Africa Investment Forum 2019: African Development Bank signs USD250-million risk participation agreement with ABSA, to address Africa’s trade financing gap
The African Development Bank has signed an unfunded USD250-million Risk Participation Agreement (RPA) facility with ABSA – a pan-Africa financial institution with a solid presence in 12 African countries. The 3-year RPA facility was signed on 12 November 2019, on the side-lines of the Africa Investment Forum through its trade finance operations. Under this 3-year RPA facility, the Bank and ABSA will share default risk on a portfolio of eligible trade transactions originated by African Issuing Banks (IBs) and confirmed by ABSA. Leveraging the Bank’s AAA rating, ABSA will underwrite trade transactions issued by African issuing banks across key sectors like agriculture, energy, and light-manufacturing with a special focus on Small and Medium Sized Enterprises (SME’s) in fragile and low-income African countries. The Bank’s commitment under the RPA is to assume up to 50% (and 75% in special cases) of every underlying transaction issued by the IBs, while ABSA will confirm such a transaction and bear not less than 50% of its underlying risk. Working with strategic partners like ABSA, the Bank’s trade finance operations aim to facilitate inter and intra Africa trade by reducing the trade financing gap on the continent. Since 2013, the Bank’s RPA program has supported over 16 issuing banks with about USD$650-million limits in Southern Africa alone, with special focus on SMEs and local corporates in manufacturing, agribusiness, import/export and energy sectors.
Source: African Development Bank Group
Urgent action needed to mobilise domestic resources as tax revenues plateau
The average tax-to-GDP ratio for the 26 countries participating in the new edition of Revenue Statistics in Africa was unchanged at 17.2% for the third consecutive year in 2017. This was lower than the averages for Latin America and the Caribbean (LAC) at 22.8% and for the OECD at 34.2%, underlining the need for urgent action to enhance domestic revenue mobilisation in Africa. The 26 countries covered in Revenue Statistics in Africa 2019, represent nearly three-quarters of Africa’s GDP. The report shows that tax-to-GDP ratios varied widely across these countries in 2017, ranging from 5.7% in Nigeria to 31.5% in the Seychelles. While tax revenues plateaued as a percentage of GDP for Africa (26) in 2017, non-tax revenues (primarily rents and royalties from natural resources, as well as grants) continued to decline and were lower than tax revenues in all but three of the 26 countries: Botswana, the Republic of the Congo and Equatorial Guinea. Between 2010 and 2017, an increase in tax revenues equivalent to 1.9% of GDP on average was offset by a decline in non-tax revenues from 7.5% of GDP to 5.7% of GDP. African economies continue to rely heavily on taxes on goods and services, which accounted for 53.7% of total tax revenues across the 26 countries. Within this category, value-added taxes (VAT) accounted for 29.4% of total tax revenues. Meanwhile, corporate income taxes (CIT) generated 18.6% of total tax revenues – a higher proportion than in LAC and in the OECD – and were equivalent to 2.8% of GDP in 2017.
Source: Organisation for Economic Co-operation and Development
Africa / Germany
Africa is ripe for business, investment – Kagame
President Paul Kagame has told participants of the G20 Compact with Africa (CwA) Investment Summit in Germany, that the presence of Africa at the summit is an indication that the continent is ripe for business and investment. “This really showcases how Africa is ripe for business and investment, and how far we can go,” the President said at the Haus der Deutschen Wirtschaft – Germany. CwA Investment Summit brings together German businesses and CwA countries to discuss ways to strengthen economic ties. The president giving an example of Germany – Africa business maturity said; “[f]or example, the partnership Rwanda has had with VW, with Siemens now coming in and SAP, demonstrates the competitiveness of our economies and the reforms that have been happening in the ease of doing business.” The G20 CwA was launched in 2017 under the German G20 Presidency. 12 African nations have so far joined the initiative: Benin, Burkina Faso, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia.
