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.
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.
Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment
Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.
Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia. Minet has been delivering world class products and services across Africa for over 70 years.
Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.
The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.
“The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.
“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”
“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital. “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development. We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”
Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.
Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.
Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.
This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.
“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.
French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.
President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.
We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.
This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”
For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.
Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”
The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.
Second, bilateral and multilateral developmentfinancing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 timestheir average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.
The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history.Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billionavailable to African members. It will boost their reserves and liquidity, without adding to their debt burden.
Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.
The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.
There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per yearof additional financing by the end of this decade.”
Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.
Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.
De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.
Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.
The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.
The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).
De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.
The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.
“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.
Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.
According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.
Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.
The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.
Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.
“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.
“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”