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A fragile recovery

Growth in Sub-Saharan Africa is projected to recover to 2.6 percent in 2017 from the sharp deceleration to 1.3 percent in 2016, and to strengthen somewhat in 2018. The upturn reflects recovering global commodity prices and improvements in domestic conditions.

Most of the rebound will come from Angola and Nigeria—the largest oil exporters. However, investment is expected to recover only very gradually, reflecting still tight foreign exchange liquidity conditions in oil exporters and low investor confidence in South Africa. Fiscal consolidation will slow the pace of recovery in metals exporters.

Growth is expected to remain solid among non-resource-intensive countries. External downside risks to the outlook include stronger-than-expected tightening of global financing conditions, weaker-than-envisioned improvements in commodity prices, and the threat of protectionism. A key domestic risk is the lack of implementation of reforms that are needed to maintain durable macroeconomic stability and sustain growth.

After slowing sharply in 2016, growth in Sub-Saharan Africa (SSA) is recovering, supported by modestly rising commodity prices, strengthening external demand, and the end of drought in several countries. Despite recent declines, oil prices are 10 percent higher than their average levels in 2016.

Metals prices have strengthened more than expected. Meanwhile, above-average rainfalls are boosting agricultural production and electricity generation in countries that were hit earlier by El Niño-related droughts (e.g., South
Africa, Zambia). Security threats subsided in several countries. In Nigeria, militants’ attacks on oil pipelines decreased.

The economic recession in Nigeria is receding. In the first quarter of 2017, GDP fell by 0.5 percent (y/y), compared with a 1.7 percent contraction in the fourth quarter of 2016. The Purchasing Managers’ Index for manufacturers returned to expansionary territory in April, indicating growth in the sector after contraction in the first quarter. Non-resource-intensive countries, including those in the West African Economic and Monetary Union (WAEMU), have been expanding at a solid pace.

Several factors are preventing a more vigorous recovery. In Angola and Nigeria, foreign exchange controls are distorting the foreign exchange market, thereby constraining activity in the non-oil sector. In South Africa, political uncertainty and low business confidence are weighing on investment. The previously delayed fiscal adjustment to lower oil revenues in the Central


African Economic and Monetary Community (CEMAC) has started, restraining domestic demand. In Mozambique, the government’s default in January and heavy debt burden are deterring investment. In contrast to oil and metals prices, world cocoa prices dropped, reducing exports and fiscal revenues in cocoa producers (e.g., Côte d’Ivoire, Ghana).


In many countries, banks are seeking to limit credit risk by tightening lending standards and reducing credit to the private sector. Lastly, the drought in East Africa, which reduced agricultural production at the end of 2016, continued into 2017, adversely affecting activity in some countries (e.g., Kenya, Uganda), and contributing to famine in others (e.g., Somalia, South Sudan). Current account deficits of oil and metals exporters are narrowing, helped by the pickup in commodity prices.


Oil exports are rebounding in Nigeria on the back of an uptick in oil production from fields previously damaged by militants’ attacks. Mining companies across the region are resuming production and exports. In contrast, current account balances have remained under pressure in a number of non-resource-intensive countries.


In these countries, capital goods imports have been strong, reflecting ambitious public investment programs. Capital inflows in the region are rebounding from their low level in 2016. Nigeria tapped the Eurobond market twice in the first quarter of 2017, followed by Senegal in May. Sovereign spreads have declined across the region from their November 2016 peak, with the notable exception of Ghana where they rose due to concerns about fiscal policy slippages. This trend reflects low financial market volatility, and a broader rebound in investor risk appetite for emerging market and developing economies (EMDE) assets.


Regional inflation is gradually decelerating from its high level in 2016. Although a process of disinflation has started in Angola and Nigeria, inflation in both countries remains elevated, owing to a highly depreciated parallel market exchange rate. Inflation eased in metals exporters, reflecting stabilizing currencies after sharp depreciations, and lower food prices due to improved weather conditions (e.g., South Africa, Zambia).

