Reuters News
South Africa’s producer inflation slowed to 2.7% year on year in July from 4.8% in June, statistics agency data showed on Thursday.
On a month-on-month basis, the producer price index was at 0.2% in July from -0.3% the previous month, Statistics South Africa said. (Reporting by Alexander Winning; Editing by Alison Williams)
Airtel Uganda seeks over $200 mln in IPO to drive growth
KAMPALA, Aug 29 (Reuters) – Airtel Uganda aims to raise 800 billion Ugandan shillings ($216 million) by selling a 20% stake to drive its expansion plans, the telecommunications firm said on Tuesday, as it announced details of its initial public offering (IPO).
When the listing completes, Airtel Uganda will be the second listed telecoms company on Uganda’s stock exchange after MTN Uganda (MTNU.UG), majority owned by South Africa’s MTN Group (MTNJ.J), which listed in December 2021.
Airtel Uganda is a unit of India’s Bharti Airtel (BRTI.NS).
Airtel Uganda Managing Director Manoj Murali told a news conference that the offer of 8 billion shares would start immediately and close on Oct. 13.
The results of the IPO will be announced on Oct. 30, and the shares listed on the Uganda Securities Exchange on Oct. 31, according to a prospectus.
The IPO’s objective is “establish a source of future capital to support its (Airtel Uganda’s) extensive growth strategy,” the prospectus said.
Airtel Uganda expects to pay dividends of 500 billion Ugandan shillings in 2023 and will target a dividend payout ratio of 95% of retained earnings or net profit after tax, whichever is higher.
The company made a pretax profit of 474 billion Ugandan shillings in calendar year 2022, down from 565 billion Ugandan shillings the previous year. It said its revenue is forecast to grow 16.6% year on year in 2023.
($1 = 3,705.0000 Ugandan shillings)
South African rand gains before data-heavy end to the week
Reuters
JOHANNESBURG, Aug 29 (Reuters) – The South African rand gained on Tuesday ahead of a raft of domestic and international data releases due later this week.
At 1522 GMT, the rand traded at 18.4825 against the dollar , nearly 0.6% stronger than its previous close.
Analysts struggled to pick out a local driver, saying one factor helping the risk-sensitive rand was a decline in U.S. Treasury yields from the previous week’s highs.
“Whether this positive market sentiment can be sustained remains to be seen and will likely depend on U.S. labour market data scheduled for release in the coming days” that could influence the Federal Reserve’s interest rate plans, said Danny Greeff of ETM Analytics.
“This will give U.S. Treasuries and the (dollar) something trade on, with the (rand) still a passenger to their movements at the moment,” he added.
South African data releases this week include July money supply (ZAM3=ECI), private sector credit (ZACRED=ECI) and budget (ZABUDM=ECI) numbers on Wednesday, and July producer inflation (ZAPPIY=ECI) and trade (ZATBAL=ECI) figures on Thursday.
Those data points will shed light on how Africa’s most industrialised economy was performing early in the third quarter.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI) closed 0.4% weaker. South Africa’s benchmark 2030 government bond also fell, with the yield up 5 basis points at 10.165%.
Nigeria to encourage investments rather than borrowing -finance minister
By Felix Onuah
ABUJA, Aug 28 (Reuters) – Nigeria will seek to encourage investments rather than rely on borrowing to create jobs, Finance Minister Olawale Edun said on Monday, as the new government tries to find a solution to sluggish growth, double-digit inflation and a high debt burden.
Edun, 62, who doubles as coordinating minister for the economy, was speaking to reporters in Abuja after president Bola Tinubu held his first meeting with his new cabinet following last week’s swearing-in of ministers.
“The federal government is not in a position to borrow at this time,” Edun said, adding that the emphasis is on creating a stable environment to attract both local and foreign investments.
Nigeria’s economy has been battered by previously low oil prices and the COVID-19 pandemic, which triggered two successive recessions in 2016 and 2020. The country has since exited that recession but growth is still fragile.
The disruptions weakened Nigeria’s public finances and created large deficits, leaving the previous government reliant on both local and foreign loans to plug holes in its budgets.
Tinubu at his inauguration in May vowed to expand the economy by at least 6% a year, lift barriers to investment and create jobs, while also tackling rampant insecurity.
He has embarked on some of the boldest reforms that Nigeria has seen in years, including scrapping a popular but costly petrol subsidy and removing exchange rate restrictions. The naira has weakened to record lows.
The reforms are a gamble to try to kick-start growth but inflation has soared, worsening a cost of living crisis.
Edun, an ex-investment banker, who was special adviser to Tinubu on monetary policy before his appointment as minister, said he will focus on fixing Nigeria’s public finances.
