AFRICABULLETIN

MARCH 2017

KENYA

TANZANIA

NIGERIA’S INFLATION RATE SLOWS DOWN FOR

THE FIRST TIME IN OVER A YEAR

Nigeria’s inflation rate fell for the first time in 16 months in February 2017, as the cost of items other than

food eased. Inflation in Africa’s most-populous nation slowed to 17.8 percent from 18.7 percent in January.

The country’s inflation rate rose above the Government’s target of 6 percent to 9 percent in 2016, reaching

the highest in more than 11 years, after a drop in prices and output of oil, Nigeria’s biggest export, led to a

shortage of foreign currency needed to import everything from gasoline to food. The Central Bank’s removal

of a peg in June 2016 caused the Naira to lose almost 40 percent of its value against the US Dollar, making

imports pricier.

The Government released an economic blueprint this month, targeting inflation at less than 10 percent by

2020. The plan proposes that this will be achieved partly by increasing food production and reducing

uncertainty in the nation’s foreign-exchange policy.

Significance:

Economists are of the opinion that inflation in Nigeria peaked and will continue coming down, but stay

above the Government’s target due to a still weak Naira. According to Nigeria’s Central Bank Governor,

Godwin Emefiele, consumer-price growth will start to subside as the economy begins to recover and the

Naira’s exchange rate stabilizes.

MARCH 2017

BOTSWANA

Botswana imports most labour for its agriculture and

construction sectors

followed by 998 permits (16.6 percent) to South Africa

nationals and 619 permits (10.3 percent) to Chinese

nationals.

Significance:

Over the past decade, Chinese firms have been actively

involved in the building industry in Botswana. In total,

over 18 projects in Botswana have been carried by

Chinese companies who normally import their own

labour from China. According to Statistics Botswana, the

majority of Zimbabwe nationals that were issued with

work permits were also hired in the construction sector

mainly by Chinese constructors.

The latest labour markets data released by the

Botswana Government statistics agency, Statistics

Botswana, shows that the country of 2.2 million

people has issued more work permits in the

agriculture and construction sectors than any

other sector in the past few years.

The agriculture sector had the largest number of

employees accounting for about 30.9 percent of

the total number of work permit holders. Labour

for the construction sector came second,

accounting for 20.1 percent of the overall

imported labour by September 2015. In summary,

the data shows that the country has issued 2,447

permits (40.8 percent) to Zimbabwean nationals,

built in the future. It will also give employment

opportunities to its citizens.

The USD 3.4 billion railway, with its red, yellow and

green trains evoking the Ethiopian flag, was 70 percent

financed by China’s Exim Bank and built by China

Railway Group and China Civil Engineering

Construction.

Significance:

Ethiopia and Djibouti will both benefit from this

linkage, with Ethiopia gaining access to the sea and

Djibouti gaining access to Ethiopia’s emerging market

of 95 million people. The railway is also the first step in

a vast 5,000-kilometre-long network of rail which

Ethiopia hopes to build by 2020, connecting it to

Kenya, Sudan and South Sudan.

A 750 kilometre railway which links Addis Ababa

to the Red Sea port city of Djibouti, began

operation this month. The new railway, the first

electrified railroad in Africa, will take products

between Ethiopia and Djibouti in about 10 hours,

a great improvement from the current multi-day

trip along a congested, pot-holed road. Some

1,500 trucks per day use the road which carries 90

percent of imports and exports from landlocked

Ethiopia to the Djibouti port, which is a key trade

hub to Asia, Europe and the rest of Africa.

According to Ethiopian Prime Minister

Hailemariam Desalegn, the railway will speed up

development of his country’s manufacturing

industry and will provide huge benefits to the

industrial parks and modern farms that will be

ETHIOPIA

Railway linking Ethiopia to Djibouti begins operation

MARCH 2017

The Law Society of Kenya (LSK) sued KRA last month,

arguing that the new regulations had stalled several

deals worth millions of shillings. According to the

advocates’ lobby, it is difficult to ascertain the amount

of capital gains tax due before completion of a sale

transaction. The LSK argued that it attempted to

engage the KRA in dialogue to resolve the disputed

clause, but that the taxman stayed put forcing

litigation.

