macroafricaintel Weekly | 13 Nov

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Date Data / Event Period Forecast Previous
14 Nov South Africa Retail Sales, % yy Sep 2018 2.5 2.5
Nigeria CPI, % yy (mm) Oct 2018 11.5 (1.0) 11.3 (0.8)
Botswana CPI, % yy (mm) Oct 2018 3.0 (0.1) 2.9 (0.0)
Namibia CPI, % yy (mm) Oct 2018 5.2 (0.5) 4.8 (0.8)
Ghana CPI, % yy (mm) Oct 2018 9.0 (0.2) 9.8 (0.0)
South Africa CPI, % yy (mm) Oct 2018 5.0 (0.4) 4.9 (0.5)

#Africa #Markets | 13 Nov

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asian shares pare losses on US-China trade optimism, oil slides
  • MSCI ex-Japan off 1.4 pct, Nikkei plunges over 3 pct
  • Asian suppliers of iPhone parts down sharply
  • Euro breaks key chart support of $1.13 to lowest since mid-2017
  • Dollar benefits from euro, pound sell-off, US rate hike bets

Oil Markets

  • Oil falls as Trump raps OPEC’s supply cut plan, global markets skid
  • Brent below $70/b, WTI below $60/b amid broader market woes
  • Saudi Arabia says there is need to cut 1 mln bpd of supply
  • Trump says OPEC should not cut supply
  • Brent crude futures down 0.9 pct at $69.47 per barrel (0214GMT)
  • US WTI crude futures down 1.3 pct at $59.15 per barrel

Precious metals

  • Gold prices inch up after hitting 1-mth low
  • Spot gold up 0.2 pct at $1,202.99 per ounce (0125GMT)
  • US gold futures flat at $1,203.4 per ounce

Grains

  • Wheat slips from 3-wk high, soybeans rise
  • Most active CBOT wheat futures down 0.4 pct at $5.17-3/4 per bushel (0344GMT)
  • Most active corn futures down 0.3 pct at $3.70-1/4 per bushel
  • Most active soy futures down 0.3 pct at $8.85-3/4 per bushel
  • Most active rice futures unchanged at $10.65 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • South Africa’s state capture inquiry continues
  • Paris Peace Forum contiunes today; a number of African heads of state in attendance
  • Libya conference in Italy today

Key African events or data releases yesterday & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • South Africa’s Telkom H1 adjusted headline EPS up 10.3 pct
  • Tunisia must control wage bill, IMF warns after deal with union
  • Tunisia parliament approves prime minister’s cabinet reshuffle
  • Tunisia expects record number of tourists, up to nine million in 2019
  • Egypt tells Israel it needs to de-escalate Gaza violence
  • Two Congo opposition leaders pull support for joint election candidate
  • Libya rivals arrive for Italy summit after election shelved
  • Management contributed to collapse of Nigeria’s Skye Bank – deposit insurer
  • UN Security Council set to lift Eritrea sanctions on Wednesday
  • Dozens in court as Ethiopia says security chiefs ordered attack on PM
  • Nigeria telecoms regulator approves Teleology takeover of 9-mobile
  • Kidnappers free last of 80 Cameroon schoolboys
  • IMF says held constructive talks with Zambia on restoring debt sustainability
  • Sierra Leone ruling against palm oil company will empower communities – campaigners
  • Women cancer patients learn makeup tips in new Egypt workshop
  • South Africa’s Brait first-half net asset value falls
  • Africa Crude – Weak Asian demand, high freight weigh
  • Congo opposition supporters protest against joint election candidate
  • Ivory Coast Oct cocoa grinding unchanged y/y – exporter stats
  • Migrants rescued by cargo ship refuse to disembark at Libyan port
  • Egypt Sisi to visit Italy for Libya conference
  • South Africa’s competition watchdog rules SABC, Multichoice deal a merger
  • Ethiopia also arrested 27 METEC employees, police officials
  • Ethiopia’s attorney-general alleges vast corruption at military-run Metec
  • Ethiopia arrests 36 intelligence officials over alleged corruption, rights abuses
  • Egypt sells 695.10 euros in 1-yr euro-denominated t-bills – cbank
  • Mubadala to buy 20 pct interest in Egypt’s Nour offshore concession from Eni
  • Italy hosts Libya conference to push new UN peace plan
  • Kenyan shilling under pressure due to oil importer dollar demand
  • Uganda shilling steady as pending taxes trim demand
  • Zimbabwe invites bids for struggling national airline
  • South Africa’s Eskom warns of power cuts due to low coal stockpiles
  • Kenya to sell 20-yr infrastructure bond worth 50 bln shillings in Nov- cenbank
  • South Africa Vodacom H1 profit down 13.5 pct

