January 2019 / South Africa

December 28 2018

High performance expected from SA real estate trusts in 2019

Performance from real estate investment trusts in 2019 is expected to deliver positive total returns, say analysts, with the coming year forecast to be better for South African REIT returns overall. This is largely driven by current forward income yield, and capital returns based on growth in income, according to Catalyst Fund Managers. "We expect the REIT sector to deliver total returns in line with the historical annualised 10-year total return of 14%," reports Mvula Seroto, investment analyst at Catalyst. This is based on performance from November 1, 2008, to August 31, 2018. Howard Penny, portfolio manager and analyst for Capricorn Fund Managers SA, holds a similar outlook, believing 2019 will be a better year for South African REIT returns overall. "In a steady valuation environment in South Africa, SA REIT returns could be in double-digit territory, supported by sector distribution yields of approximately 9%, despite lower distribution growth of around 4% to 5%," says Penny. Positive prospects Besides positive performance prospects for 2019, factors that market commentators believe will make SA REITs appealing investments in the year ahead include improved corporate governance in the sector, its historically high yields and the good value to be found in the share prices of many REITs. According to Andrea Taverna-Turisan, SA REIT marketing committee chair, SA REITs are exposed to the best commercial properties in the country and, in some instances, offshore. "Their property income is underpinned by lease agreements with tenants in these property assets. Rentals are contracted and most escalate at a predetermined rate annually - around 6.5% to 8% in the current domestic market," explains Taverna-Turisan. Political, economic outlook According to Anchor Stockbrokers, although South Africa's economic and political outlook is a potential damper on expectations for 2019, the long-term forecast remains positive. "We expect listed property to deliver a total return, made up of share price movement plus distributions, of roughly 13% to 14% per year over the long term. "Unless South Africa's economic and political outlook improves substantially in 2019, we expect the total return in 2019 to be marginally lower than the long-term forecast," notes Wynand Smit, real estate analyst at Anchor Stockbrokers. Penny notes that yields have historically been high despite the potentially unfavourable impact of rising interest rates. "Despite a rather treacherous rising global interest rate environment, historically high yields remain the greatest supportive force for the sector in 2019 and over the medium term," says Penny. Smit adds that most SA REITs de-rated during 2018, and if growth expectations start to improve during 2019, the valuations of SA REITs are compelling.
December 31 2018


