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The Market is Closely Eyeing South Africa’s Election Results

South Africa's Election Results

The JSE has had a tough time on Thursday, with the all-share index down more than 1% on the first trading day following the national and provincial elections.  However, this is unrelated to the South African vote: trade tensions between the US and China have wreaked havoc in markets across the world. The real market barometer for elections is the rand – and that has remained steady following largely peaceful elections. Much has been made of the “mandate threshold” for ANC support in the election; most professional investors believe that if the ANC secures a strong enough level of support, it will become easier for President Cyril Ramaphosa to institute economic reforms, according to an Intellidex survey. The survey found that investors believe the magic level is 58%, so if the ANC gets more than that, it may trigger a rally in the rand, bonds, and shares. After 80% of the polling stations had tallied the results, the African National Congress stood at 56.99% of the vote, while the Economic Freedom Fighters had 10.1% and the Democratic Alliance 21.83%. Analysts say if the ANC and EFF together breach 66% of the total national vote, they could have a mandate to change the Constitution, which may inject some uncertainty in the market. Investors are also carefully eyeing what is happening in Gauteng, given its importance to economic activity, employment and the tax base.


Signs that Africa’s Financial Markets are Starting to Grow

Africa’s Financial Markets

With Africa’s population expected to overtake China’s by 2025, the continent’s economic potential is undeniable. At a time of slowing global growth, the world is starting to take notice of Africa’s fast-growing population and markets, and the opportunities they hold. Between 2010 and 2016, more than 320 embassies were opened in Africa, while global investment is beginning to pour in. If Africa truly wants to become an economic powerhouse of the future, it needs to get serious about reforming its financial markets. A broad, all-inclusive financial market that makes it easy for investors will enable Africa to grow. Fortunately, we can see large strides towards progress. The recent ratification of the African Continental Free Trade agreement promises to create a single market with a combined GDP of US$2.5trn and access to 1.2bn people. everal countries have recently progressed in migrating to market-determined foreign exchange regimes, implementing local content policies, and creating more transparent and well-regulated capital markets, which have been supported by an improving tax environment. This is vital for drawing foreign investment, encouraging domestic participation in capital markets, and aiding the development of the local capital markets. Equally impressive is the increased financial inclusion through better design, implementation, and regulation of savings institutions. This has widened opportunities for people in these countries to access capital markets.  Progress has also been made through policies that have increased the size of assets held by local investors, creating opportunities to develop financial products and enhance market liquidity.


Ethiopians Pay Heavy Price for Industrialisation

Ethiopia's Industrialisation

Ethiopian garment factory workers are now, on average, the lowest paid in any major garment-producing company worldwide, a new report says. The report by the New York University Stern Center for Business and Human Rights comes as Ethiopia, one of Africa’s fastest-growing economies, pursues a bold economic experiment by inviting the global garment industry to set up shop in its mushrooming industrial parks. “The government’s eagerness to attract foreign investment led it to promote the lowest base wage in any garment-producing country — now set at the equivalent of $26 a month,” according to the authors of the report, Paul M. Barrett and Dorothée Baumann-Pauly. In comparison, Chinese garment workers earn $340 a month, those in Kenya earn $207 and those in Bangladesh earn $95. Drawn by the newly built industrial parks and a range of financial incentives, manufacturers for some of the world’s best-known brands — among them H&M, Gap, and PVH — employ tens of thousands of Ethiopian workers in a sector the government predicts will one day have billions of dollars in sales. The new report is based on a visit earlier this year to the flagship Hawassa Industrial Park that opened in June 2017 in southern Ethiopia and currently employs 25,000 people. According to the report, most young Ethiopian workers are hardly able to get by to the end of the month and are not able to support family members.


MTN’s Largest Market is also its Most Problematic


While it dominates market share and infrastructure, the South Africa-owned giant’s biggest battles are with the local authorities rather than other telecoms rivals. Over the past five years, MTN has faced potential fines of up to $15 billion in Nigeria for a range of alleged misdeeds. A permanent resolution is crucial as MTN looks to continue doing business in its most important market. Amid murmurs and a denial of shutting down its Nigerian unit, there’s ample sign of how costly these disputes can be for investors. After the tax debt claims by Nigerian authorities, MTN’s stock tanked and closed at a nearly 12-year low. MTN has long maintained that its legal tussles with Nigeria’s government will not dent its interest in its biggest market despite investor concerns. Indeed, the company has committed to launching a mobile money service this year in Nigeria. Regardless, the disputes have had an impact: MTN has already revised plans for a highly anticipated initial public offering on the Nigerian Stock Exchange. While it will still list its shares locally, the company has taken up a listing by introduction option which will see it only list already existing shares without raising new funding or issuing new shares.