N.B. Full stories of above headlines are available on Reuters

macroafricaintel | Ghana: Need for stronger banking supervision

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

After the failure of a couple of banks recently, the public is on edge. That is, even as the Bank of Ghana, the central bank, has provided assurances that depositors’ funds are safe. Not that a banking crisis is at hand. Far from it; although some might argue otherwise. But there is definitely a lot more that the BoG could and must do to restore confidence. For instance, culprits behind the failure of Unibank, hitherto Ghana’s sixth largest bank, where directors were found to have helped themselves to depositors’ funds to the tune of $1.1 billion, about 75 percent of the bank’s assets, should in addition to being relieved of their positions, also be prosecuted to the full extent of the law. Loan defaults have also become rampant, with non-performing loans (NPLs) accounting for 21.3 percent of all loans in August 2018; albeit largely unchanged from the same period last year when they were 21.9 percent of loans. Naturally, banks are reluctant to lend, preferring to buy government treasuries and bonds instead. Consequently, the government accounts for a great deal of banks’ exposure. And although private sector credit extension (PSCE) has been growing in real terms, at 5.4% in August 2018 from -5.0% in same month last year, it is not the case when compared to GDP in nominal terms; based on Bank of Ghana data. In August 2018, nominal private credit extension was 14.7% of GDP from 15.2% in the same month last year. A great deal of regulatory drive would be required for a turnaround. Thus, the central bank’s directive in September 2017 for banks to beef up their capital base to a minimium of 400 million cedis from 120 million cedis hitherto should be pursued with the utmost determination. And there should not be a shifting of the end-December 2018 deadline. Better capital adequacy reporting via Basel II at the direction of the central bank in July is also laudable.

More consolidation & liquidation
To date, the BoG has taken the following actions to clean up the banking system and restore confidence. It liquidated and gave control of UT Bank and Capital Bank to Ghana Commercial Bank in August 2017 “due to severe impairment of their capital.” A year later, it revoked the licenses of Unibank, Royal Bank, Beige Capital, Construction Bank, and Sovereign Bank and put them together under Consolidated Bank Ghana Ltd, a special purpose vehicle, which it capitalised to the tune of 450 million cedis. The authorities also issued a 5.8 billion cedi ($1.2 billion) bond to cover their liabilities. Considering when put together, the five banks have pending obligations that require funding of about 5.8 billion cedis, the measures put in place by the central bank should suffice for now. Much more funds would probably be needed in due course, however, as more information is discovered and perhaps other banks are found to be in less than ideal positions.

Not only were the failed banks found to be struggling but some obtained their licenses fraudulently; Sovereign Bank, Beige Capital and Construction Bank for instance. With the benefit of hindsight, the BoG was not quick to act. Unibank and Royal Bank were known to be significantly undercapitalized as far back as 2016. Almost 80 percent of Royal Bank’s loans were non-performing, it was discovered. It is certainly curious that it was only until 2018 that Unibank was declared to be “beyond rehabilitation.” Surely, there was no need to wait that long. The reason might not to too hard to determine. Unibank had some influential board members, including former Ghanaian finance minister and central bank governor Kwabena Duffuor, the founder. In early September, KPMG, an audit firm and receiver for the now defunct Unibank, asked a High Court to declare unlawful, loans made to Mr Duffuor, other named shareholders and their so-called related interests. KPMG is also asking Mr Duffuor et al. to pay back 5.7 billion cedis ($1.1 billion), about 75 percent of the defunct bank’s assets, of allegedly misappropriated funds of Unibank. According to Bloomberg, a news wire service, Nii Amanor Dodoo, a partner at KPMG in Accra, says Mr Duffuor and co. have committed to the repayment; albeit Daniyal Abdul-Karim, Mr Duffuor’s attorney, raises doubt about that when he remarks in the same report that “[KPMG’s] claims are extremely weak…[and]…are defeated both on facts and the law.” And in a report by Reuters in mid-August, Mr Duffuor disputes the figures: “We believe the figures the central bank is putting out are not right.