Significance:

According to the LSK, the new regulations risked

affecting Kenya’s economy by frustrating land deals,

which had already stalled. The High Court ruling is a

welcome decision for landowners in the country.

A Kenya Judge has barred the Kenya Revenue

Authority (KRA) from demanding advance capital

gains tax payments from investors before

completion of asset sales, annulling new

regulations on the levy.

High Court Justice John Mativo this month ruled

that paragraph 11A of the Eighth Schedule of the

Income Tax Act infringes on the rights of both

buyers and sellers by demanding that capital gains

tax be paid before completion of asset sales. The

judge argued that the regulation could hinder

transactions as some buyers and sellers may not

have the financial muscle to make tax payments

before completing asset sales. This, the judge held,

contradicts the public’s right to property and

therefore violates the Constitution.

KENYA

Landowners in Kenya win as High Court rules against KRA’s advance capital gains tax

MADAGASCAR

Air Madagascar selects Reunion-based Air Austral as preferred strategic partner

Government. An agreement is expected to be signed by

31 March and strategic partnership and shareholder’s

agreement to be finalized by 31 May.

Significance:

While Air Austral’s selection over Ethiopian Airlines

may seem as an unusual choice, Air Austral and Air

Madagascar are joined together through the Vanilla

Alliance, alongside Air Mauritius and Air Seychelles. The

Indian Ocean carriers are part of the “Wings of the

Indian Ocean” strategy, which calls for stronger inter-

island links.

Reunion-based Air Austral has been selected as

Air Madagascar’s preferred strategic partner

over Ethiopian Airlines. In an announcement

issued on 15 March 2017, Air Madagascar said

that its consultants had presented their final

recommendations to the Board after holding

parallel negotiations with Air Austral and

Ethiopian Airlines since February. Following this

evaluation stage and a meeting held on 13

March 2017, the Management Board decided to

recommend the selection of Air Austral as the

preferred bidder to the Madagascan

MARCH 2017

Significance:

Malawi has been experiencing inadequate power

supply and prolonged power outages in recent times,

a situation which has necessitated power sector

reforms and several other interventions championed

by Government and non- governmental

organisations. One of the interventions has been to

split the Electricity Supply Corporation of Malawi

(Eskom) to Eskom residual and Egenco, a generation

company which is part of the power sector reforms to

improve generation and distribution infrastructure.

Electricity Generation Company (Egenco) plans to

diversify electricity generation sources, to increase

available power for the country. According to the

company’s CEO, it is exploring alternative sources

such as solar, coal, wind, geothermal and also

diversifying hydro from the Shire River to other

water sources.

According to the CEO, the changes in the Electricity

Act, power sector reforms and several other

programmes that are being implemented in the

country, are creating an enabling environment for

the company to diversify and thrive.

MALAWI

Egenco looks to alternative energy sources for Malawi

MAURITIUS

Marriott International to launch its Aloft brand in Mauritius

Mauritius Port Louis underscores the momentum the

brand has been garnering and their strategic

commitment to grow the Aloft brand in key

destinations around the world.

Marriott International announced plans to launch

its Aloft brand in the capital city of Mauritius with

the signing of Aloft Mauritius Port Louis this

month. The hotel is set to open in early 2019 and

will be the brand’s first adaptive reuse project in

Africa. The existing nine-floor office building will

transform into the hotel with 150 loft-like rooms,

accessible technology and a social atmosphere.

Aloft Mauritius Port Louis is located close to Le

Caudan Waterfront district, the dynamic city

center. It will complement Marriott

International’s existing portfolio in Mauritius,

comprising three operating hotels under the St.

Regis, Le Meridien and Westin brands and one

hotel currently under development under the

Sheraton brand.

Significance:

According to Alex Kyriakidis, President and

Managing Director, Middle East and Africa,

Marriott International, the signing of Aloft

MARCH 2017

China’s investment in Mozambique has been

growing at a very fast pace and in cumulative terms

is approaching USD 6 billion. This is according to a

statement by the Chinese Embassy attache in

Lisbon, Nie Quan, on 16 March 2017.

