Nyasha Chingono

Zimbabwe is replacing its collapsing local currency with a new one backed by gold and foreign currencies that it hopes will be more stable and help bring down inflation, the central bank said on Friday, 5 April.

A man poses with a handful of Zimbabwean dollars at a bank in central Harare, 15 June 2015. Zimbabweans began exchanging old notes of local dollars for US dollars, as President Robert Mugabe’s government seeks to officially bury the worthless currency. Reuters/Philimon Bulawayo/File Photo

The Southern African country relaunched its own currency in 2019 after a decade of dollarisation, but it struggled to win public trust and more than 80% of domestic transactions are now conducted in foreign currency.

A more than 70% slide in the Zimbabwean dollar since the start of the year pushed price rises beyond 55% in annual terms in March, evoking bitter memories of hyperinflation under former leader Robert Mugabe.

The new currency – called Zimbabwe Gold (ZiG) – will circulate alongside foreign currencies, central bank governor John Mushayavanhu told a press conference in the capital Harare.

The central bank also said it was “recalibrating” its main interest rate and setting it at 20%, without elaborating, a drastic cut from the previous rate of 130%.

In a monetary policy statement, the Reserve Bank of Zimbabwe said the new currency’s starting exchange rate would be determined by the closing interbank exchange rate on 5 April and the London PM Fix price of gold on 4 April.

The bank referred to the new currency as “structured”, saying it would be “anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank”.

“If we implement these measures, we expect them to have an impact on inflation,” Mushayavanhu told reporters.

Banks are to convert their current Zimbabwean dollar balances into ZiG with immediate effect, while people will have 21 days to exchange their old notes and coins for new ones, the monetary policy statement said.

Friday’s announcements are the culmination of months of deliberations between the central bank and finance ministry on currency reforms.

The central bank also said on Friday that it had $100m in cash and 2.52 tonnes of gold worth $185m in reserve assets.

Staff Writer

Eighty20 has released its 2023 Q4 Credit Stress Report (CSR) in collaboration with Xpert Decision Systems (XDS) outlining developments in the credit sector as well as its impact on the economic landscape:
The 2023 Q3 analysis brought a glimmer of hope to South Africa’s credit sector for the first time in years. This optimism was short-lived as Q4 highlighted a blend of both positive and negative indicators with the unemployment rate increasing slightly, inflation creeping up, and consumer confidence dipping down again.

Despite this, there was a significant improvement within the credit sector as the percentage of loans in arrears decreased by a full percentage point.Our economy bounced back to its pre-Covid level in mid-2023, and Q4 saw a 0.1% growth in the economy (following a 0.25% decline in GDP during Q3 of 2023), meaning we avoided a technical recession.

The UK has already slipped into a technical recession, and globally, the outlook remains bleak.

Below are a few Q4 developments:

– This was the first quarter since Q1 2020 where the average outstanding balances have seen a QoQ decrease. The decrease was 0.7% since the last quarter.

– Over the past two years, total loan balances for vehicle asset finance (VAF) among the middle class have been declining, resulting in 100,000 fewer middle-class individuals holding VAF loans during that timeframe.

– The total value of home-loan balances experienced its first decrease since the onset of the Covid lockdown.

– In December, retail sales delivered a surprise by increasing 2.7% year-on-year (YoY) before inflation. However, overall, 2023 saw a 1% decline compared to 2022 in real terms. During this quarter, there were 1.25 million new retail loans.

– The average ratio of monthly instalments to net income for all South Africans is currently at 47%, indicating that nearly half of the income of the average credit-active individual is allocated to debt servicing. Among the middle class, this ratio is nearing 80%, marking a 14.5% increase over the year.

Constrained credit market

All major listed banks acknowledged the impact of credit impairments on their 2023 financial results. African Bank revealed it had to double its provisions to account for bad debt, whereas Standard Bank noted that while its credit impairment charges had decelerated, they remained at elevated levels.

