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issue 507 | 30 Jul 2023

World

Global economy on track but not yet out of the woods

The global economy continues to gradually recover from the COVID-19 pandemic and Russia’s invasion of Ukraine. In the near term, the signs of progress are undeniable. The COVID-19 health crisis is officially over, and supply-chain disruptions have returned to pre-COVID-19 pandemic levels. Economic activity in the first quarter of the year proved resilient, despite the challenging environment, amid surprisingly strong labour markets. Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected. And financial instability following the March banking turmoil remains contained thanks to forceful action by the United States (US) and Swiss authorities. Yet many challenges still cloud the horizon, and it is too early to celebrate. Under the International Monetary Fund’s (IMF) baseline forecast, growth will slow from last year’s 3.5% to 3% this year and next, a 0.2 percentage points upgrade for 2023 from April’s projections. Global inflation is projected to decline from 8.7% last year to 6.8% this year, a 0.2 percentage point downward revision, and 5.2% in 2024.

Source: IMF

Africa

AfDB Group and World Bank set path for transformative collaboration in Africa

A recent productive working meeting in Abidjan, between senior vice-president of the African Development Bank (AfDB) Group Bajabulile Swazi Tshabalala and a delegation from the World Bank led by managing director for Operations Anna Bjerde has resulted in a mutual agreement to identify key areas for intervention and collaboration. This collaboration strengthens efforts to tackle poverty and climate change, develop various sectors, including energy and agriculture, and deal with pandemics. Both leaders agreed to work together to achieve transformative results in Africa. They also emphasised the role of the private sector in mobilising capital resources. Ms Bjerde was accompanied by the institution’s regional vice-president for West and Central Africa, Ousmane Diagana, and other colleagues. The meeting, which took place at AfDB Group’s headquarters in Abidjan, built upon previous discussions between the World Bank’s president Ajay Banga and the president of the AfDB Group, Akinwumi Adesina.

Source: AfDB

Africa

Africa’s graphite boom ignites global battery revolution

Africa, known for its rich mineral resources, is making significant strides in the global graphite supply chain, positioning itself as a major player in the battery sector. With the world’s growing demand for clean energy solutions, the continent’s diverse graphite projects are attracting investors and downstream consumers alike, signaling a potential shift away from China’s dominance in the market. Graphite, a crucial component for lithium-ion batteries used in electric vehicles (EVs) and electronic devices, plays a pivotal role in the global transition to clean energy. As the demand for battery storage capacity increases, so does the need for high-quality graphite supplies. Currently, synthetic graphite, produced from crude oil, is prevalent in the market. However, the energy-intensive and carbon-emitting nature of its production might soon give way to the rise of natural graphite. In 2021, Africa produced about 9% of the world’s graphite supply, and this figure is expected to surge further in the coming years. The continent’s largest mine, Balama, located in Cabo Delgado, Mozambique and owned by Australia-based Syrah Resources, is already a significant global supplier. The Balama Graphite Mine province is a vital global supply chain link with 107 million tonnes of reserves at 16% total graphite carbon (TGC) and 1.42 billion tonnes of resources of 10% TGC.

Source: Energy Capital & Power

Africa

Leveraging technology and innovation to address climate change risks

Climate change continues to bring about devastating consequences for people, governments, and businesses alike. Extreme weather events, rising sea levels, and temperature changes can cause significant financial losses and widespread human suffering. Nowhere are these consequences felt more acutely than in Africa, where various sectors crucial to the economic success of countries, including agriculture, infrastructure, and coastal regions, face particularly high vulnerability to the physical risks of climate change. Corporate leaders will need to develop effective and innovative strategies for risk mitigation, resilience planning, and long-term sustainability to the continent. A comprehensive and data-driven approach will be indispensable for accurately assessing and managing these risks, and technology will play a pivotal role. Technology and innovation in the environmental, social and governance (ESG) space can improve everything from increasing efficiency of data gathering and enhancing data quality to providing more advanced analytics and reporting capabilities. Technology is playing an ever-greater role in a range of applications, such as energy management, as well as climate modelling, monitoring, and reporting. Digitalisation is being adopted across all sectors and is quickly becoming a critical technology for ESG management.