He added that the government’s naira revenues have increased from crude oil proceeds following a devaluation in June.
“The federation earns dollars and if those dollars are feeding through, at let’s say, 700 naira or 750 naira or so to one dollar as opposed to 460 naira where it was before. Clearly, that is repairing the finances of government,” Edun said.
“So, that’s the plan.”
Role of insurance in developing countries’ economic growth: Nigeria
Nigerian Tribune
The importance of insurance in mobilising savings that could be channelled to the development of the economy of developing countries has been widely acknowledged. JOSEPH INOKOTONG, in this piece, presents the United Nations Conference on Trade and Development (UNCTAD) report that identifies the problems and new developments affecting insurance.
Insurance can help to encourage investment by promoting financial stability and mobilising savings. For example, the concentration of income from customers purchasing life insurance policies can provide capital that can be invested elsewhere in the economy by the company for greater returns.
No doubt, the importance of the relationship between financial development and economic growth has been recognised in the economic literature. According to J. François Outreville, a one-time Economic Affairs Officer with the Special Programme on Insurance at the United Nations Conference on Trade and Development (UNCTAD), recent evidence suggests that the developing countries, Nigeria inclusive, have a supply-leading causality pattern of development.
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Property-liability insurance like other financial services has grown in quantitative importance as part of the general development of financial institutions. The relationship between property-liability insurance premiums and economic and financial development has been established.
Even though insurance is said to be of primordial importance in domestic economies and internationally, the role of insurance in the development process is difficult to assess. While insurance, like other financial services, has grown in quantitative importance as part of the general development of financial institutions, it also has become qualitatively more important due to the increase of risks and uncertainties in most societies.
However, the share of total insurance premiums generated in developing countries remain at a low figure even though these countries contain more than 75 percent of the world’s population and account for almost 20 percent of the world’s economic activity.
Indeed, so important is insurance in the trade and development matrix that at its first session in 1964, the United Nations Conference on Trade and Development (UNCTAD) formally acknowledged it.
The eighth session of UNCTAD, held in Cartagena, resolved to give a new direction to the work of UNCTAD as expressed in the Cartagena Commitment. Following the new approach adopted by the conference, it was decided to suspend the existing main committees of the Trade and Development Board, including the committee on Invisibles and Financing related to Trade (CIFT), one of whose two sessions was devoted to insurance. The body said the work on insurance is to be incorporated in that of the newly created standing committee on Developing Services Sectors: Fostering Competitive Services Sectors in Developing Countries.
In implementing the decisions of UNCTAD VIII, the Trade and Development Board, at the second part of its 38th session, adopted the terms of reference of the standing committee.
Interestingly, paragraph four of these terms of reference applies to insurance, asking the committee “to analyse prospects for developing and strengthening the insurance sector and enhancing the trade of developing countries in this sector.”
In addition, the terms of reference asks the committee to focus on a “review of the development of services sectors in developing countries and comparative analysis of policies, including identification of domestic weaknesses and capabilities, aimed at creating the conditions necessary for the development of competitive service sectors and export of services.”
The preparation of the present assessment and review is in line with this objective. Some of the data used for the preparation of the review were supplied to the UNCTAD secretariat by the governments of developing countries in response to a request made by the Secretary-General of UNCTAD.
Other information has come from papers presented at international insurance conferences and meetings, which were made available to the secretariat. Much of the information has been taken from trade journals and periodicals. The coverage of countries included in the UNCTAD survey has therefore largely depended on the “information available in the professional press.”
The body admitted that it has of course not been possible to verify the accuracy of the information obtained through this method. Also, some of the information may be outdated and superseded by new developments by the time the review is out. It should be noted that when reference is made to specific insurance problems of developing countries, the statements made often apply only to a certain number of countries and not to all of them, since they are at different stages of development. Some problems may also be more widespread in one region or on one continent than elsewhere.
The UNCTAD report is an assessment of the insurance markets of developing countries with particular reference to the problems faced by them, and a general review of developments that have taken place during the period under review.
On the problems and new developments affecting insurance, UNCTAD remarked that the problems affecting the functioning of insurance markets can be classified into two categories. The first category consists of problems arising from factors external to the insurance sector and relating to the general economic environment. The second concerns problems related to the practice of insurance itself, such as those deriving from a specific market structure, the level of skills and expertise present in the sector, underwriting factors and those relating to the evaluation of losses and settlement of claims.
Explaining the problems related to the general economic environment growth of insurance markets, UNCTAD said the development and growth of the insurance sector in a country depends on the general level of economic development and on economic prospects in the immediate future. Generally, there is a positive correlation between the economic development of a country and the amount people spend on insurance. In addition, the demand for insurance is influenced by the general price level, prices of insurance services, the aversion to risk and the specific social and political features of a country.