Source: KT Press
Africa / Russia
Russia’s emerging sphere of strategic competition and engagement
The key findings of a report that has recently been published by IHS Markit are: First, Russia’s African strategy aims to exploit a geopolitical ‘gap’ between diminished United States (US) focus and wariness of China, driven by Russia’s post-2014 increased economic and diplomatic isolation, and the Russian desire to strive for global influence. Second, the primary purposes of Russia’s African strategy are securing lucrative investments and inserting itself as a powerbroker in African conflicts, to achieve the secondary objective of using this as leverage with the US and the European Union to engage diplomatically and thereby promote Russia’s key interests, such as weakening sanctions against Russia. Thirds, African governments that become reliant on Russian assistance will likely come under heavy pressure to favour Russian companies when allocating contracts or concessions, especially in defence procurement and the mining, oil and gas, road and rail construction, and nuclear power sectors, posing increased state contract alteration and expropriation risks to non-Russian investors. Finally, key African theatres for probable Russian competition with other powers during the next 18 months are the Central African Republic (CAR), the Democratic Republic of Congo (DRC), Eritrea, Libya, Madagascar, Mali, and Sudan.
Source: IHS Markit
Botswana forecasts slower GDP growth, wider deficit this year
Botswana’s economy is expected to grow at a slower pace this year compared to last year, the deputy secretary in the ministry of finance said, with the services sector set to drive growth in the medium term. GDP growth in the diamond-producing southern African nation is projected to slow down to 4.3% in 2019, from 4.5% last year, deputy finance secretary Kelapile Ndobano said. Economic growth is later projected to pick up to 4.6% in 2020, supported by ongoing structural reforms aimed at diversifying the economy, he said. “The non-mining sector, particularly services, will drive growth, signalling that our economy is now more diversified as diamonds are no longer the biggest contributor to growth.” “The medium term growth outlook remains positive,” Ndobano told a budget conference.
Source: The Patriot
Cape Verdean government sells state position in national fuel company Enacol
The Cape Verdean government will sell its 2.1% stake in the national fuel company Enacol through a public offer through the Cabo Verde Stock Exchange, according to a statement issued in Praia. Enacol, which was founded in 1979, is currently 48.3% owned by Portuguese group Galp Energia, 38.7% by Sonangol Cabo Verde and, in addition to the Cape Verdean State, 10.9% by other small shareholders. Enacol’s share capital is ESC1-billion (USD10-million), represented by one million shares, with a nominal value of ESC1,000 (USD10), so the state’s position, with 21,000 shares, has a nominal value of ESC21-million.
DRC / Uganda
DRC, Uganda forum settle on trade, roads deal
Movement of goods and people, bilateral trade and investment are set to ease as Uganda and the Democratic Republic of Congo (DRC) plan to jointly construct 1,200km of roads. The project includes 24km Bunagana-Goma road up to Rutshuru in the DRC; a 977km road from Mpondwe border post in western Uganda to Beni in the DRC and a 180km road from Goli in northern Uganda to Beni. DRC President Felix Tshisekedi and Uganda President Yoweri Museveni signed the agreement at the first Joint Business Forum held at the Speke Resort Munyonyo in Kampala. The forum sought to promote bilateral trade, investment and connectivity between the two countries. Total exports for Uganda to the DRC in 2018 stood at USD532-million of which informal trade exports were worth USD312-million, while formal trade accounted for USD221-million.
Source: The EastAfrican
Harmonisation pushes up intra-East African Community trade over 10%
Intra-regional trade within the East African Community (EAC) bloc rose by 10.3% last year, courtesy of harmonisation of cross-border rules and procedures. “Reforms taken under the Customs Union has also boosted intra-regional trade,” Christophe Bazivamo, EAC deputy secretary general responsible for productive and social sectors, said in Arusha on 11 November 2019. He said intra-EAC trade catapulted to USD3.2-billion last year from USD2.7-billion in 2016 and USD2.9-billion in 2017. Bazivamo disclosed this at the second meeting of the EAC Development Partners’ Group (DPG). Officials at the EAC secretariat officials say there was “no one rule or procedure” introduced but insisted generally most of the trade procedures within the region have been simplified. They cite the operationalisation of the EAC Single Customs Territory (SCT), the Authorised Economic Operator (AEO) and One Stop Border Post (OSBP) and their respective rules and regulations as having a multiplier effect on the ease of doing business in the region.
Source: The New Times
State, Tullow to set pipeline loan terms
The Kenyan government and energy multinationals Tullow Oil, Total S.A. and Africa Oil have approached international lenders to set the terms on which they will finance the pipeline to be used to export the country’s crude oil. The pipeline will be a key infrastructure in the oil production venture, with the government also accelerating the process of acquiring land where the pipeline will pass. “The joint venture partners and the Government of Kenya are set to commence discussions with prospective lenders for the project financing of the export pipeline that will run from Turkana to the new Lamu Port at Manda Bay,” Tullow said in a trading update. Identity of the lenders was not disclosed but they could include global investment banks and development finance institutions. The government has said Kenya’s oil production is profitable from USD34 (KES3, 500) per barrel, indicating a potential windfall from the current international crude oil price of USD62.69 (KES6, 400). Tullow says the recent agreements it signed with the government and ongoing regulatory and infrastructure works gives it confidence that the project will be profitable even at low oil prices.