Other banks would definitely not want to become part of “Consolidated Bank.” Thus, there is almost certainly going to be more consolidation in the industry, as smaller banks or those not able to raise enough capital in time to meet the BoG end-December deadline, merge with bigger ones or come together to become bigger and stronger. Others are looking to raise capital on the stock market. But considering the supposedly lucractive 1.14 billion cedis ($238.5 million) initial public offering (IPO) of MTN Ghana, a telecoms firm, in late August underwhelmed below its 3.47 billion cedis target, there are doubts about how successful the banks looking to take this route would be. That is not deterring them, it seems. In September, just weeks after the MTN listing, Energy Commercial Bank secured approval from the Securities and Exchange Commission (SEC) to raise 340 million cedis via an initial public offering to enable it meet the new minimum capital requirement. There should probably be a few more before the December deadline. Additionally, a couple of merger talks are ongoing; some not so well, though. In late July, for instance, there were reports Premium Bank and BSIC Ghana were abandoning merger plans with GN Bank. A merger proposition between Sahel Sahara Bank, GN Bank and Premium Bank also fell through. Instead, Sahel Sahara Bank chose to go with Omni Bank in mid-August, making it the first potential merger since the scramble to meet the new capital requirements, having since received a no objection nod from the central bank.

Firm up oversight
The recent bank failures are evidence of poor banking supervision by the central bank. If confidence is to be restored, the prominent people found to be responsible for the mess in the banking sector should not only be required to pay back the depositors’ funds they misappropriated but also face the full wrath of the law. Their collaborators at the central bank should also be punished severely. It is heartening to know that the authorities’ rhetoric reflect this sentiment. In mid-August, the BoG told Reuters, a news agency, that it planned to prosecute the errant executives of the failed banks. More specifically, BoG deputy governor Elsie Awadzi said the central bank was “working very hard on submitting a dossier on each of these banks to the law enforcement agencies…to further investigate criminal behaviour or what could potentially be criminal behaviour and to prosecute,” adding further that the regulator was “going to ensure that integrity is returned to the financial sector by ensuring that persons whose conduct contributed to the banks’ failure will not be shielded.” According to Moody’s, a rating agency, the new state-owned bad bank would raise the already worryingly high indebtedness of Ghana to 70 percent of GDP from 64 percent in May. The authorities’ words must be backed by action to matter.

An edited version was published in the Q4-2018 issue of African Banker magazine

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. https://www.businessdayonline.com/columnist/rafiq-raji/article/ghana-need-for-stronger-banking-supervision/

#Global #Markets | 13 Nov

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

(GMT+1)

CALENDAR
08:00 Germany Inflation Rate YoY Final 
08:00 Norway GDP Growth Rate YoY 
08:00 Norway GDP Growth Rate QoQ 
08:00 Norway GDP Growth Mainland QoQ 
09:00 Euro Area ECB Praet Speech 
10:30 UK Average Earnings incl. Bonus 
10:30 UK Unemployment Rate 
10:30 UK Claimant Count Change 
10:30 UK Employment Change 
11:00 Euro Area ZEW Economic Sentiment Index 
11:00 Germany ZEW Current Conditions 
11:00 Germany ZEW Economic Sentiment Index 
12:00 Brazil Retail Sales YoY 
12:00 Brazil Retail Sales MoM
NEWS
Australia Business Sentiment Lowest in over 2 Years 
New Zealand Food Inflation Jumps on Higher Meat Prices 
Uruguay Industrial Output Rises 16.1% YoY in September 
European Shares Close Lower 
Kosovo Inflation Rate Edges Up to 1.5% in October 
Euro Hits 16-Month Low 
Sterling Heads for Biggest Daily Decline since September 
India Inflation Rate Lowest in Near 1 Year 
India Industrial Output Growth Beats Forecasts 
Latvia Current Account Gap Widens in September 
Azerbaijan Inflation Rate Steady at 0.2% MoM in October 
Dollar Hits 17-Month High 
Lithuania Producer Inflation Rises to 9.1% in October 
Bulgaria Trade Balance Shifts to Deficit in September