According to Nie Quan, the pace of growth of

Chinese investment in Mozambique has been very

fast, with 100 Chinese companies operating in the

country in diverse areas, such as energy, agriculture,

fishing, real estate, building materials, tourism,

transport, telecommunications, infrastructure and

trade.

Nie Quan also said that China’s relations with

Mozambique and Portugal are global strategic

partnerships, making them more than

straightforward economic investments, and that

there is the potential for “tripartite cooperation”

throughout the Portuguese-speaking world. Together,

he noted that China and the Portuguese-speaking

countries account for 17 percent of the global

economy and 22 percent of the population, so there

are conditions for relations to be stronger and more

prosperous.

Significance:

Mozambique has maintained a longstanding

friendship with China and remains a preferred

investment destination for the country.

MOZAMBIQUE

China’s investment in Mozambique is worth close to USD

6 billion

RWANDA

Rwanda signs Bilateral Air Service Agreement with Mali

that will expose RwandAir to more West African

markets, including Conakry in Guinea and Dakar in

Senegal.

Rwanda has so far signed similar agreements with 38

countries in Africa and elsewhere.

Significance:

In addition to enhancing their bilateral relations, the

deal will also bring down the cost of transport between

the two nations. Currently, passengers travelling from

Kigali to Bamako have no choice but to connect either

through Dar es Salaam, Ethiopia or Nairobi, Kenya,

which takes more than 10 hours. They will now be able

to fly directly to Bamako in less than five hours.

Rwanda and Mali have signed a Bilateral Airspace

Service Agreement to open their airspaces

allowing their national carriers to operate without

restrictions. According to the agreement, all air

service operations will be conducted under the

fifth freedom arrangement, which means that an

airline has the right to carry passengers from one

country to another and from that country to a

third country. The airlines of the two parties can

operate unlimited frequencies per week for both

passenger and cargo services.

According to the Chief Executive Officer of

RwandAir, Bamako, Mali is a strategic destination

MARCH 2017

migrants from Eritrea, Ethiopia, South Sudan and

other neighbouring countries.

Significance:

Sudan is the fourth-biggest source of asylum seekers

in Britain, according to Oxford University’s Migration

Observatory and 47 percent of the migrants at the

Calais Camp were from the country. Sudan is also

considered a key transit country for migrants to

Europe. An estimated 30,000 people travelled

through it on the way to Italy in the first 11 months of

2016. Around 500,000 refugees from Eritrea, Ethiopia

and Somalia are currently thought to be in the

country.

Representatives of the European Union (EU) and

the United Nations Industrial Development

Organisation have signed an agreement to

implement a USD 3.2 million project to foster

employment opportunities and economic growth in

Sudan. The funding reiterates the EU's

commitment to address the root causes of

displacement and irregular migration from Africa to

Europe.

The intervention is intended to provide alternatives

to primary and secondary movements of migrants

and refugees and enhance self-reliance

opportunities. Special attention will be given to

youth and women internally displaced persons and

TANZANIA

Foreign investors allowed to buy shares in Vodacom IPO

Vodacom controls 31 percent of the Tanzania telco

market, followed by Tigo, Airtel and Halotel. Tigo,

Airtel and Zantel are also expected to be listed at

the Dar es Salaam Stock Exchange, in accordance to

a directive passed by Finance Bill 2016 that all

mobile network providers list at least a quarter of

their authorised share capital at the stock exchange

by January this year.

Significance:

The move to allow foreigners to be part of the IPO

is meant to enhance the issue’s chances of success

amidst fears that the flotation was likely to be

undersubscribed given recent liquidity trends at the

Dar es Salaam Stock Exchange.

According to a prospectus of Vodacom’s Initial

Public Offering (IPO) released on 7 March, foreign

investors will get a chance to buy the company’s

shares should Tanzanians not take up the entire

issue. The offer opened on Thursday 9 March and

closes on 19 April.