An exception is Mozambique, where inflation was still above 21 percent (y/y) in April, reflecting continued depreciation. Inflationary pressures increased in non-resource-intensive countries. In East Africa, drought led to a spike in food prices, notably in Kenya. However, in countries where the drought has been less severe, inflation has remained within central banks’ targets. Low inflation in Tanzania, Uganda, and Zambia, and steadily falling inflation in Ghana allowed central banks to cut interest rates in early 2017.

Fiscal deficits remain elevated across the region. Oil and metals exporters are still running sizable fiscal deficits. Fiscal balances have deteriorated in several non-resource-intensive countries, reflecting a continued expansion in public infrastructure.
Large fiscal deficits and, in some cases, steep exchange rate depreciations, have resulted in rising public debt ratios in the region (Box 2.6.1). A number of countries have embarked on fiscal consolidation to stabilize government debt (e.g., Chad, South Africa). In early April, S&P Global Ratings and Fitch downgraded South Africa’s sovereign credit rating to sub-investment status on account of heightened political uncertainty.

Outlook
 
Growth in SSA is forecast to pick up to 2.6 percent in 2017, and average 3.4 percent in 2018-19, slightly above population growth. The recovery is predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances. The forecasts are below those in January, reflecting a slower-than-anticipated recovery in several oil and metals exporters.

Per capita output growth—which is projected to increase from -0.1 percent in 2017 to 0.7 percent in 2018-19—will remain insufficient to achieve poverty reduction goals in the region if the constraints to more vigorous growth persist (Bhorat and Tarp 2016).

Growth in South Africa is projected to recover from 0.6 percent in 2017 to 1.5 percent in 2018-19. A rebound in net exports is expected to only partially offset weaker than previously forecast growth of private consumption and investment, as borrowing costs rise following the sovereign rating downgrade to sub-investment level. For Nigeria, growth is expected to rise from 1.2 percent in 2017 to 2.5 percent in 2018-19, helped by a rebound in oil production, as security in the oil-producing region improves, and by an increase in fiscal spending.


In Angola, growth is projected to increase from 1.2 percent in 2017 to 1.5 percent in 2019, reflecting a slight pickup of activity in the industrial sector as energy supplies improve. The subdued recovery in the region’s largest economies reflects the slower-than-expected adjustment to low commodity prices in Angola and Nigeria, and higher-than-anticipated policy uncertainty in South Africa.  In other oil exporters, growth is expected to strengthen in Ghana as increased oil and gas production boosts exports and domestic electricity production.

Growth will be weaker than previously projected in CEMAC, as larger-than-envisioned fiscal adjustment reduces public investment. In several metals exporters, high inflation and tight fiscal policy will be a greater drag on activity than previously expected. Growth in non-resource-intensive countries should remain solid, on the basis of infrastructure investment, resilient services sectors, and the recovery of agricultural production.

Meanwhile the World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies.  Growth in advanced economies is expected to accelerate to 1.9 percent in 2017, a benefit to their trading partners.


Amid favorable global financing conditions and stabilizing commodity prices, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016. Nevertheless, substantial risks cloud the outlook. These include the possibility of greater trade restriction, uncertainty about trade, fiscal and monetary policy, and, over the longer term, persistently weak productivity and investment growth. Global growth is projected to strengthen to 2.7 percent in 2017, as expected. Emerging market and developing economies are anticipated to grow 4.1 percent – faster than advanced economies.

© 2017 International Bank for Reconstruction and Development / The World Bank

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Business

The Bulb World starts operations in South Africa

8th April 2021

Homegrown LED light manufacturing company, The Bulb World, has kick started operations in South Africa, setting in motion the company’s ambitious continental expansion plans.

The Bulb World, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017, announced last year that it will enter the South African market in the Special Economic Zone (SEZ) of North West province under the auspices of North West Development Corporation (NWDC).