From its works, it can be seen that the share of developing countries in world total insurance increased from 3.9 percent in 1988 to 4.5 percent in 1990. This increase is accompanied by contrasting performances in individual regions, sub regions and even countries. While Africa’s share declined by more than 23 percent mainly due to the decreasing premium volumes in the Northern African countries, the share of Asia grew by 26 percent mainly due to sharp growth in premium volumes in the Republic of Korea and in the ASEAN countries. Latin America’s share, after a sharp fall in 1989, recovered somewhat to its previous levels. Changes in premium volumes were generally in line with the economic performance of the different regions, sub-regions and countries.
UNCTAD observed that a high level of inflation is a factor of great concern to the insurance industry in a number of countries. Conditions of high inflation result in premium levels being depreciated in real terms and create numerous problems for insurance companies. Very high levels of inflation or hyperinflation may even render insurance inoperative in certain cases.
For example, in Argentina, where the economy was characterised in the last years of the 1980s by hyperinflation peaking at 200 percent a month in 1989, the value of insured properties could not be adjusted because there were no indexes that could predict price increases. In the motor insurance branch in 1989, despite the fact that policies were invoiced every four months, a car’s replacement value estimated a month before could not be used a month later as a reference to estimate the total loss value, since that value would have been less than 50 percent of a similar car’s actual price tag. As a consequence the premiums charged were insufficient.
South African rand drifts firmer, analysts struggle to see clear trend
Reuters
The South African rand drifted stronger in early trade on Tuesday, but analysts said they struggled to see a clear trend for the currency before a raft of upcoming local and international data releases.
At 0730 GMT, the rand traded at 18.4500 against the dollar , around 0.7% stronger than its previous close.
Local data releases this week include July money supply , private sector credit and budget numbers on Wednesday, and July producer inflation and trade figures on Thursday.
ETM Analytics said those releases from the middle of the week plus the build-up to U.S. non-farm payrolls data on Friday meant the local market had a lot to contend with.
“It is difficult to pick any clear direction in these early trading sessions of the week,” ETM Analytics added. “Investors are urged to keep directional position-taking somewhat limited to avoid any unexpected volatility.”
On the Johannesburg Stock Exchange, the blue-chip Top-40 index last traded about 0.1% weaker than its closing level on Monday. South Africa’s benchmark 2030 government bond was stronger in early deals, with the yield down 3.5 basis points to 10.125%.
Offshore investors net sellers of South African stocks, bonds
Reuters
Offshore investors sold a net 2.87 billion rand ($153.2 million) of South African stocks last week, data from the Johannesburg Stock Exchange showed on Monday.
Settlement data on bonds showed 12.50 billion rand of net sales while trading data showed 1.97 billion rand of net sales. ($1 = 18.7295 rand).
South African rand slips on US rate hike concerns
Reuters
JOHANNESBURG, Aug 28 (Reuters) – The South African rand slipped on Monday in response to higher U.S. Treasury yields and concerns over further U.S. interest rate hikes.
At 1156 GMT, the rand traded at 18.6650 against the dollar , over 0.3% weaker than its closing level on Friday.
The dollar last traded around 0.1% weaker against a basket of global currencies.
On Friday, addressing the Jackson Hole Symposium of global central bankers, U.S. Federal Reserve Chair Jerome Powell reiterated that further interest rate hikes are on the cards in the world’s biggest economy, should they be needed to lower inflation.
“(This) usually does not bode well for risk assets,” said Bheki Mahlobo, market analyst at ETM Analytics.
The risk-sensitive rand often takes cues from global factors, such as U.S. monetary policy, in the absence of local economic drivers.
Other global dynamics included the BRICS summit in Johannesburg last week where South African President Cyril Ramaphosa announced the expansion of the bloc of emerging economies.
“The inclusion of countries such as Saudi Arabia… (and) Iran could be read as South Africa moving away from the West, which does carry significant risks should Western countries respond aggressively,” Mahlobo added.
Local data releases this week include July money supply (ZAM3=ECI), private sector credit (ZACRED=ECI) and budget (ZABUDM=ECI) numbers on Wednesday, and July producer inflation (ZAPPIY=ECI) and trade (ZATBAL=ECI) figures on Thursday.
On the Johannesburg Stock Exchange, both the blue-chip Top-40 (.JTOPI) and the broader all-share (.JALSH) indices last traded around 1% higher from their Friday close.
South Africa’s benchmark 2030 government bond was flat, with the yield at 10.210%.
