Interesting Analysis on World Cup 2010 and the Construction Sector in SA

From Sean’s Investment Review http://investreview.wordpress.com/2007/01/23/construction-sector-update/

Construction sector update

January 23, 2007 at 8:53 am | In Companies, Economy |

The Construction and Materials Index has been a sector of the market that has received quite a bit of attention since South Africa was awarded the rights to host the 2010 Soccer World Cup in May 2004. This attention has been justified, owing to South Africa’s shortage in stadia with sufficient capacity to host the largest sporting event on the earth.

Companies such as Murray and Roberts, PPC, and Group 5 will all be beneficiaries in the massive infrastructure spend over the next few years, both directly in the stadia, but also to the supporting systems, such as roads, rail (Gautrain) and upgrading of the airports.

Press Corp. Ltd. leads the pack of stocks gaining value on Malawi Stock Exchange (MSE)

From The Malawi Nation http://www.nationmalawi.com/articles.asp?articleID=20435

 Expectations of good results from most listed companies has created some panic buying on the local bourse with investors dying to make a quick killing through dividends.
According to last week’s Malawi Stock Exchange (MSE) trading commentary, the market saw seven of the 11 listed companies having their shares gaining in value as investors scrambled for the limited stocks on the bourse.
Topping the list of price gainers was Press Corporation Limited (PCL) which has been enjoying good times on the equity market. Its shares gained a massive K15.50 to close the week at K117.50 each.

African Development Bank launches $100mn Nigerian Bond to be issued by Standard Bank, listed on Luxembourg Stock Exchange

I found this breakdown quite interesting: “Nalletamby said the issue was received with enthusiasm, attracting investors from the United States Offshore (52%), the United Kingdom (31%), Continental Europe (15%), and the Middle East (2%), with banks accounting for $22mn, funds and asset managers $77.9mn, and retail, $0.1mn”.  

From Panapress:

AfDB launches $100mn Nigerian bond

Published: 23-JAN-07

Lagos – The African Development (AfDB) has successfully launched its first bond issue denominated in the Nigerian naira, worth $100mn, with one year maturity and a fixed coupon of 9.25 percent.

“This is a remarkable achievement for the bank: it is the first NGN-denominated note to be issued by a supranational; it is the bank’s largest issue denominated in a local currency to date; and it is the bank’s first issue with an Africa-based lead manager—Standard Bank, Africa’s largest bank by capital,” the AfDB Group’s treasurer, Stefan Nalletamby, said.

According to the Bank’s release on Monday, “The note is listed on the Luxembourg Stock Exchange and clears through Euroclear and Clearstream.”

Moreover, the note has led to the first cross-currency interest rate swap executed by a domestic Nigerian bank – First Bank of Nigeria, Standard Bank’s partial hedge counter-party, it added.

The AfDB described the note as the first investment-grade money-market instrument that offers non-residents exposure to Nigeria while allowing trading flexibility and settlement through international clearing houses.

Nalletamby said the issue was received with enthusiasm, attracting investors from the United States Offshore (52%), the United Kingdom (31%), Continental Europe (15%), and the Middle East (2%), with banks accounting for $22mn, funds and asset managers $77.9mn, and retail, $0.1mn.

The Naira bond, which launched last week, follows sales last year in the Botswana Pula, Tanzanian Shillings and Ghanaian Cedi.

Nalletamby said the AfDB “may sell debt in other African countries later this year,” adding, “other markets in Africa are under consideration as well as re-issuance in markets that the bank has already opened. -panapress

BLACKOUTS: SA Infrastructure to get a boost from EU

Generator sales were again on the rise as South African businesses saw another round of blackouts due to electricity supply problems.  At the same time, the European Investment Bank (EIB) just committed 900 million Euros for infrastructural investments to be made over the next seven years. Aging infrastructure and increased pressure from rising populations of migrant workers in cities like Johannesburg necessitate this type of investment. In the meantime, Eskom is under great pressure and is losing the faith of the business community and potential investors.

Top banks no longer trust Eskom after power cuts 

http://www.businessday.co.za/articles/weekender.aspx?ID=BD4A363103

The sector is spending millions on generators and uniterrupted power supply systems to ensure that it can keep operating when blackouts hit writes KHULU PHASIWE

SOUTH Africa’s major banks have signalled that they can no longer rely on parastatal provider Eskom for electricity after countrywide blackouts this week, and will be implementing measures to guarantee uninterrupted power.

