Some positive light thrown on corporate ’survivors’ in Zimbabwe

I get the feeling more and more as of late that there are hordes of investors standing eagerly by as the Zim crisis appears to be reaching some sort of climax.  A recent rise in the ZSE is partly “underpinned by weak money market interest rates, higher exchange rate movements coupled with negative inflation projections”.  How sustainable is this with the tightening of liquidity due to treasury bill deficits and approaching maturities couple with the printing of more and more Zim dollars? Talk about a bubble being blown (and burst) again from the same old balloon that continues to wreak havoc on the Zim economy. But how much do past infrastructure developments and the sound economic and business principles that made Zim the ‘breadbasket’ of Southern Africa keep wary eyed investors anxious in the wake of a potential overturn of a dictator who seems to be getting more and more desperate in finding support locally, regionally and internationally? Expected returns could be what puts Zim back on the fast track to finding its way back to the ‘breadbasket’ label it once adorned. Also see discussion on Ryan Shen-Hoover’s site.

Zim corporate survivors in strong position – Imara

Published: 03-APR-07

Harare – Zimbabwe’s listed companies are proven survivors that are well placed for the long haul. That’s the positive message drawn from Zimbabwe’s corporate reporting season by the investment professionals at Harare-based Imara Asset Management Zimbabwe, part of the Imara financial services group.

ICT environment in sub-Saharan Africa

A couple of recent articles from www.mybroadband.co.za highlight some of the key issues surrounding the ICT curve in SSA. 

SA’s broadband and ICT environment worsen

By Hilton Tarrant, Moneyweb, 31 March 2007 A report released yesterday by the World Economic Forum shows that South Africa has fallen ten positions in the Networked Readiness Index.   While many will be tempted to say that our broadband access has increased, costs have come down, and regulation is improving, this definitive study shows that SA is simply not keeping up with the rest of the world. The report, officially titled “The Global Information Technology Report 2006-2007″ (GITR) compares 122 economies worldwide in the following areas: The regulatory/infrastructure environment for ICT; The readiness of individuals, businesses and governments to use and benefit from ICT; The actual usage of the last technology available.

Macro Accounts show solid performance and stability for Ghana

Buoyed by private remittances, Ghana saw an increase in its BOP surplus while the cedi depreciated against the major currencies. 

Private Remittances Rake In $5.78bn (www.ghanaweb.com) 

Private inward transfers through the banks and finance companies from January to December 2006 amounted to $5.78 billion, which represents a 21.5 per cent increase over those for 2005, Dr Paul Acquah, Governor of the Bank of Ghana, has announced.He said the foreign exchange market remained buoyant in 2006 with purchases and sales of foreign exchange by the banks and forex bureaux increasing by 16.6 per cent over the 2005 level to $6.8 billion.

Fitch Ratings upgrades Malawi’s long-term foreign currency issuer default rating

One of the ironies of debt relief is that it allows countries better terms on the issuance of more debt. It is vitally important for Goodall Gondwe, the Ministry of Finance and the Malawian government to continue on this path of fiscal discipline and diligent policy-making in order to be taken seriously by outside investors and perhaps more importantly, the plethora of Malawi nationals living outside their homeland waiting for the opportunity to remit serious cash flows back to the motherland.  Health, education, irrigation and infrastuctrual developments together with a mixed inflow of capital from investors and donors need to be key objectives in reaching private and public sector development on an altogether different scale than Malawi’s neighbors who at the moment, need more incentives to particpate in development projects with the small landlocked country.

Reuters South Africa – Johannesburg,South Africa
LILONGWE (Reuters) – The latest Fitch rating upgrade for Malawi will boost donor confidence and foreign investment, Finance Minister Goodall Gondwe said on Friday. “This is a signal to the rest of the world that Malawi is ready to participate in the global economy and that it has the ability and is willing to repay debt,” Gondwe told a conference. Fitch Ratings last week announced that it had upgraded the long-term foreign currency Issuer Default rating of Malawi to ‘B-’ (B minus) with a stable outlook, from ‘CCC’. “This upgrade of B- is nothing to write home about but considering our circumstances and where we are coming from this is very important because it will help build more donor confidence, increase investment and it signals our road to economic recovery,” Gondwe said. The World Bank and the International Monetary Fund cancelled $2.9 billion of Malawi debt in September last year. But Malawi remains one of the world’s poorest nations with annual per capita income of about $160, and continues to rely heavily on foreign aid despite the debt relief. External debt slid to 23 percent of GDP at the end of last year compared with 142 percent at the end of 2005. Charles Seville, associate director of Fitch’s Africa and Middle East sovereign team, told delegates to the conference that other positive developments in Malawi include a cut in the fiscal deficit and tighter controls on public spending … 

Ghana looks to raise $500 million via the bond market

Just as Ghana is reaching its 50 year mark since independence and the subsequent socialist leadership of the ‘pan-Africanist’ Kwame Nkrumah, the prospects for new and continued growth remain positive.   The World Bank Group reports,”In a major new state-of-the-art move on March 1, practically all donors (covering 95% of flows to Ghana) signed an innovative commitment, the Ghana Joint Assistance Strategy – G-JAS.  Covering a four-year program, with as much as US$5.3 billion, the G-JAS partners commit to back Ghana’s national development strategy at the highest best-practice levels, harmonizing work and backing results with efficient resource utilization.”