The year ends with several African banks stronger than they started. Nigeria’s Access Bank Plc. announced a deal that seems sure to make it the country’s largest bank in 2019, even as competitors Guaranty Trust Bank (GTBank) and Zenith Bank Plc. strengthen. In Kenya likewise, largest privately owned commercial bank CBA and Nairobi Securities Exchange (NSE)-listed mid-sized lender NIC Bank are merging to produce the country’s third largest bank. Pan-African banking group Oragroup raised $100 million, the largest ever on Bourse Régionale des Valeurs Mobilières (BRVM), Ivory Coast’s stock exchange. Regulators also stepped up in 2018, handing down fines to erring banks and safeguarding depositors’ funds from banks doomed to fail. But how will 2019 look for African banks? Ratings agency Moody’s Investor Service says African banks will show resilience in 2019, especially Egyptian, Moroccan and Mauritius banks rated by Moody’s, but tightening global financial conditions are a key downside risk. “For 2019, we expect most rated banks to maintain stable profitability, build up their capital buffers and retain ample local currency funding,” says Moody’s “While growth across Africa is recovering, it is still below potential. Our stable outlook for African banks reflects expectations of a slight acceleration in growth and stricter regulation that supports financial stability; but risks are titled to the downside,” the ratings agency added. Moody’s expects several African economies to show a mild recovery, with the macroeconomic outlook strengthening slightly. The ratings agency projects GDP growth of 3.8 percent in 2019, up from 3.1 percent in 2018 and 2.7 percent in 2017 for countries it rates. This growth is expected to be driven by relatively stable oil and commodity prices, stronger agricultural output, domestic policy adjustments and strong domestic demand. Growth will come mainly from East Africa, Egypt and the West African Economic and Monetary Union (WAEMU), which has Benin, Senegal, Burkina Faso, Ivory Coast, Mali, Niger, Togo and Bissau Guinea. Growth will, however, be subdued in Nigeria and South Africa, at 2.3 percent and 1.3 percent respectively, says Moody’s, which expects more stable oil prices to drive economic acceleration in Nigeria and improved business and investor confidence will spur improvement in South Africa. While Moody’s identifies risks, the ratings agency says the banking sector in Africa has significant scope for growth in the longer term. “This is mainly because of the still low banking penetration (banking assets at ~63% of GDP, according to the IMF), low level of financial inclusion and rising urbanisation, increased use of mobile technology in particular will help unlock potential: already, unique mobile money accounts in Sub-Saharan Africa increased to 280 million, accounting for 21% of adults (up from 12% in 2014). Also, the use of mobile money accounts brings significant benefits for banks, including higher fees relating to money transfers/payments; reduced costs as mobile technology uses agents in place of bank branches; and eventually increasing banking penetration,” Moody’s says.
Sources: International Monetary Fund, National Bank of Angola, Central Bank of Egypt, Central Bank of the DRC, Moody’s Investors Service; latest available data
In the short term, however, Moody’s expects loan quality to remain under pressure. This will be driven by legacy issues, such as weak risk management practices in the past. “For 2019, we expect capital to increase slightly, driven by internal capital generation and modest dividend payments. The quality of capital will also remain strong,” Moody’s adds. Moody’s also expects profitability of African banks to remain broadly stable, with an estimated pre-tax return on equity (RoE) of around 16.5% and return on assets of 1.9 percent.
January 3 2019

Cargo traffic through Ghana’s ports increase by 20%

The acting Director-General of Ghana Ports and Harbours Authority, Michael Luguje has revealed that Cargo traffic through the Ports of Ghana grew by 20% in 2018 compared to same period in 2017. “We have also seen our Cargo Traffic grow and the statistics indicate that we have a growth of at least 20% above that of 2017 especially in Cargo Traffic,” he stated. Addressing Staff of GPHA at a thanksgiving service to appreciate the goodness of God for successes chalked by the Authority in the year 2018, the acting GPHA Boss recounted some successes chalked by the authority in 2018. He said a lot of progress have been achieved in terms of infrastructure development in both Ports of Tema and Takoradi. “We are also making quite a lot of progress in the area of our infrastructural development projects in Tema and Takoradi. A lot of progress is being made, 2019 is going to see at least some of the projects being commissioned for operations both in Tema and Takoradi Ports,” he said. Michael Luguje added that GPHA will continue to instill confidence in the business community for more progress to be achieved in 2019. “Whilst we are preparing to open up our infrastructure to accommodate more business, it instills a lot of confidence in the business community to sign on Ghana as their destination for import and export. So we trust that next year by this time, we will be meeting with better results to present,” he added. Earlier, the Director of Tema Port, Edward Kofi Osei in his welcome address, emphasized the need for all staff of the Authority to show gratitude to God for his faithfulness. “We as GPHA management, we don’t want to be the nine lepers, we want to be that one that came to say thank you. Indeed, it is great to be alive this day and for us to see the end of one year and the beginning of another year. Let us sing and praise the Lord for he has really done wonders for us,” he said. The Chief Imam of Tema Port, Sheikh Laberan Salifu Barry in his message highlighted the need for forgiveness as the vehicle of progress and growth. “Before a good or reputable organization can achieve its aims and objectives, there must be the concept of forgiveness. The concept of forgiveness in very fundamental and critical to our existence,” he said. In her sermon grounded on Psalm 118:7, Rev. Dr. Mary Ghansah stated that it was necessary for the Lord to be on side of GPHA in order for the Authority to achieve great exploits. The thanksgiving service brought together staff of the Port Authority as well as representatives from several other stakeholder organizations who operate in the port and maritime industry. Staff sang and danced to show appreciation to God for how far he has brought the Port Industry in general and the Authority in particular.
January 4 2019