The company has already secured a deal with South Africa authorities which entails production factory shells and tax incentives arrangements.

The company founder and Chief Executive Officer, Ketshephaone Jacob has also previously stated that the company is looking for just under P50 million to finance its expansion strategy and is reaching out to institutional investors such as Botswana Public Officers Pensioners Fund (BPOPF) and government investment arm, Botswana Development Corporation (BDC).

However, Jacob told WeekendPost that instead of sitting and waiting for expansion funding the company has started hitting the ground running.

“We have decided to get in the streets of SA, start selling lights from door to door, ” said Jacob who is in currently in Rusternburg to oversee the introduction of The Bulb World products in the market.

Jacob explained more brand activations will be undertaken in South Africa. “The plan is to do it the whole of North West and Limpopo province, through hawkers, we give the hawkers the lights to sell at a factory price and they put a mark up and make a living,” he said.

The Bulb World operates from Selibe Phikwe, it currently employees 65 young people, 80 % of which are Phikwe youth. The company plans to add 100 jobs this year alone as it forges ahead with its regional and continental expansion plans.

In July this year Bulb World products will hit South African Shelves:  Pick n Pay, Checkers and Africa’s largest retailer Shoprite.

The Bulb World has been registered as a company in South Africa; the company will start producing lights from Mogwasa after striking a special economic zones deal with North West Development Corporation in North West Province South Africa.

“Over the next 10 years we are looking to create over 5,000 jobs in Africa. Through our expansion into all of Africa we will be able to create employment for various individuals in different sectors namely; manufacturing, distribution electronics and retail,” Jacob told this publication earlier this year.

Jacob said if all goes well, the plan is to have taken over Africa or rather penetrated, and have prevalent presence in the African market.

“We are gunning to have at least 30 percent market share by then. According to a 2016 Market Survey, the total valuation of sales for LED Lighting was 57BN, a portion of which we plan to have taken over by then,” he said.

 

While the company has set its eyes on Africa, Jacob said, the company has not fully exploited its local growth, indicating that there could be strategic factories built to supply neighbouring countries of Angola and Zimbabwe.

“There is potential for further local expansion as well to other areas of Botswana if things run smoothly as anticipated. Hopefully in the long-term if our fellow Africans and all these markets receive us well we are planning to build another factory,” he said.

“We are looking to build another factory in the Chobe/Ngamiland Area that will give priority to markets in Zimbabwe and Angola,” he said

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Business

‘Oil exploration will have minimal impact’

30th March 2021
Okavango-River-Basin

The Maun based Okavango Research Institute (ORI) has downplayed the impacts of oil and gas exploration in part of Okavango delta arguing that given the distance proposed the likelihoods of negative impacts drilling these exploration wells on the surface water systems is likely to be negligible.

The Institution released a position paper titled ‘Proposed Petroleum (Oil and Gas) Exploration Operations in the Petroleum Exploration License (PEL) No. 73,’ with findings stating that, in the event of discovery of economically viable hydrocarbon deposits, much more careful consideration of the impacts and economic benefits of development of the resource will be needed.

For example, the fracking process for gas and oil extraction is known to require large volumes of underground water.

It further argues that increased extraction of the underground water is likely to affect the water table level and further affect the overall water availability in the river-basin.

“The effect on water availability and use may become worse if surface water is reticulated or sourced by any means from the Kavango River. Should the exploration and fracking for oil and gas expand to Block 1720, 1721 and 1821, the impact on water availability and quality will be significant, especially if the wastewater is not well managed,” said the paper.

The research unit recommends close communication between the relevant Basin State Ministries (Mineral Resources, Environment) and the Permanent Commission on the Okavango River Basin, OKACOM, and other stakeholders must be facilitated.

This will facilitate sharing of the correct information on the desired intentions of the basin states and compromises sought for the sustainability of the ecosystems in the downstream of the Cubango-Okavango river Basin, states the position paper.