Source: ESI Africa

Africa

AfDB enters new USD1-billion exposure exchange with ADB to increase development lending capacity

The Board of Directors of the African Development Bank (AfDB) has approved a USD1-billion exposure exchange with the Asian Development Bank (ADB). The transaction will support its efforts to unlock additional sovereign lending headroom. It will also bolster continued efforts to create buffers within the AfDB’s capital adequacy metrics. This new exposure exchange agreement is the second transaction that the AfDB has executed following the success of the first agreement finalised in 2015 with the Inter-American Development Bank (IDB) and the World Bank Group’s International Bank for Reconstruction and Development (IBRD). Exposure exchanges between multilateral development banks involve a synthetic exchange of sovereign exposures in a risk-neutral manner to help address single obligor constraints and portfolio concentration. This new exposure exchange allows the AfDB to continue supporting its regional member countries, particularly following the COVID-19 pandemic, combined with the spillover effects of the Russian–Ukraine war, which affected most African countries. 

Source: AfDB

Southern Africa

2023 Southern Africa Economic Outlook: Southern Africa’s economic prospects subdued, yet abounds with investment opportunity in climate change initiatives

The Southern Africa region has seen a slowdown in economic growth over the past year as its largest economy, South Africa, confronts multiple challenges. Civil unrest, electricity crisis and natural disasters have contributed to dampen prospects for the region, which is lagging behind the others in Africa, according to the African Development Bank’s (AfDB) new economic report. The 2023 Southern Africa Economic Outlook, launched on Monday, 24 July analyses the recent economic trends and developments in Southern Africa. In line with this year’s theme for the annual outlook: Mobilizing private sector financing for climate and green growth in Africa, the report also explores the potential role of the private sector in financing the region’s climate action and green growth ambitions. In 2022, the Southern Africa region’s GDP growth barely reached 2.7%, a level much lower than global and African averages of 3.4% and 3.8%. The slowdown in South Africa has been mirrored in other countries within the region such as Zimbabwe, Zambia, Malawi, Madagascar, and São Tomé and Príncipe, which have also experienced intense adverse weather events, the report said. Growth in the region is expected to slow down further in 2023 to 1.6%, followed by a slight improvement of 2.7% in 2024. 

Source: AfDB

Cabo Verde

EUR14-million loan from AfDB will strengthen role as regional technology hub

The African Development Bank (AfDB) and the Government of Cabo Verde have signed a EUR14-million loan agreement to enhance the Cabo Verde Technology Park by making it more climate resilient and supportive of enterprise development. The agreement was signed on 19 July in Praia, Cabo Verde. The AfDB had earlier provided a loan of EUR31.59-million to finance the first phase of the state of the art technology park, which is already transforming the country into an innovative regional information and communication hub. The park, which functions as a special economic zone with tax and import duty incentives, will draw information and communications technology (ICT) professionals from across Africa. It has two campuses: one in the capital, Praia and the second on the island of São Vicente. As part of phase two, the hub will be equipped to run on renewable energy and, as part of a public-private partnership (PPP), furnished with two data centres. The Cabo Verde ICT hub will launch a EUR1-million seed fund to invest in approximately 20 innovative Cabo Verde startups. It will offer more than 50 technology startups from across Africa integration grants of at least EUR5 000 each. 

Source: AfDB

Ethiopia / Djibouti

Addis-Djibouti corridor to get major upgrade that is key to unlocking connectivity and trade for Ethiopia and the Horn of Africa

The Addis-Djibouti corridor, a vital trade route and a lifeline for Ethiopia's 120 million people, will get a significant upgrade thanks to the newly approved Horn of Africa Initiative’s Regional Economic Corridor Project. The project, endowed with a USD730-million grant from the International Development Association (IDA), aims to improve regional connectivity and logistics efficiency in Ethiopia along this key trade route connecting landlocked Ethiopia to the port of Djibouti. Improved regional connectivity and trade are essential to unlocking Ethiopia’s economic potential,” said Ethiopia’s Minister of Finance Ahmed Shide. “This project is important to support our commitment to fostering inclusive growth and regional integration, as we are now fully focused on sustaining the growth and reaping the peace dividends,” he added. Over 95% of Ethiopia’s import-export trade (by volume) uses the Addis-Djibouti corridor. The project aims to upgrade the road to Djibouti, including the Mieso-Dire Dawa section, which is currently in poor condition and unsuitable for growing truck traffic. 