Source: Business Daily
Dublin company eyes PPPs with new Nairobi unit
Kenya’s policy emphasis on public-private partnerships (PPPs) has drawn Ireland’s largest construction company, Designer Group, to open an office in Nairobi. The Irish engineering solutions company said its fully-owned subsidiary will oversee ongoing projects worth KES1.46-billion set for completion by year-end, as well as execution of new ones worth KES2.8-billion starting next year in Kenya and Uganda. Designer Group – which partners with local construction companies when bidding for engineer, procure and construct (EPC) contract jobs – handles utility, infrastructure, industrial and sustainable energy projects. It says it has secured 80% of funding for the projects. Visiting Irish Business, Enterprise and Innovation minister Heather Humphreys pitched for joint venture partnerships, saying they presented a good opportunity for Kenyan and Irish companies to trade. Designer Group said it will work closely with local contractors across the value chain, thereby creating a platform for knowledge transfer and up-skilling over the coming 12 months. The firm has operations in Ireland, the UK, Germany, Africa and the United States.
Source: Business Daily
Embu signs KES25.5-billion deal with Chinese firm
Embu County has entered into a KES25.5-billion investment deal with Shanxi Dikuang overseas Engineering Construction Company of China “to spur economic growth in the region.” Under the pact, the Chinese company is to construct an agricultural demonstration centre, value addition parks and a mineral resource exploration and processing unit. The company will also develop hospitality facilities, build support infrastructure at the Mwea Game Reserve and construct a waste treatment plant. Speaking in Embu town yesterday during the signing of a memorandum of understanding, Governor Martin Wambora welcomed the partnership adding that the initiative would ensure effective resource mobilisation and wealth optimisation for Embu County.
Source: Business Daily
Construction council to play match-making
Namibia’s construction industry federation will be matching contractors with projects according to their sizes to ensure that tenderpreneurs or agents who do not add any value are cut out. This was revealed by Barbel Kirchner, the consulting general manager of the Construction Industries Federation (CIF), when she explained the outcome of a construction conference which was held in Windhoek. She said their overall aim is to align the current economic and fiscal environment and its impact on the construction sector. The construction industry has been declining by 12% annually on average since 2015, shedding its workforce from 65 000 to 47 000 by 2018, with the informal sector affected the most. The CIF believes that the council would level the playing field, realign the economic benefits of local procurement versus regional and foreign procurement, while considering contract size, location, material sourcing, ownership, youth, women, previously disadvantaged persons, experience, and access to finance. Such interventions would furthermore allow contractors to grow gradually, sieving out the ones that do not perform.
Source: The Namibian
Nigerian Senate passes bill to increase VAT
The Nigerian Senate has passed the Finance Bill. The bill which was presented to the National Assembly by President Muhammadu Buhari in October, seeks to increase the value-added tax (VAT) from 5% to 7.5%. If signed into law, Nigerians will pay more for specific goods and services that attract VAT. The bill will also reform the tax regime by amending several Acts, namely, the Petroleum Profit Tax Act (PPT), Custom and Excise Tax Act, Company Income Tax Act (CITA), Personal Income Tax Act, Value Added Tax Act, Stamp Duties Tax Act, and Capital Gains Act. The Finance Bill had on 6 November 2019 passed the second reading despite lawmakers not being fully aware of its content. The bill was passed after lawmakers considered it clause-by-clause following the submission of a report by the finance committee. The Senate will now expect a concurrence by the House of Representatives before the legislation goes to the president for signing.
Source: Premium Times
Uganda / France
French businesses set to visit Uganda to explore investment opportunities
A French business delegation of more than 25 companies will visit Uganda in a bid to explore business opportunities, create partnerships for trade and investment in Uganda. The business trip is an initiative of MEDEF International – the French Business Confederation which represents MEDEF and its 170 000 member companies and 10 million employees. The French companies represent a wide range of sectors, including transport, infrastructure, industrial projects, aeronautics, utilities, logistics, energy (including renewable energy), ICT, water management, banking and financial services, and services to government.