Stanbic Bank Zambia intensifies its investment in the growth of Zambia’s agricultural Sector

Stanbic Bank Zambia has intensified its investment in the growth of Zambia’s agricultural sector by supporting agro-value chain players. Recently voted the best bank in Zambia by EMEA Finance and the Financial Times Banker’s awards, Stanbic has continued playing an active role in promoting sustainable national development through economic diversification. Zambia has for the last few decades been striving to diversify its economy away from copper mining to accelerate long-term sustainable growth. One of the sectors identified as a key growth sector in the 7th National Development Plan (7NDP) is agriculture. Keegy Zambia Ltd Managing Director Chongo Kasongole says Zambia’s agro sector will not achieve true growth without mechanisation. He said: “Zambia is sitting at a crossroads. We have the potential to be a regional food basket; we have climatic and political stability. We also have the capacity to make agriculture one the country’s main drivers of the economy thanks to our vast land and water resources. “However, the country is still a long way from feeding the sub-Saharan region due to inadequate investment in agriculture, hence the sector continues to face challenges that are hindering sustainable growth.”
“Some of these hindrances include low levels of mechanisation stifling production, especially among smallholder farmers. While there is urgent need to overturn this situation and improve the level of mechanisation, significant results will only be realised through concerted efforts from all stakeholders including government, value chain players, farmers and financial institutions.” He adds: “Financial institutions have a big role to play in facilitating easier access to farming equipment through the creation of sector appropriate services and products that allow even small-scale farmers to mechanise and improve production.” Mechanisation can increase productivity by at least 50 percent according to research data from A Green Revolution in Africa (AGRA) – an international organisation involved in improving agricultural products and supporting local farm owners and labour in Africa. Africa remains one of the least mechanised continents on the planet with the World Bank estimating there are only five tractors for every 1,000 farmers; in stark contrast to an agricultural powerhouse like the USA that has 1,600 tractors for every 1,000 farmers. Kasongole, who has over 24 years’ experience in industrial equipment distribution, notes the main constraint to achieving full mechanisation is the price at which these items come into the country. “The high cost of import for agro equipment means that the retail price is usually too high for most smallholder farmers to afford. Therefore as one of Zambia’s leading material’s handling and agro equipment distributors we decided to create a service that enables businesses of all sizes including farmers to have easier access to equipment through our leasing programme. Under the leasing programme, Keegy provides the equipment on a temporary lease basis, to allow farmers to use the machinery to improve their production, and return it after a specific period. The programme provides a more affordable and flexible alternative for farmers to mechanise and grow their business without having to purchase the equipment until they have built enough capacity to do so. The initiative, which was launched with support from Stanbic Bank Zambia, has been well received by farmers as well as other businesses who are able to rent out modern high tech forklifts and agro equipment. One of the bank’s focus areas is improving the agro value chain, from transport and storage to food processing, by providing flexible finance solutions as well as collateral management agreements and production loans to eligible players. Stanbic has so far invested over US$200 million in the agricultural sector earning it the award for ‘Best Agribusiness Bank in Zambia 2017’ from the Global Banking and Finance Review. “Looking at the success the leasing programme has had, I would like to encourage Stanbic to remain innovative and continue creating and supporting products that are meaningful to small scale farmers and businesses and help grow agriculture in Zambia, said Kasongole. “We also offer our clients the option of clients selling their equipment back to us, which also helps them raise extra revenue. Our goal as Keegy is to provide the best industrial equipment in Zambia as well as support the growth of the country’s agriculture sector through mechanisation,” he added. “Agribusiness has great potential to contribute to national food security, poverty reduction through employment and national GDP growth. It is therefore of utmost importance for all stakeholders to play a part in creating a favourable environment for agriculture and its value chain to grow. We need more entrepreneurs in the agribusiness sector to stiffen the competition because it is through competition that innovation is born, and it is innovation that accelerates growth.” Kasongole noted : “Without full participation of banks in terms of investment in agriculture and financial support for businesses in the value chain, we cannot hope to see significant growth in the sector thus derailing the country’s diversification drive. Financial institutions must continue to bridge the gap and assist farmers and agribusinesses have easier access to finance for the benefit of the sector and the economy at large. “At Keegy we will continue playing our part by providing the best quality material handling equipment and agriculture machinery to facilitate improved production,” he concluded.
January 6 2019