Source: Trading Economics, Macroafricaintel Research

#Africa #Markets | 12 Nov

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Sterling tumbles on Brexit turmoil; dollar, oil jump
  • Brexit uncertainty hits pound, euro, buoys dollar
  • MSCI Asia Ex-Japan index down 0.5 pct
  • But European share markets seen opening higher
  • US dollar hits new 16-month high
  • Weak China data, US Fed rate hike expectations weigh
  • Oil prices surge on Saudi production cut plans

Oil Markets

  • Oil prices jump after Saudi Arabia announces December supply cut
  • Saudi Arabia plans December supply cut of 0.5 mln bpd
  • OPEC producers mull supply cuts for 2019
  • OPEC reacts to 20 pct price fall since early October
  • Brent crude oil futures up 2 pct at $71.59 per barrel (0749GMT)
  • US WTI crude futures up 1.6 pct at $61.15 per barrel

Precious metals

  • Gold prices hold steady near 1-mth low
  • Spot gold little changed at $1,209.57 per ounce (0121GMT)
  • US gold futures up 0.3 pct at $1,211.7 per ounce

Grains

  • Wheat rebounds from 1-week low; lean demand caps gains
  • Most active CBOT wheat futures up 0.4 pct at $5.04 per bushel (0144GMT)
  • Most active corn futures down 0.8 pct at $3.69 per bushel
  • Most active soy futures down 0.5 pct at $8.86-1/4 per bushel
  • Most active rice futures unchanged at $10.62 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • South Africa’s state capture inquiry resumes
  • Paris Peace Forum contiunes today; a number of African heads of state in attendance

Key African events or data releases over the weekend & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • South Africa’s Eskom warns of power cuts due to low coal stockpiles
  • Italy’s PM expects Libyan commander Haftar to join Palermo conference
  • South Africa’s rand retreats as dollar surge rattles demand
  • Kenya to sell 20-yr infrastructure bond worth 50 bln shillings in Nov – cenbank
  • South Africa’s Vodacom H1 profit down 13.5 pct
  • Italy hosts Libya conference to push new UN peace plan
  • Congo opposition picks Martin Fayulu as its presidential candidate
  • Egyptian court adds Islamist group to terrorism list
  • Health of Gabon’s hospitalized leader has greatly improved – presidency
  • Tanzania president fires two ministers over cashew nut prices, govt may buy stock
  • Zimbabwe’s unlicensed foreign currency traders face 10-yr jail
  • Egypt’s core inflation accelerates to 8.86 pct y/y in Oct – cbank
  • Egypt’s Banque Misr seeks to borrow $550 mln before end-2018 – vice chairman
  • US concerned by rising attacks on human rights in Tanzania
  • Nigeria names fifth commander in under 2 years to lead fight against Boko Haram
  • Egypt’s headline inflation surges to 17.7 pct in Oct
  • Total plans new offshore Angola well to boost oil output
  • Current ebola outbreak is worst in Congo’s history – ministry
  • IMF sees Namibia’s GDP contracting in 2018
  • Death toll from Somalia hotel attack rises to 39
  • Soccer-Tunisia’s Esperance win African Champions League
  • Libyans want truly national govt, wealth distribution – NGO report
  • Africa Crude – Brisk spot trade on strong diesel margins
  • US appoints Pham as envoy to Africa’s Great Lakes region
  • South African central bank fines HSCB for lax money laundering controls
  • South Africa’s struggling state arms firm Denel fires CFO
  • First food aid to reach Cameroon’s Anglophones after months
  • South Africa’s Tongaat swings to HY loss, shares dive
  • Kenya signs agricultural exports deal with China
  • South Africa’s Sasol to reverse provision over tax dispute
  • Kenyan private equity firm raises $155m in second round funding
  • EU observers say Madagascar presidential vote anomalies are marginal
  • South Africa’s Gold Fields reports drop in Q3 output
  • Kenyan shilling weakens against the dollar due to higher demand
  • Nigeria’s Diamond Bank has not received offers of cash from investors
  • Union demands bailout for South Africa defence group Denel
  • South Africa’s Tiger Brands says FY earnings to fall as much as 30 pct
  • Carmakers lure ride-hailer, delivery drivers in Africa
  • US firm to assemble phones in Uganda
  • South Africa’s Discovery to issue 11.4 mln shares to buy out FirstRand JV stake
  • US OPIC signs $100 mln loan deal with Africell
  • Angola’s net reserves fall further in October to $11.6 bln
  • South Africa’s Life Healthcare flags higher profits
  • Ethiopia says mass grave with 200 bodies uncovered in strife-torn region
  • US concerned about ebola outbreak in Congo conflict zone – official

