.7bn in machinery and equipment.

Trade between the US and South Africa amounted to R93.5bn: R51.7bn in exports, and R41.8bn in imports – leaving South Africa R9.9bn in surplus. The main export item was R15bn worth of precious metals and stones followed by R14.3bn in motor vehicles and transport equipment. Top of the import bill was machinery and equipment valued at R14bn.

The biggest trading surplus came from Japan – R15.9bn (exports: R46.9bn; imports R31bn). The major export was R24.2bn in precious metals and stones; the top import was R8.8bn in motor vehicles and transport equipment.

In the case of the UK, R13.5bn of precious metals and stones was the biggest export and machinery and equipment was the top import at R5.5bn. - Business Report