Consequently, banks and retailers are adopting stricter measures in extending credit to new customers, alongside writing off overdue debts. Interestingly, this trend could account for the second consecutive QoQ decline in the proportion of loans in arrears, currently standing at 36.4%, as banks eliminate bad debts from their records.

These observations mirror trends evident in the credit data. It is the first QoQ decrease in average outstanding balances since Q1 2020. Moreover, both the total open loans and the count of credit-active individuals experienced a marginal 1% QoQ increase.

Concurrently, overdue balances exhibited a reduction of 0.5% QoQ, amounting to R188.6bn.

Unsecured loans growing; larger secured loans are not

There were more than 600,000 net new loans in the quarter, which reflected the trend of large loan products (home and car loan) typically reserved for the middle class, Heavy Hitters and Comfortable Retirees are shrinking significantly.

Conversely, there was also robust growth across the retail and unsecured loan sectors.The percentage of new loans as a proportion of credit-active individuals, home loans and VAF are down but there is a significant increase in both retail and unsecured loans.

Vehicle finance under pressure

Currently, there’s a noticeable decline in the number of people opting for Vehicle and Asset Finance (VAF) compared to 2019.

Year-on-Year, VAF loan numbers have dipped by almost 1%. Total VAF loan balances have seen less than 1% growth each quarter over the last three quarters, culminating in a YoY growth rate of 3.8%.

Concurrently, overdue VAF balances have decreased by 4% year-on-year.This trend has particularly impacted the middle class, constituting approximately 30% of all VAF loans. Their loan balances have steadily decreased over the past two years, with a notable decrease of 100,000 individuals with VAF loans in this segment during that period.

Passenger vehicle sales have also experienced a decline, with year-to-date figures in December 2023 showing a decrease of 4.4% compared to 2019. January hasn’t shown any improvement either, with new sales down by 6.7% compared to January 2023.

The decrease in VAF financing and new car sales has opened up opportunities for companies like WeBuyCars. They report receiving approximately 14,000 credit applications per month and aim to transition cash sales into formal credit channels.

Some of these cash sales currently involve loans from family, friends, and informal lenders, suggesting a potential benefit in formalising this process. With inflation exacerbating the already high costs of new cars (as highlighted in a recent TopAuto article revealing that nearly three-quarters of all new cars in SA now exceed half a million rand), there is significant potential for growth in this market.

Home loan market is also struggling

While there has been a 6.4% growth in home loans by value YoY, the total value of home loans decreased this quarter for the first time since the Covid lockdown. The number of home-loan holders has grown 1% YoY, with the number of home loans growing 1.7%.

Average Instalments on home loans are up 13%, and overdue balances up 56% YoY. There are roughly 200,000 new home loans issued per year in South Africa. The rate at which new loans are being issued has been dropping, with new home loans as a percentage of credit active individuals showing a decreasing nearly 6% over the last two years.

This is unlikely to change until interest rates come down, presumably in mid-2024.Nalen Naidoo, general manager of Property24 explains: “The increases in the repo rate in 2022 and 2023 have had a cooling effect on property transfers.

Based on an analysis of Deeds Office data, we estimate that the year-on-year erf and sectional scheme transfers are down 15% in terms of value and 20% in terms of counts This includes all property types (including commercial) and comprise transfers, not loans.

Retail loan performance proving to be resilient

The overall number of retail loans grew by 441,000 this quarter to nearly 25 million retail accounts held by roughly 14 million individuals. The YoY growth in the number of retail loans is at 4%, and by value 9% over that same period.In December, retail sales experienced an unexpected surge, rising by 2.7% YoY in real terms. This upturn helped offset a lacklustre performance during the Black Friday period.

The primary contributors to this growth were retailers specialising in textiles, clothing, footwear, and leather goods. However, despite this positive development, retail sales for 2023 overall were down by 1% compared to 2022 in real terms.