N.B. Full stories of above headlines are available on Reuters

#Global #Markets | 12 Nov

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

(GMT+1)

CALENDAR
10:00 Italy Industrial Production MoM 
13:00 India Manufacturing Production YoY 
13:00 India Industrial Production YoY 
13:00 India Inflation Rate YoY 
20:30 US Fed Daly Speech 
01:30 Australia NAB Business Confidence 
08:00 Germany Inflation Rate YoY Final 
08:00 Norway GDP Growth Rate YoY 
08:00 Norway GDP Growth Rate QoQ 
08:00 Norway GDP Growth Mainland QoQ 
09:00 Euro Area ECB Praet Speech 
10:30 UK Average Earnings incl. Bonus 
10:30 UK Unemployment Rate 
10:30 UK Claimant Count Change
NEWS
Philippines September Retail Price Rises the Most in 19 Months 
Singapore Retail Sales Rise for First Time in 3 Months 
Malaysia Retail Sales Rise the Least in 4 Months 
Rwanda Consumer Prices Fall for 2nd Month in October 
Ireland Ulster Bank Construction PMI Falls to 43-Month Low 
US Stocks Close Lower on Friday 
Mozambique Inflation Rate Slows to 4.75% in October 
Ukraine Inflation Rate Rises More Than Expected in October 
US Wholesale Inventories Revised Higher in September 
US Consumer Sentiment Falls Less than Expected 
Mexico Industrial Output Growth at 5-Month High of 1.8% 
US Producer Prices Post Biggest Gain in 6 Years 
Belarus Inflation Rate at 3-Month Low of 4.9% 
Mauritius Holds Interest Rate Steady at 3.5%

Source: Trading Economics, Macroafricaintel Research

macroafricaintel | Nigeria: Cautious economic outlook as politics weigh

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

A man walking, albeit all too slowly, and hitherto virtually paralysed, would be greeted with joy by well-meaning friends. As expectations are raised afterwards, a tinge of disappointment welcomes less than expected progress. Surely, he should be able to walk briskly by now, some would wonder aloud. This is perhaps a fitting allegory of the Nigerian economy at the moment. Incidentally, it is also characteristic of its many contradictions. With wealth palpably abundant, from oil and gas to numerous other natural resources of note, most Nigerians are poor. And there is a lot of them that would argue that even when the economy was booming at above 5 percent levels some years back, their lives during today’s supposedly sluggish times are not much different from then. Out of a five-quarter recession since Q2 2017, growth remains sluggish. Most recently, in Q2 2018, real GDP growth was 1.5 percent from almost 2 percent in the first quarter of the year; a slowdown. It was a little heartening, of course, that the main driver of growth in the second quarter was the non-oil sector, which rose by 2 percent year-on-year; thus helping to fill some of the gap that an almost 4 percent contraction in oil sector GDP created. With elections due in a couple of months, and the consequent slowdown that tends to ensue, as investment decisions are delayed or postponed till afterwards, hopes are down on any significant revival. Add to that the recently forced resignation of former finance minister Kemi Adeosun over a certificate forgery scandal in September, and you might be forgiven for being so dour.