Dubai healthcare company buys stake in Kenyan drugs maker

Dubai-based healthcare company Shalina has bought an undisclosed stake in a Kenyan-owned pharmaceutical manufacturing company, expanding its medicine production and distribution venture to the seven countries in Africa.
Shalina Healthcare is a privately-owned company that has had a special focus on Africa for the past 30 years and runs its operations in Nigeria, Zambia, Democratic Republic of Congo, Angola, Ghana and Central Africa Republic.
The firm deals largely in prescription and over-the-counter medicines that include anti-malarials, antibiotics, anti-inflammatory and nutrition. It has production facilities in India and China.
“The Competition Authority of Kenya excludes the proposed acquisition the manufacturing and distribution of pharmaceutical business of Pharmaceutical Manufacturing Company (Kenya) Limited by Shalina Healthcare Kenya Limited,” said CAK, Director General, Wang’ombe Kariuki.
“The merger will not affect competition negatively, the acquirer’s assets for the preceding year 2017 was Sh409,125 while the target’s value of asset was Sh43.3 million and the combined assets of Sh43.7 million meets the threshold for exclusion as provided under the Merger Threshold Guidelines,” said Mr Kariuki.
In Kenya, the firm’s subsidiary, Shalina Healthcare Kenya Limited, is working closely with Harleys Limited, a locally-based regional importer and distributor of healthcare and consumer goods. In its official site the firm says that Kenya’s Pharmacy & Poisons Board has given it a lifeline by helping it to successfully renew the factory registration of its facility in India.
“We work with our local partner, Harleys Ltd, and together we have successfully won a number of institutional tenders as well as serving the local trade market with high quality affordable medicines.”
January 10 2019

Nigeria completes construction of 8 multi-million dollar power plants

Nigeria has successfully completed 8 multi million power plants under the Federal Government’s National Independent Power Project (NIPP) with an aim of increasing electricity generation in the highly populated country. According to the company behind the construction of the plants, the Niger-Delta Power Holding Company(NDPHC), the plants installed include; 750MW Olorunsogo 11, 450MW Sapele, 434MW Geregu 11, 450MW Omotosho 11, 450MW Ihovbor, 450MW Alaoji, 563MW Calabar and 225MW Gbarain. “The NDPHC has completed 2,194km of 330KV transmission lines and 809km of 132KV transmission lines;this is an increase of 46 per cent and 13 per cent respectively over the pre-NIPP status of grid infrastructure,” said NDPHC in a statement.
Collapse of electricity supply in Nigeria
Additionally the company also constructed a total of 2,600km of 11kv and 1,700km of 33kv distribution lines for improving access to electricity. The NDPHC assets are the backbone of Nigeria’s power infrastructure. In grid instability, NIPP plants provide about 265MW of spinning reserves to facilitate grid responsiveness during disturbances on the transmission network. The massive construction of these power projects has prevented the total collapse of electricity supply in Nigeria. The NDPHC noted that electricity supply has stabilized while incremental power supply is ongoing. “When most of the NIPP projects are completed and are operational, power supply to Nigerians is expected to be better and drive the economy,” said NDPHC. The NDPHC however hinted power distribution chain as the major  hitch with the power supply in Nigeria and urged the government to give serious consideration to waving duties on equipment for power duties for power projects. The company further suggested that power distribution companies should have the capacity to take more than what the transmission gives out. This enables redundancies to decrease at the different levels and minimize losses while power is being transmitted from one location to another.  
January 10 2019