Instalment to income ratios continue to surge

What strategies are South Africans employing to prevent defaulting on their debt? According to the data, the average instalment-to-net monthly income ratio has been on the rise since the third quarter of 2021. These increments are significant.These trends are fuelled by stagnant income growth and individuals responding to inflationary pressures and rising interest rates by seeking larger unsecured loans.

It’s important to exercise caution when drawing conclusions, as the debt-to-income ratio relies on predicted income, which may be less precise for both high-income earners and those with lower incomes, often reliant on cash transactions.

According to a recent BusinessTech article, over the past seven years, average take-home pay has increased by just 1%, while inflation has surged by 40%. To cope with this financial strain, people have increasingly turned to retail loans for clothing and homeware purchases, relying on unsecured loans and credit cards for other expenses.

Notably, credit-card balances have demonstrated double-digit year-on-year growth for eight out of the last 10 quarters, peaking at 15% in mid-2022.

“As we step into 2024, the outlook is still fragile, but it may not be as bleak as some might think. Echoing the sentiments of Adrian Gore, chief executive officer of the Discovery Group, often the narrative about South Africa is significantly worse than the reality. “There are signs of improvement, and with cautious optimism, we can navigate towards a brighter economic future,” adds Andrew Fulton, director at Eighty20.

Christian Akorlie and Maxwell Akalaare Adombila

Ghana’s economy grew 3.8% year-on-year in the fourth quarter of 2023, the country’s statistics agency said on Wednesday. (Reporting by Christian Akorlie and Maxwell Akalaare Adombila; Writing by Nellie Peyton; Editing by Bate Felix)

Yejide Gbenga-Ogundare

To foster inclusion for female entrepreneurs in Nigeria, various experts have identified the need for a concentrated effort on dissemination of accurate information, more access to finance, creating a pool for women with like businesses, breaking down of cultural barriers and more structured support from the government at all levels.

This was made known at the 2024 International Women’s Day celebration organised by ImpactHER, a foremost non-profit organisation with a mandate for empowering African female entrepreneurs by bridging the gender business financing gap so as to help them realise their full economic potentials in partnership with the African Union, ToolUp, BRAVE Women, GIZ and Lotus Bank. The training had in attendance over 400 female entrepreneurs.

In her remarks, Efe Ukala, founder, ImpactHER, urged the women to forge a strong bond of unity, pull resources together and serve as a torch bearer in their various business enterprises. She explained that ImpactHER is an inclusion platform that seeks to help female entrepreneurs become the best version of themselves.

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She said: “Inspiring inclusion is more than just a theme for International Women’s Day. It is a guiding light for us all, especially the vibrant community of African women entrepreneurs. It means creating spaces where every woman’s voice can echo with strength, where her ideas can flourish without boundaries and where her dreams are nurtured by the collective support of a community that sees no limit to what she can achieve. It means each of us committing to lift as we climb ensuring that our success is not a solitary journey but a shared voyage that paves the way for more women to step into their power.”

“For this training, we had a slot for 250 women, but today, we have over 400 women in attendance. These women came from all parts of Lagos, Ibadan, Ogun State and even Benin Republic to learn. This shows that women across Nigeria and even Africa truly need platforms like this where they can learn, network and receive guidance for sustainable business progression. Generally, ImpactHER helps even the most marginalized women to get free resources that allows them to build a more structured and sustainable business. For example, we provide free business registration service, book keeping and accounting so that they can access the finance needed to build their businesses. All these, we believe will help foster inclusion to help bridge the gender gap. During the event, we organised a market place with over forty vendors to showcase and sell their items. We appreciate all our sponsors for making this event very successful”.

Another facilitator, Olanrewaju Oniyitan, Founder/CEO, W-Holistic Business Solutions who spoke on the topic Growing Wealth: Growing an investable company as a woman founder hinted that people, a wonderful business model, track record of business growth, financial viability, scalability and risk management are some of the pointers needed for female entrepreneurs to become successful in their business.