Source: World Bank

Kenya

KRA raises tax on employee benefits

The Kenya Revenue Authority (KRA) has dealt workers a blow by raising the tax rate charged to employers granting employee benefits. In the adjustment, the taxman has raised the fringe benefits tax to 11% for the next three months until September on account of the prevailing high market interest rates – the second successive raise since the April-June window. “For the purposes of section 12B of the Income Tax Act, the market interest rate is 11%. This rate shall be applicable for the three months of July, August, and September 2023,” the KRA said. The levy is paid by employers on certain benefits offered to employees, their families, or other associates. The fringe benefits tax is imposed on employees receiving extra welfare benefits such as cheap loans in addition to their wages. Taxable employment income in Kenya includes all payments made by an employer to an employee. This will include salaries, wages, bonuses, and fringe benefits received or enjoyed during employment. The taxman also raised the deemed interest rate to 11% for the three months to September of which a withholding tax of 15% would be deducted and paid to it by the 20th day of each month.

Source: Business Daily Africa

Lesotho

IMF Executive Board concludes 2023 Article IV consultation with Lesotho

The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Lesotho. Lesotho’s economy continues to face a number of challenges in the wake of the COVID-19 pandemic. Climate shocks, delays to infrastructure projects, high food and fuel prices, declining diamond prices, layoffs in the textiles sector, and weak regional and external demand are weighing on activity. High public expenditure also continues to distort incentives and hinder private sector development. Headline inflation remained elevated averaging 8.4% in financial year (FY)22/23, two percentage points higher than the year before. Furthermore, food inflation rose to 10.4% during the same period. To anchor inflation expectations and support the exchange rate peg, the Central Bank of Lesotho has continued to track the policy rate changes of the South African Reserve Bank, raising rates by 425 basis points since November 2021. The government is prioritising fiscal consolidation on the back of windfall transfers from the Southern African Customs Union (SACU), which have helped alleviate near-term pressures on financing and reserves. However, the fiscal deficit deteriorated to 7.7% in FY22/23, due to lower revenue and rigid expenditure, with public debt increasing to almost 60% of GDP. 

Source: IMF

Mali

World Bank says Mali’s economy showed signs of resilience despite sanctions and climate shocks

Mali’s economy showed signs of resilience despite Economic Community of West African States (ECOWAS) sanctions, high food inflation, and parasite infestations that affected cotton production. According to the World Bank’s 2023 Mali Economic Update, entitled Strengthening Financial Resilience of Pastoralists to Drought, GDP growth is estimated at 1.8%, driven by the recovery of food agriculture and the resilience of the gold and telecommunications sectors. Average annual inflation increased to 9.7% in 2022, owing primarily to rising food prices. In terms of projections, the report notes that the outlook for 2023 is fraught with risks associated with the electoral timetable and tighter financial conditions. The rising cost of financing on the regional market, given Mali’s high gross domestic financing needs, is a significant risk that has emerged in the last 12 months. Tighter monetary policy has resulted in higher yields for six to 12-month Treasury bills and five-year Treasury bonds for West African Economic and Monetary Union (WAEMU) countries. Liquidity and rollover risks and the ensuing public finance difficulties could produce a drag on the wider economy and on society by cutting social spending and investment and potentially increasing the accumulation of arrears.

Source: World Bank

Mauritania / Mali

USD900-million mobilised for Mauritania-Mali power line project

Multilateral development finance institution, the African Development Bank (AfDB) Group, and the Governments of Mauritania and Mali have agreed to mobilise USD900-million in support for an international power transmission line connecting Mauritania and Mali. The project will extend distribution networks between the two countries, with almost 1 500 kilometres (km) of high-voltage wires deployed to provide power to 620 000 people while fostering long-term growth in the region. It additionally incorporates the construction of several solar power stations, and is set to increase solar capacity by 100 megawatts (MW). According to the AfDB, the project falls in line with the institution’s ambitious Desert-to-Power programme, which aims to construct the world’s largest solar power producing region. AfDB deputy director for North Africa and country manager for Mauritania, Malinne Blomberg, stated that, “The aim of our involvement in this large-scale project is to turn our policy of supporting the development of green infrastructure in Africa into a reality… to promote green, inclusive, sustainable growth, which will significantly improve the living conditions of people in Africa.” The Mauritania-Mali power line project is an important component of the planned trans-Sahel spine, a regional electrical distribution system connecting Mauritania to Chad through Burkina Faso, Niger and Mali.