Uganda launches largest solar power plant in East and Central Africa

KAMPALA, Jan. 10 (Xinhua) -- Ugandan President Yoweri Museveni on Wednesday unveiled the largest solar power plant in East and Central Africa which has the capacity to generate a total of 20 megawatts of electricity. The Kabulasoke Pilot Solar Park is located in the central Ugandan district of Gomba. According to the State House Uganda, the president's official residence, the solar park project is already connected to the national grid and will serve more than 5 million people in rural areas. Installed with 68,000 solar panels, the park has provided over 300 jobs and will offer power to neighboring districts, the State House Uganda said. The project is owned by David Alobo, who has so far invested 24.5 million U.S. dollars in the project. He plans to invest 200 million dollars in four other similar projects.
January 12 2019

Tanzania: Spanish Firm to Design Top-Level Lake Victoria Ferry

South Korean firm GAS Entec has contracted Spanish engineering and technology group Sener to design a 1,200-passenger ferry to ply Lake Victoria under the Tanzanian state-run shipping line, Marine Services Company.

When completed, the 90-metre $38.5 million vessel is expected to link ports in Tanzania, Uganda and Kenya. With a capacity to carry 400 tonnes of cargo and 20 cars, it will be the largest vessel plying the Great Lakes.

The parts for the ship are to be built in Korea and transported to Mwanza, where the ferry will be assembled.

Sener says the ferry will be equipped with an aft cargo hold to allow the passage of vehicles and storage of cargo, with one aft ramp door for vehicles and another smaller ramp door on the starboard side for palletised cargo.

MSCL chief executive Eric Hamissi said they hope to complete building the ferry by the time the standard gauge railway services between Mwanza and Dar es Salaam begin.

He also disclosed MSCL plans to introduce oil tanker and container carrier services on Lake Tanganyika "to address an ever-increasing demand for such vessels in that lake plying the Burundi, DRC and Zambia routes."

"Before 2025, we have plans for an extended spectrum of operations that will include introducing cargo ship services for ocean routes, particularly to the Comoros Islands. We are closer to those islands than Mombasa and Durban," Mr Hamissi added.

Last September, the Marine Services Company, signed separate contracts with three South Korean firms to revamp shipping services on Lake Victoria under a Tsh152 billion ($66 million) project co-funded by the Tanzanian government.

Under the deal, GAS Entec will team up with the Tanzania People's Defence Forces National Service economic wing, Suma JKT, to build the ferry and commission it within two years.

The other contracts involve the rehabilitation of two old boats -- MV Victoria and MV Butiama -- at a combined cost of Tsh27.5 billion ($12 million), and construction of a 100-metre slipway at Tsh35.9 billion ($15.6 million).

The former will be undertaken by KTMI and Yuko's Enterprises (EA) Co Ltd, while the slipway will be done by Korean firms STX Engine Co and Saekyung Construction Company.

Work on the two old ships involves replacing the engines.