Africa now fastest growing source of diaspora flows to Kenya
The East African
Diaspora remittances from African countries to Kenya posted a 42 percent growth in the seven months to July as more Kenyans continue to seek jobs and study abroad, especially in the continent.
The Central Bank of Kenya (CBK) data reveals that in the seven months to July, Kenyan citizens living in other African countries wired $164.4 million (Ksh22.2 billion), up from $116 million (Ksh15.6 billion) last year.
The growth is the fastest among all continents in a period when North America and Europe are coming from high inflation that averaged eight percent in the US and 7.9 percent in the UK.
Read: Kenya’s diaspora remittances rise to $4.027bnMost of the cash from those residing abroad is spent on consumption, with North America accounting for 60 percent.
The search for ‘greener pastures’ in terms of employment and education is the biggest factor pushing Kenyans to go try their luck abroad.
Uganda and Zambia are an example of countries offering better opportunities for Kenyans.
Inflows from Zambia more than doubled, growing 136 percent to $5 million, followed by Uganda, which posted a 113.5 percent growth in cash sent back home by Kenyans.
Inflation in the US has since eased to 3.2 percent in July. But with cumulative seven-month inflows, the world’s biggest economy still declined by 1.6 percent ($22 million) to $1.36 billion.
Remittances, which are the single-biggest source of forex inflows into Kenya, stood at $4.3 billion (Ksh483 billion last year), beating earnings from tourism (Ksh268 billion-$1.85 billion), tea (Ksh163 billion-$1.13 billion) and horticulture that brought in Ksh152.2 billion ($1.1 billion) last year.
High global inflation brought by geopolitical tensions led to the United States raising its interest rates, which resulted in contractionary global monetary policies and a preference for government securities as investment assets due to a reduction in inflows into Kenya.
Read: Kenya charms diaspora to capital marketsOn the flip side, inflows from Middle East countries posted a significant drop in the period, with Bahrain posting an 80 percent reduction from $5.6 million last year to $1.1 million this year.
Qatar posted a 38.4 percent fall to $31.9 million, while inflows from Oman declined to $1.1 million (68 percent).
South Africa also posted a significant drop halving to $6.3 million from $13.5 million in the January-July period last year. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
Egypt hopes BRICS entry will lure foreign cash, but analysts counsel patience
By Patrick Werr
CAIRO, Aug 25 (Reuters) – Egypt hopes its imminent inclusion in the BRICS bloc of developing nations will help ease its shortage of foreign currency and attract new investment, but analysts say it may take time before any benefits appear.
The bloc, which includes Brazil, Russia, India, China and South Africa, on Thursday invited Egypt and five other countries to join, and Egypt immediately welcomed the offer.
“I appreciate Egypt being invited to join BRICS and look forward to coordinating with the group to achieve its goals in supporting economic cooperation,” President Abdel-Fattah al-Sisi said soon after being invited.
Egypt over the past few years has been mired in an economic crisis aggravated by the coronavirus pandemic and Russia’s invasion of Ukraine.
Its currency has fallen by half in 18 months, annual inflation surged to a record 36.5% in July, and a borrowing spree over the last eight years has made external debt repayments increasingly onerous. The dollar crunch has forced it to defer payments for wheat imports.
“The group’s aim of reducing dollar transactions will lower the foreign currency pressure in Egypt,” the cabinet said in s statement on Thursday. Membership in the bloc’s New Development Bank (NDB), established by its members in 2015, will provide concessional funding for development, it added.
Egypt’s supply minister said in April it was discussing with China, India and Russia using their currencies for commodities, but no deal had been reached.
Monica Malik of ADCB said BRICS membership may eventually help Egypt attract more investment.
“Its positive for Egypt to be included. Whilst in the near term the impact is expected to be limited, it could help strengthen it relationships with key EM (emerging market) economies.”
Charles Robertson, head of macro strategy at FIM Partners, said gaining access to cheap NDB funding would help Egypt and it made sense to keep close to China, a potential source of huge foreign direct investment (FDI) in Egyptian manufacturing.
“Egypt has two deep needs – FDI and a cheaper debt burden – and BRICS membership can help with both,” Robertson said.
The BRICS group on Thursday also invited Saudi Arabia, Iran, Ethiopia, Argentina and the United Arab Emirates to join.
“Whether it is Saudi and UAE injecting capital, or Egypt drawing on that capital, this bank is a welcome addition to the global financial architecture,” Robertson added.
James Swanston of Capital Economics said the BRICS expansion was unlikely to have major economic effects in the near term, but that “the possible shift in geopolitical alignment could have longer-run implications for trade and economic growth”.