Officials would probably take comfort in the fact that the prospects of another recession are relatively slim. South Africa was not so lucky, entering into a recession in Q2 2018. Still, but for unnecessary and avoidable holdups, there certainly should have been more spring in the steps of the Nigerian economy by now. The central government’s 9.1 trillion naira ($29.8 billion) budget, after a half a billion naira increase by legislators, was not passed until May, for instance; well into the year, and about seven months after it was submitted in November for legislative approval by President Muhammadu Buhari. And now, a request for virement of some components of the budget to ensure proper funding of the upcoming elections has become a source of tensions. Why? Mr Buhari proposes that funds hitherto allocated for constitutency projects of federal legislators should instead now be used to fund the polls. And with the president of the Nigerian Senate now aiming to unseat the incumbent at the State House and many of his colleagues looking to become governors or retain their seats, there is little chance of much governance till after the polls. Naturally, the economy would likely be a casaulty. In July, the International Monetary Fund (IMF) put it succinctly: “Under current policies, the outlook remains challenging…[Thus] a coherent set of policies to reduce vulnerabilities and increase growth remains urgent.” But how likely are the chances of that with the 2019 polls top-of-mind of policymakers? African Business asks two leading Africa economists for their views.

Better growth on reforms
Gaimin Nonyane, head of economic research at Ecobank, a pan-African bank, in London says “the outlook is for a stronger recovery despite the recent slowdown seen in Q2 2018.” But if that is the case, why is the economy still sluggish? “The slowdown in Q2 real GDP growth was owing mainly to challenges in two key pipelines (Trans-forcados and Nembe Creek) in May 2018, security challenges in major agricultural belts in North-East and North-Central regions, slower-than-expected recovery of the trade sector and administrative inertia in implementing structural reforms,” says Ecobank’s Nonyane. “With efforts to resolve the technical difficulties in the pipelines underway, we expect the oil sector to move back into positive territory in the coming quarters (barring any major disruptions to foreign oil installations), while the non-oil sector will continue to drive growth driven by strengthening activity in the utilities, construction, ICT and transport sectors,” she adds. The authorities’ ambitious spending plans also underpins relative optimism about growth. Real GDP growth should be closer to 3 percent in 2019, according to Ecobank; from about 2 percent estimated by the IMF for 2018. This is below potential, for sure. Thus, if growth is to be restored to pre-crisis levels of 5-6 percent, reforms would have to be deepened, Ms Nonyane avers. The probability of major policy actions in this regard during an election season already in high gear is quite slim, however.

Cautious markets due to political uncertainty
Investors are understandably taking precautions. Ecobank’s Nonyane shares insights from her observations of the markets and note-sharing with clients: “From a financial market perspective, we have certainly seen investors being a lot more conservative with risk taking on NGN assets over the past six months on the back of the rising political risk. Andrew Nevin, chief economist at PwC, a consultancy, in Lagos agrees: “Investors are obviously slowing down as we head into a complex election season. Outsiders certainly cannot be expected to understand all the players and issues and this election is highly uncertain. In this environment, they will prefer to wait. In addition, high profile incidents that put regulators and major players in conflict will also cause investors to be cautious.” There is already evidence of this. “The Nigerian equity market is currently amongst the worst performing in the world in local currency terms, indicating that beyond the EM/FM risk aversion, there is an element of political risk in the pricing of Nigerian equities, says Ecobank’s Nonyane. “Furthermore, portfolio inflows via the IE Window dropped to a one year low in August (USD546m), just a third of the monthly average over Q1 2018 (USD1.6bn), [with] FDI inflow [falling] to a 13-month low in July (USD11.4m) and [setting] a new record low in August (USD8.7m),” Nonyane adds. Ecobank’s head of economic reseach believes “investors are also cautious, partly due to…[the] absence of policy reforms, which has subdued the outlook for growth.”

An edited version was published by New African magazine in October 2018