January 24 2019

The European Union and Ethiopia step up their partnership and cooperation

The President of the European Commission, Jean-Claude Juncker met with the Prime Minister of Ethiopia Abiy Ahmed to discuss EU support to Ethiopia's reform process and agree to an additional €130 million to support job creation.
On this occasion, President Juncker said: "The partnership between Ethiopia and the EU is particularly strong and the meeting with Prime Minister Abiy today allowed us to exchange on how to further deepen it. The EU supports the ambitious reform agenda in Ethiopia and is committed to step up its support to the country". Commissioner for International Cooperation and Development, Neven Mimica and Ethiopian Minister of Foreign Affairs Dr. Workneh Gebeyehu Negewo furthermore signed three new programmes to promote sustainable economic growth and job creation in the country for a total amount of €130 million. Commissioner Mimica said: “Today's cooperation package worth €130 million is proof of our support to Ethiopia's economic development and job creation, which will help build new opportunities for its people. With this additional funds we are also supporting the better access to sustainable energy and the development of the agro-industrial sector in the country". The 3 new programmes signed today are part of the implementation of the ‘Africa-Europe Alliance for Sustainable Investment and Jobs', which aims to deepen the economic and trade relations between the two continents, in order to create sustainable jobs and growth. These financing agreements between the EU and Ethiopia support job creation (€50 million), sustainable energy (€35 million) and the establishment of agro-industrial parks in Ethiopia (€45 million). During Prime Minister Abiy Ahmed's first visit to the EU institutions, he also met with High Representative/Vice-President, Federica Mogherini, Commissioner for International Cooperation and Development, Neven Mimica, as well as Council President, Donald Tusk. Background Ethiopia is a key partner for the European Union and they have a long standing partnership. In 2016 the EU and Ethiopia signed a “strategic engagement”, which implies close cooperation in areas ranging from regional peace and security, to trade and investment, and including migration and forced displacement. EU development cooperation portfolio in Ethiopia is one of the largest in Africa and in the world (€715 million for the period 2014-2020); and the country is also one of the major beneficiaries of the EU Emergency Trust Fund for Africa (€257.5 million for 2015-2018). The EU is also providing humanitarian assistance to refugees and internally displaced people in the country. EU humanitarian assistance to the country amounted to €381 million for the period 2014-2018. The EU supports Ethiopia in the implementation of its development strategy, notably in the areas of food security and agriculture, health, and governance. In recent years, the EU has increased the focus in areas related to job creation, industrial and agro-industrial parks, export and trade promotion and private sector development. Ethiopia has also become a destination of choice for investors. Foreign Direct Investment (FDI) level has surged in the past years. The EU accounts for 23% of exports and 25% of imports, remaining the second trading partner. There are over 300 EU companies present in Ethiopia, most members of the EU Business Forum for Ethiopia (EUBFE), a fully-fledged chamber of commerce set up in 2016.
January 24 2019

Germany to invest in agricultural mechanization in Africa

AGCO and Germany’s BMZ announce intention to co-operate in a new project to support farm mechanization in Sub-Saharan Africa

AGCO, a worldwide manufacturer and distributor of agricultural equipment and solutions, has signed a Letter of Intent (LOI) with the German Federal Ministry of Economic Cooperation and Development (BMZ) to implement a joint agricultural project in Africa. The potential project is subject to further talks but the aim is to make measurable contributions to increasing agricultural productivity and skills development, thereby boosting income and employment in African rural households. The LOI was signed in Berlin on 18 January by Martin Richenhagen, President, Chairman and CEO of AGCO, and Dr. Gerd Müller, Federal Minister for Economic Cooperation and Development. “We expect that the collaboration between the BMZ, an important institution for international cooperation on agricultural projects, and AGCO, one of the world’s largest producers of farm machinery, to trigger significant synergies,” said Martin Richenhagen. “We both seek to foster mechanization to facilitate sustainable agriculture.” The mechanization activities of both the BMZ and AGCO are designed to contribute to the United Nations’ 2030 Agenda and Sustainable Development Goals (SDG) to eradicate extreme poverty and end hunger by 2030. The Goals also aim to double the agricultural productivity of small-scale food producers, ensure sustainable food production systems and implement resilient agricultural practices. “With the 2030 Agenda and SDG as a globally binding framework for action, cooperation between the German Development Ministry and the private sector is becoming increasingly important,” commented Dr. Müller. “The close involvement of companies in joint measures enables private sector know-how and resources to be used for development policy goals. A world without hunger is possible if we join forces.” AGCO’s newly-launched Farm in a Box initiative, which provides a package of essential farm equipment together with the crucial support mechanisms, is the company’s latest innovative solution to promoting farm mechanization in Africa. The BMZ provides companies with financial and technical support for joint projects. The partnership enables companies to make effective and efficient contribution to the implementation of development objectives within the framework of their business activities. With its special initiative ‘One World – No Hunger’, the BMZ is a strong supporter of agriculture and rural development through its Green Innovation Centers in African and Asian countries.