Bhargav Acharya and Elisha Bala-Gbogbo

Nigeria’s inflation rose to 31.70% year on year in February from 29.90% in January, its bureau of statistics said on Friday. (Reporting by Bhargav Acharya and Elisha Bala-Gbogbo Editing by Alexander Winning)

Nigerian Tribune

The Economist Intelligence Unit, EIU, has revised Nigeria’s 2024 economic growth forecast figures from 2.2 percent to 2.5 percent in its latest country report, which was generated on March 8th, 2024.

According to the EIU, hydrocarbons generate about 50 percent of government’s revenue and more than 80 percent of export receipts, but agriculture and services dwarf industry’s contributors to GDP.

This is premised on higher-than-expected crude output and earlier-than-expected production from a new mega-refinery.

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“The oil sector constitutes about 6% of GDP. The higher growth forecast has come despite sharper-than-expected monetary tightening in February 2024. We now expect the Central Bank of Nigeria’s policy rate to peak at 23.75 percent, 200 basis points higher than our previous forecast,” it added.

Commenting on the current reforms by the administration of President Bola Tinubu, the EIU highlighted that market reforms were intended to attract investments but did not constitute a coherent plan. The two flagship policies, the elimination of petrol subsidies and the liberalisation of the exchange rate, have an inner contradiction.

The EIU stated, “As Nigeria imports virtually all its fuel, naira devaluations, the latest being a 45% drop in February 2024, should be reflected in the pump price. However, owing to the threat of industrial action, there has been little movement since June, despite the naira having weakened from N461/$1 in May 2023 to N1,600/$1 in late February 2024. This indicates the return of (large) subsidy.”

It further stated that a large naira devaluation in early February will likely herald further depreciation, as inflation remains high and real short-term interest rates remain negative.

“Falling risk premiums on government international bonds make tapping the international capital market another viable (albeit costly) option once US interest rates start to fall from the second half of 2024. For most of this year, the naira will be highly volatile, leading to regulatory erraticism that can affect businesses, especially those holding foreign currency. The CBN lacks the liquidity to support the naira itself; out of $33bn in foreign reserves, a large share (estimated at nearly US$20bn) is committed to various derivative deals.”

EIU noted that the Nigerian business environment will remain highly challenging, undermined by corruption, cronyism, rampant insecurity, and a giant infrastructure gap.

Looking at investments, the report observed that multinationals are increasingly deciding to quit Nigeria or reduce their presence; EIU estimated that there was a net withdrawal of foreign direct investments in 2023, to be repeated in 2024 as naira losses exert pressure on balance sheets carrying large foreign liabilities.

“The exodus includes oil majors selling onshore assets, which are high-cost and vulnerable to insecurity, leading to the sector’s indigenisation over time. Although, in principle, this is positive for foreign exchange accumulation, local companies will be unable to match the investing power of outgoing multinationals.”

It also forecasted that Nigeria’s crude oil production will rise from 1.23mbpd in 2023 to 1.48mbpd in 2028, although this remains about 250,000bpd below the 2019 level.

By DavidOchieng Mbewa

Zimbabwe’s economic growth in 2024 is expected to decline to 3.5 percent, compared to 4.5 percent in 2023, according to a report by the World Bank.

The fourth World Bank Zimbabwe Economic Update (ZEU), launched on Wednesday, said that though the country’s economic outlook appeared “moderate”, it reflected continued global headwinds, structural bottlenecks, weather-related shocks, and price and exchange rate volatility.

The World Bank said that one of the factors behind the growth decline is a reduction in agricultural output due to depressed global growth and predicted erratic and below-average rainfall. The Zimbabwe Meteorological Services already warned that the ongoing drought being experienced is expected to continue into 2024.

“The ZEU finds that while Zimbabwe’s economic outlook appears moderate, it reflects continued global headwinds, structural bottlenecks, weather-related shocks, and price and exchange rate volatility,” the World Bank said.

“Prolonged global turmoil could result in a slowdown in global output, reduced trade and investment, increased volatility in commodity prices, and supply disruptions.”