One of SA’s largest retail banks, First National Bank (FNB), will spend R50m this year alone to buy backup generators and uninterrupted power supply (UPS) units to guard against the adverse effects of power outages similar to those that hit most of the country this week. The emergency power suppliers would be installed in all FNB branches across the country.

Increase in global liquidity results in more Africa-based assets in investors’ portfolios

South Africa has been a likely target of portfolio managers looking for larger yields with relative certainty. Now what will debt relief and increased commodity prices provide other African countries facing demands from donors not to build up another round of debt? Private sector issuance, this article mentions, needs a benchmark for future private capital flows to base future investments.   

Africa: More Liquidity in African Markets Now

Business Day (Johannesburg)

January 18, 2007
Posted to the web January 18, 2007

Ayanda Shezi
Johannesburg

AFRICAN markets are overcoming their historical liquidity problems and attracting increased, sustainable portfolio flows.

This in part reflects an improved picture in many of the continent’s economies, according to Standard Chartered economist Razia Khan.

A Case of an Import Substitution strategy and its short and long-term consequences in South Africa

As one director mentions in the article, it is hard to assess the total impact at present because importers brought goods in early to beat the quotas (good business).  The article mentions a supply switching that will take place as outlets like Woolworths seek out other countries producing cheap inputs in order to dampen the affect of these new quotas. The irony here is, yes Lesotho, Swaziland and Botswana’s (more likely Bangladesh and Vietnam, two countries that benefitted from past Chinese FDI) workers in garments and textiles may stand to gain some as a result, but

Macro Stability and key sectoral growth (telecomm, manufacturing, energy, tourism and construction) are attributed to Kenya’s steady growth

According to this article by Reuters, there are some concerns over the upcoming presidential election in Kenya towards the end of this year. But the overall forecast seems quite optimistic and at least one investor’s confidence remains in tact.

By David MageriaNairobi – Kenya’s economic growth is expected to have risen slightly to six percent in 2006, and the growth momentum should be maintained this year, the Central Bank of Kenya (CBK) said on Thursday.“Leading economic indicators for the first ten months of 2006 show that the economy is still robust and is projected to grow at 6 percent in 2006 compared with 5,8 percent in 2005,” the central bank said in its latest monthly economic review.

India’s Reliance Communications to help slash internet & business costs

Reuters reports on what may eventually facilitate the emergence of investments in service industries such as call centers in English-speaking Kenya and South Africa.

By Rebecca Harrison

 JOHANNESBURG (Reuters) – India’s Reliance Communications plans to build a submarine cable around the east of Africa that could help slash Internet costs and rival the continent’s own much-delayed plans for a cable.

“Increased appetite for investment opportunities in emerging market economies will benefit small open economies like Namibia with favourable investment climate”

A recent post from The Namibian:

Nam economy to grow TONDERAI KATSWARA THE short-term outlook for the Namibian economy for 2007 and 2008 looks positive, despite the expected slowdown in the global economy, a leading economist has said.

Martin Mwinga, who is the Portfolio Manager for RMB Asset Management Namibia, also said inflation would remain favourable, and despite the negativity likely to emerge from a lukewarm global economic performance, he expressed optimism about the Namibian economy. RMB Asset Management Namibia forecasts a GDP growth rate of around four per cent for 2007, slightly up from an estimated 3,9 per cent in 2006.The growth rate is seen to shoot to up 4,5 per cent in 2008. Inflation is seen at an average of 6,5 per cent, which is higher than the 5,2 per cent estimate of last year. It is expected to slow down to 5,8 per cent in 2008.

Malawi to issue bonds after lower interest rates increase borrowing potential

Can Malawi afford to issue these longer maturity bonds to raise funds for infrastructure projects? What type of investors will be attracted to these investement vehicles? What are the main sources of government revenue and what can we forecast for the length of these maturities?  From the Malawi Nation:  Finance Minister Goodall Gondwe said Tuesday he expects the country’s interest rates to continue falling this year, a development he said will provide a lee-way for the introduction of government bonds. The former International Monetary Fund (IMF) economist said chances of having a further cut in interest rates in the near future look very good, especially with an impressive crop in the field.