ORI as a key stakeholder with scientific information says it is positioned to provide scientific advice and guidance to decision-makers on the potential impacts of both exploration and development and operation activities.

It also recommends that while the impacts might be minimal at the exploration stage, environmental impacts during the development and extraction process are significant.

Findings also state that the SADC Protocol places a mandatory duty to make a notification of planned measures undertaken in any riparian state in cases where such measures hold the potential to cause ‘significant adverse effects.’

It further states that where the planned development is trivial and not expected to cause any significant harm, the development state is not under duty to notify other riparian states.

Given that the drilling in the Kavango Region in Nambia is merely for exploratory purpose and the possibility of harm is minor, it is therefore not surprising that the Namibian government did not inform Botswana.

However, should it be found that the oil can be profitably or economically exploited, the Namibian government would be under a duty to notify both Angola and Botswana.

The institution further states that to ensure sustainable development in the Okavango Delta the following in the context of exploration for and potential development of hydrocarbon deposits within the Cubango-Okavango River Basin, it must be considered that the Okavango Delta is a World Heritage Site listed in 2014 by UNESCO and one of the binding requirements of the listing is the non-permissible commercial mining of any mineral, gas or oil within the World Heritage Site.

It states that the Okavango Delta is also a RAMSAR site in which mining is not allowed.

Should the exploration for minerals, oil and gas be allowed, there is a high chance that a mineral, oil or gas may be found given that the Delta is sitting on karoo sediments and shale rocks which in other parts of the world have been found to be sources of oil and gas deposits. Should oil or gas be discovered, there will be a strong socio-economic pressure to mine oil or gas and create jobs for the masses.

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Business

Pakmaya yeast penetrates local market

30th March 2021
Pakmaya Africa Sales Manager: Cem Perdar

Manufactured in Turkey, Pakmaya Instant Dry Yeast can be used in the production of various fermented products, as it is suited for both traditional and industrial baking processes. All kinds of breads, buns and fermented pastry products are typical examples of applications.

Pakmaya Africa Sales Manager Cem Perdar says Pakmaya has 4 plants in across the world, further indicating that all of the plants have the highest standards of quality certificates and approvals. Regarding raw material, molasses is the main ingredient for yeast. Concerning production activities, yeast manufacturing requires high know-how and capability. Pakmaya has all those capabilities and aspects more than 45 years.

According to Perdar, Pakmaya has been existent in African markets since 30 years. From South to North, Central to East and West, a consumer can find Pakmaya in nearly every part of Africa continent.

“With its high quality, rich product selection and good service, our brand has become the favorite yeast of many Africans. On the other hand, our distributors in African countries are working very hardly and loyally in order to promote our products in their markets. After some time, we are becoming like families with our exclusive distributors in Africa and this enables both parts to work harder and keeps our product sustainable in market,” he said in an interview this week.

The yeast manufacturing giant made its way to Botswana market. The company has been smoothly working with Kamoso Distribution, a local distribution company. Perdar told BusinessPost that two entities have been working hard to earn is market locally.

“At the moment we have a good market share with them in Botswana market. I’m sure during 2021 long, we will be increasing our sales and market position. Soon we are going to start a marketing campaign in Botswana, so that means Batswana will see and recognize Pakmaya more and more. Pakmaya wants to be the best friend of bakers in bakeries and ladies at homes in Botswana.”

As per global COVID-19 regulations to curb the spread of the COVID-19, Botswana just like other country closed borders. Providentially, the restrictions did not affect the company destructively.

Perdar says “Kamoso Africa is a very important and strong partner in Botswana territory. With Kamoso’s hard work and strict measurements, we have done a very good job. So as Pakmaya, we have not suffered any distribution problem. Our partner is doing the needful at the reaching our products to end users.”

He further said “We are doing well in Botswana market and hoping to make much more. Our aim is to enter every single corner in Botswana territory. With our new marketing campaigns, we are planning to be the most preferred yeast in Botswana market.”

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