“Climate change shocks may also lower economic output, particularly in the agriculture sector.”

Power shortages are also expected to contribute to the economic growth decline as Zimbabwe’s electricity sector still faces major challenges.

“The report estimates that power shortages cost the country a total of 6.1 percent of GDP per year, comprising 2.3 percent of GDP in generation inefficiencies and excessive network losses, and 3.8 percent of GDP on the downstream costs of unreliable energy.”

Zimbabwe’s persistent power crisis has negatively affected the country’s mining sector and many small- and medium-sized businesses, in addition to disrupting the lives of thousands of households.

The World Bank added that continued economic reforms, including fiscal adjustment and rebuilding foreign exchange reserves, will be vital in helping Zimbabwe mitigate the risks of potential economic downturns.

“To sustain economic growth, Zimbabwe must continue tackling its macroeconomic challenges. Addressing price and exchange rate volatility and public debt arrears will support economic growth and job creation. This will help the country address the poverty, vulnerability, and food insecurity rates, which remain high,” World Bank Country Manager Eneida Fernandes said.

Reuters News

South Africa’s rand slipped on Friday, as focus shifted towards a reading of a key U.S. inflation gauge due later in the day.

At 0630 GMT, the rand traded at 18.4075 against the dollar , down 0.2% from its previous close.

“The rand struggled yesterday… as thin liquidity and the squaring of short dollar positions ahead of the Christmas long weekend hit the currency,” said Andre Cilliers, currency strategist at TreasuryONE.

In the absence of local economic indicators, investors will look at U.S. core personal consumption expenditures print, the Federal Reserve’s preferred measure of underlying inflation, which is expected to provide clues on its interest rate path next year.

South Africa’s benchmark 2030 government bond was weaker in early deals, with the yield up 5.5 basis points at 9.830%.

Reuters

Egypt’s central bank kept its overnight interest rates unchanged on Thursday as predicted, saying GDP growth had slowed to 2.9% in the second quarter of 2003 and headline inflation had decelerated in October and November.

The central bank’s Monetary Policy Committee (MPC) left the deposit rate at 19.25% and the lending rate at 20.25%, it said in a statement.

The median forecast in a poll of 14 analysts was for the MPC to hold rates, although six analysts had expected a hike of between 100 and 300 basis points.

Second-quarter growth slowed to an annual 2.9% from 3.9% in the first quarter, implying growth of 3.8% for the whole of fiscal 2022/23, which ended on June 30, the MPC said. The economy grew by 6.7% in fiscal 2021/22.

“Furthermore, real GDP growth is expected to slow down further during fiscal year 2023/24 before gradually picking up thereafter,” the MPC statement said, adding that global economic growth had slowed and the outlook revised downwards as well.

Headline inflation slowed to 34.6% in November from a record 38.0% in September.

“In light of the above, the MPC decided that current policy rates remain appropriate at this juncture,” it said.

Some analysts had expected a quick increase in rates after the political tensions of the Dec. 10-12 presidential election that swept President Abdel Fattah al-Sisi into a third, six-year term. Egypt had been widely expected to delay hard economic measures until after the vote.

Africa Business

SA Innovation Summit CEO Buntu Majaja looks back at this year’s successes and quantifies next year’s opportunities.

– SAIS2023 brought together 2,600 innovators from 26 countries

– The investment capital in attendance equalled around R30 mbillion

– Startups are pivoting to or building on AI

In the dynamic world of technology and entrepreneurship, the courage and determination of startup founders is invigorating. As the CEO of the SA Innovation Summit, witnessing these entrepreneurs, often unsure of their own capabilities until the moment of truth, fuels a passion for the role and a deep sense of responsibility as an enabler for the industry.

It’s believed that everyone possesses an innate desire to contribute positively to the world, and it is this entrepreneurial spirit that is seen on display at the summit.