Fred Swaniker has been on a Roll over these Last Two Months

Fred Swaniker

Last week he was named one of Time Magazine’s 100 Most Important People in the World. And last month, the organization he founded, African Leadership University, was named one of the 50 Most Innovative Companies in the world by Fast Company Magazine. Swaniker successfully launched the African Leadership Academy eleven years ago. This pan-African high school located in South Africa attracts the best and the brightest from across the continent, and its college placement record reads like every parent’s dream: Oxford, Cambridge, Harvard, Yale, Princeton, etc. Despite the global recognition of the fine work he does in recruiting and educating Africa’s “talented tenth,” Swaniker was not happy that these brilliant young minds were leaving the continent behind to pursue their higher education. Swaniker’s response? Build the Harvard, Oxford and Cambridge of Africa. Sound ambitious? If anyone can do it, it is Swaniker. Over the last four years he has launched three African Leadership Universities in Mauritius, Rwanda and Kenya.  The universities have reinvented tertiary education for the new millennium. They have also reinvested the university concept for a uniquely African context.


Mugabe’s Assets Up for Auction

President Robert Mugabe

Zimbabwe’s former President Robert Mugabe is auctioning off five combine harvesters and other farm equipment.  An advert by a local auction firm announced plans to sell off at least 40 of his vehicles, including a luxury car and five Toyota Hilux pick-up trucks. Mr Mugabe was ousted in 2017 after a military takeover. Observers say the sale could be sign that his family’s business empire – including 21 farms – could be in financial trouble. Zimbabwe’s Herald newspaper reported that it was not immediately clear why the family was auctioning the items but its business empire built up during Mr Mugabe’s 37 years in power, has been facing lawsuits over unpaid debts.


A Calculated Move Got this Entrepreneur Back on the Forbes’ List

Abdulsamad Rabiu

Abdulsamad Rabiu is a business mogul and Nigeria’s third richest man, who cemented his return to Forbes’ African Billionaires List this year since dropping off it in 2015. He says he owes his $1.6 billion net worth to being a disruptor – and to being stubborn. A firm believer in strategy, the cement and sugar tycoon boosted his fortunes by a whopping $650 million this year when he merged Kalambaina Cement, a subsidiary company of his BUA Cement, with the publicly traded Cement Company of Northern Nigeria (CCNN), where he was a controlling shareholder. He says his fall from the coveted list was due to the devaluation of the Naira, which meant that the exchange rate went from N190 against the dollar, to N300. “That was the main reason I dropped off the rich list. Also, most of our other assets were not being considered because once you are not listed, it becomes more challenging to get an accurate valuation. His return to the billionaire boys’ club is due to five years of strategic expansion and a much more stable Nigerian economy.


Testing if Universal Basic Income in Africa Works

Universal Basic Income

From Kenya and southern India to Alaska and Finland, cash payment schemes have been claimed to show that UBI “works”. In fact, what’s been tested in practice is almost infinitely varied, with cash paid at different levels and intervals, usually well below the poverty line and mainly to individuals selected because they are severely disadvantaged, with funds provided by charities, corporations and development agencies more often than by governments. Experiments in India and Kenya have been funded, respectively, by Unicef and Give Directly, a US charity supported by Google. They give money to people on very low incomes in selected villages for fixed periods of time. Giving small amounts of cash to people who have next to nothing is bound to make a difference – and indeed, these schemes have helped to improve recipients’ health and livelihoods.


The World Bank plans to Boost Lending to African Countries to Help Fight Poverty

David Malpass

David Malpass, who has pledged to step up the bank’s antipoverty mission, visited Madagascar, Ethiopia and Mozambique from April 29 to May 3, meeting leaders and stakeholders and visiting World Bank-funded projects. Malpass said he had visited Africa because the continent was a central part of the World Bank’s focus on alleviating poverty, as well as to assess the damage done by a cyclone that battered Mozambique, Zimbabwe and Malawi in March. The bank said on Friday that it had increased emergency support for the three affected countries to $700m. “The key take-away is that the economic challenges [in Africa] are really big, but the countries themselves are trying to work with those challenges and the World Bank is having programmes so that can help with that process.”


Egypt’s Drive to Lure Back Investors who Left during the Arab Spring

the Arab Spring

The country expects the 1.6 gigawatt solar park it is building in the south of the country to be operating at full capacity in 2019. The $2 billion project, set to be the world’s largest solar installation, has been partly funded by the World Bank, which invested $653 million through the International Finance Corporation. Some parts of the park are already operating on a small scale, while other areas are still undergoing testing.  Egypt aims to meet 20 percent of its energy needs from renewable sources by 2022 and up to 40 percent by 2035. Renewable energy currently covers only about 3 percent of the country’s needs. Most of the foreign direct investment Egypt attracts goes toward its energy sector.


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