Foreigners will, however, have to dig deeper than

they would if they were buying shares in other

telcos listed across Africa. With the IPO valuing

Vodacom Tanzania at USD 208.5 million, the price

earnings ratio (an indication of how long it would

take an investor in years to recoup the capital

outlay) is 24.5 times against 19 times for telcos in

other frontier markets.

SUDAN

EU gives USD 3.2 million to Sudan for combating irregu-

lar migration

MARCH 2017

majority shareholder of AGR, Alain Goetz, has assured

that the refinery is highly compliant and will conduct

due diligence for all its clients.

The factory has an initial output capacity of 300

kilograms of pure gold per week and the ability to

increase to 500 kilograms eventually.

Significance:

Uganda has been keen to attract investors to its

mining sector after Government surveys established

the existence of minerals, including gold, base metals,

uranium, rare earths, iron, titanium, vermiculite, and

diamond in various locations. President Yoweri

Museveni has also stated that he will abolish royalty

taxes, as part of his Government's efforts to remove

hindrances to investment in the minerals sector.

Uganda has opened its first gold refinery in

Entebbe. The refinery, which is owned by Africa

Gold Refinery (AGR), will use raw gold from South

Sudan and eastern Democratic Republic of Congo,

as Uganda has only small mines and no

commercial mine.

Rights activists are, however, concerned about

the use of gold from conflict areas such as the

volatile mineral-rich east of the Democratic

Republic of Congo and South Sudan, which has

been mired in civil war. A US law passed in 2010,

the Dodd-Frank Act, requires companies to

disclose whether their products contain minerals

from conflict-ridden parts of Africa. The law aims

to hinder armed groups from using minerals to

finance conflicts. The Chief Executive Officer and

UGANDA

Uganda opens its first gold refinery

ZAMBIA

Bank of Zambia expected to continue to cut its key policy

rate over 2017

According to Business Monitor International

(BMI)’s latest southern Africa report, the Bank of

Zambia (BoZ) will enter a gradual rate-cutting cycle

over 2017, as inflation remains within the Central

Bank's target of 6 to 8 percent. The Central Bank

already reduced its policy rate to 14 percent at its

February Monetary Policy Committee Meeting, the

first time that the Bank has done so since 2012.

Inflationary pressures will remain largely contained

in Zambia over the next several months and this

will enable the BoZ to take a more accommodative

policy stance. Price growth peaked at 22.9 percent

year-on-year in February 2016, but has eased

substantially in the last few months, coming in at

6.8 percent in February 2017.

While food supply in Zambia remains at risk owing to

an outbreak of army worms, BMI expects it to

improve over the next several months.

Significance:

With growth having slowed down considerably in the

wake of the global commodity price slump, the BoZ

will continue to reduce its policy rate in an effort to

stimulate the economy. While growth will pick up

over 2017, it will remain well below the annual

average of 7.6 percent per year between 2004 and

2014 and BMI predicts that BoZ’s primary focus will

be on stimulating weak growth.

MARCH 2017

The recovery has also fed through to other

commodities, for instance, the price of gold rose in

2016, the first annual rise in four years and continued

to increase in January 2017.

Significance:

South Africa produces more iron ore, coal, gold and

manganese than any other country in Africa and is a

mining exporter of global importance. The country is

currently the sixth biggest producer of iron ore and

third biggest exporter in the world. The situation in

the country is thus of particular significance for the

mining sector in Africa as a whole.

The recovery in global commodity prices is

welcome news for South Africa. In particular, the

more optimistic outlook for the Chinese economy

– in January the IMF upgraded its growth forecast

for the country to 6.5 percent – could herald new

investment, as South Africa ships 50 percent of its

mineral exports to Asian countries.

Figures from Statistics South Africa, a

Government agency, show that a recovery has

begun in demand for both coal and iron ore, the

country’s two biggest mining exports by both

volume and value. South Africa should therefore

benefit from renewed Chinese demand for

African iron ore.

SOUTH AFRICA

Commodities’ recovery boosts South African mining

industry

MARCH 2017

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Sources

The information contained in this Bulletin is accredited to the named sources and does not necessarily represent the views of

ALN. ALN accepts no responsibility whatsoever for any loss, direct, indirect or consequential, arising from information made

available and actions resulting therefrom.