South Africa is undoubtedly poised to secure its future economy, even amidst these uncertain times. The summit not only attracted startups and investors, but also spectators seeking inspiration.

This active community, always on the lookout for the next big thing, is a testament to the country and continent’s entrepreneurial mindset. By supporting entrepreneurs, everyone is contributing to job creation – an important consideration anywhere in Africa – and fostering an entrepreneurial culture.

Taking stock

In 2023, the summit focused on exploring Africa’s innovation frontier. In fact, we left a space in front of Africa’s innovation frontier in order to create that engagement and buy-in for all who attended. You were free to insert a verb of your choice to personalise not only the conference experience, but your commitment to the founders and innovators.

Those nearly 2,600 registered attendees came from 26 different countries across 6 continents. Over half (15) of the countries represented were from Africa, which indicates a deep desire for interaction that was maybe missing from the innovation landscape in the post-pandemic times.

Founders who toiled in isolation were once again gathered together for face-to-face dialogue and discussion.

There’s a challenge to the perception that Africa lacks the technological capabilities to compete globally. It has been argued that Africa has all the necessary capabilities; but that the use cases are so much different than in more developed economies that it makes directly importing technology or solutions difficult.

The reality of the challenge that we see lies in redefining what investing in innovation looks like in Africa, and how venture capitalists can achieve a return on social investment.

Those dollars make a difference on a deeper level in Africa. It uplifts entire communities which, in turn, inspires more innovation as the elevated technological minds seek new ways to harness the power these digital solutions have unlocked.

Fintech leads African innovation

Standout trends at this year’s summit was a downturn in numbers of crypto-oriented startups. This didn’t affect the general fintech startup ecosystem, though, with the total count of fintech startups in Africa rising to 678 in 2023. This is up from the 576 Disrupt Africa counted in 2021.

That 17.7% increase in fintech startups mirrors the growth rate observed between 2017 and 2019 during which the number of active ventures rose by 17.3% on the back of the blockchain hype. During that period the number of blockchain startups active in Africa leapt 150% to 45 (9.2% of the fintech total).

In 2023 only 37 blockchain startups remain active on the continent, accounting for just 5.5% of the fintech total. More than half of those startups are from Nigeria, with 21 startups while South Africa is home to 9, and 3 found in Kenya.

In total, the count of active fintech startups in Africa has surged by 125.2% from 2017 to 2023.

With its rapid adoption, vast consumer demand, and limitless application possibilities in an untapped market, Africa, particularly South Africa, could be on the brink of becoming a sought-after global crypto valley.

This is in stark contrast to mature economies that are burdened with legacy systems. The key factor here is the competitive talent pool. Given the right nurturing, we believe it has the potential to create a standout blockchain ecosystem.

AI dominates the future

Looking ahead to 2024, a wider adoption of artificial intelligence (AI) is anticipated. Many startups at the 2023 summit were either pivoting to AI or building their solutions on top of AI. It’s believed that we have yet to fully explore all the ways AI can be used to improve lives in Africa.

Despite a dip in venture capital funding in Africa in 2022, optimism about the future prevails. A return to 50-75% year-over-year growth in startup investment in Africa by the end of 2024 is predicted. The cyclical nature of the market, with technology trends ebbing and flowing as they mature, is acknowledged.

Out of the businesses that came to SAIS 2023 with funding ambitions, 50% were at seed stage and 28% ready for venture capital. Nearly a quarter of those startups asking for more than a million dollars to scale to the next phase.

Startups can save the continent

Finally, confidence is high that the startup community can rise to the challenge of saving the continent with much needed job and economic opportunities. SA Innovation Summit 2023 brought together investors representing around $1,5 billion in assets under management, demonstrating the immense potential and promise of Africa’s entrepreneurial landscape.

In meeting rooms and hallways hosted a pipeline of over 80 startups with a collective deal flow of $21.6 million. This leadership and vision underscore the importance of fostering an entrepreneurial mindset to secure a prosperous future for Africa.