“For 2007 the Bank is committing to more than $400 million in new finance.  The World Bank Group is also seeking to combine the tools of the whole World Bank Group, including IFC and MIGA, for innovative financing solutions to expensive infrastructure investment.”

AllAfrica.com pulled a recent article from the Public Agenda in Accra that describes Ghana’s plans for its first international sale of of bonds “to help spur a market for corporate debt” (http://allafrica.com/stories/200703050502.html).

Ghanaweb.com (http://www.Ghanaweb.com) reported today on Paul Wolfowitz and the World Bank’s engagment in Ghana as well as specific projects in cocoa processing, horticulture product storage facilities, internet service provision and municipal governance (as well as one project near and dear to my heart – mushroom farming (http://www.ghanaweb.com/GhanaHomePage/economy/artikel.php?ID=120242)) that are helping to diversify the economy that is still largely commodity/natural resource-based.

Ghana has been the recent beneficiary of increased commodity prices (i.e. gold) and debt relief that is allowing the country more favorable credit ratings (see article at allAfrica.com that mentions recent Fitch ratings) and to become a more attractive destination for investors looking for higher returns but more importantly, a much safer asset class in African countries less burdened by debt overhang and showing signs of sustained growth and sound governance.

Regionally, Cote D’Ivoire has signed a peace accord that if held by all parties involved, could see the re-emergence of the world’s largest cocoa producer and West African success story of the 1990s (http://news.bbc.co.uk/2/hi/africa/6417349.stm). 

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.

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.

Ghana’s Macro Fundamentals

Emerging Markets Monitor highlights the rise in investor activity due to increasing confidence in the Ghanaian economy.  A bit of caution is noted on the over-reliance on gold and cocoa exports (the impact of lowering gold prices and changes in cocoa supply dynamics in neighboring Cote D’Ivoire) affecting the value of Ghana’s currency, the cedi.

Core View (from Emerging Markets Monitor)
The Ghanaian economy is expanding at a healthy clip and the most recent estimations point to a real GDP growth on the firmer side of 6% in 2006. We forecast this positive momentum to be sustained in 2007 and see growth coming in at a similar level to this year. The upbeat trend is reflected in the Bank Of Ghana’s (BOG) composite index of economic activity, hovering at 11.5% in Q4 (above the trend rate of 10.1%). Meanwhile the macro economy is stabilising, with inflation approaching the single digits (consumer price inflation registered 10.3% y-o-y in November).

Botswana’s Macro Fundamentals

The Emerging Markets Monitor highlights Botwana’s need to diversify away from the mining sector and recent policy attempts to do so via devaluation of the pula in 2005.  The article also mentions expected tightening of diamond supplies (by De Beers) in 2007 that would keep Botswana’s trade surplus at around 9% of GDP. Given the elasticity of demand for these precious stones (and marriages) that make up roughly 75% of Botwana’s exports, we can only wait and see what the tightening of supply together with a potential ‘hard landing’ in the U.S. and flattening global economy will leave in store for Botswana’s diamond exports.

Core View (from Emerging Markets Monitor)
Botswana’s fundamentals continue to perform robustly, although the heavy reliance on the mining sector – which accounted for 38% of nominal GDP in 2005 – raises questions over longer term sustainability.

Mozambican Economy Still Growing Strong

Mozambique’s economy rests on the back of aluminum ingots, natural gas and electricity exports. The ingots come from Mozambique’s largest factory, the MOZAL aluminium smelter on the outskirts of Maputo; the electricity from the Cahora Bassa dam on the Zambezi is sold to South Africa and Zimbabwe; while natural gas is produced by the South African petro-chemical giant Sasol in Inhambane province, and sent by pipeline to its plants in the South African town of Secunda. Most of the other 30 per cent of export earnings come from tobacco, prawns, sugar, cotton and cashew nuts.

On December 13th, The Minister of Planning and Development, Aiuba Cuereneia, told the country’s parliament, the Assembly of the Republic, the economy is expected to grow by 7.9 % this year.

The graph below shows the steady groth Mozambique has experienced since the end of its civil war in 1992.  The only exception is in 2000, when a banking crisis resulted in a massive government bailout and the worst flooding in over a century struck the south and center of the country devastating economic infrastructure and transport links.