Source: Energy Capital & Power

Nigeria

NNPC inks FLNG HoA with UTM Offshore, advancing domestic gas use in Nigeria

The Nigerian National Petroleum Corporation (NNPC) signed a Heads of Agreement (HoA) with Nigerian oil and gas company UTM Offshore Limited for the UTM Floating Liquefied Natural Gas (FLNG) project – a planned FLNG vessel set to produce 176 million cubic feet of gas per day from the Yoho Field. The agreement lays out the terms of the NNPC’s 20% equity contribution of the FLNG project, and represents a milestone in advancing domestic gas utilisation in Nigeria. The African Energy Chamber (AEC) believes that this is a monumental step towards scaling up access to clean cooking solutions in Africa, with the project and agreement serving as a blueprint for other resource-rich countries across the continent. With the agreement, liquefied petroleum gas (LPG) will become increasingly accessible to the Nigerian market, thereby reducing costs of the product while improving health, environmental protection and employment across the country. The agreement showcases the NNPC’s commitment to ensuring domestic gas resources reap tangible rewards for the local population.

Source: AEC

Republic of the Congo

IMF Executive Board completes the third review of the ECF arrangement for the Republic of the Congo and approves USD43-million disbursement

The Executive Board of the International Monetary Fund (IMF) has completed the third review of the Republic of the Congo’s economic programme under the SDR324-million Extended Credit Facility (ECF), which was approved on 21 January 2022. The completion of the review allows for the immediate disbursement of SDR32.4-million (about USD43-million), bringing total disbursements under the ECF to SDR226.8-million. This financing from the IMF will continue to help the authorities implement their development policies, maintain macroeconomic stability and strengthen economic recovery amid high food inflation, lower oil prices and tightening financial conditions. Structural reforms continued to advance in some areas, but the programme underperformed in several areas. Progresses were achieved in procurement planning, debt reporting, and efforts to increase transparency. However, three out of five performance criteria related to the fiscal position and debt service management were missed, prompting authorities to request waivers for these three criteria and take strong corrective measures. Authorities will continue to pursue two reform benchmarks aiming for additional transparency in the management of natural resources and higher fiscal revenues.

Source: IMF

Rwanda / Republic of the Congo

Rwanda, Congo-Brazzaville sign deal to trade under AfCFTA

Rwanda and the Republic of the Congo (Congo-Brazzaville) on 22 July signed an agreement to fast-track trade and economic cooperation under the African Continental Free Trade Area (AfCFTA). The agreement was signed by Jean Chrysostome Ngabitsinze, Rwanda’s Minister of Trade and Industries, and Denis Christel Sassou Nguesso, the Minister of International Cooperation in the Republic of the Congo. The deal’s signing was presided over by President Paul Kagame and President Denis Sassou Nguesso. This was during President Nguesso’s two-day state visit during which he visited the Kigali Genocide Memorial, addressed members of Parliament, and toured the Rwanda Institute for Conservation Agriculture (RICA), among other activities. The Minister of Foreign Affairs and International Cooperation, Vincent Biruta, said the Congolese president’s visit was an opportunity to take stock of the progress made so far in terms of implementation and to identify strategic areas to focus on. He said the signing of the memorandum of understanding (MoU) on preferential trade to enhance economic cooperation between the two countries under the AfCFTA, will be based on key strategic areas. 

Source: The New Times Rwanda

Seychelles

Seychelles' government to have further discussions on collection method for environmental levy

Seychelles' finance authorities will undertake further discussions with the Cabinet of Ministers on the environment levy for tourism accommodation expected to start from 1 August, amid concerns of tourism establishments on the proposed collection method. Top finance officials recently met with representatives of tourism accommodation owners and yacht operators to discuss the imminent environment levy. The payment of the levy approved by the Cabinet in its meeting on 5 July has a three-tiered approach. Small hotels will pay SCR25 (USD2), medium hotels, SCR75 (USD6) and large hotels and yachts SCR100 (USD8). The proposed collection method was that when an establishment makes an invoice, similar to how they currently collect value-added tax (VAT), there will be a line on the invoice for the environment tax charged per person per night. Revenue collected through the levy was earmarked to finance climate mitigation projects. Part of the concerns raised was the fact that the establishment owners would have to pay an additional 3% incurred from banks following credit card payments from their clients.

Source: Seychelles News Agency

Zambia

AfDB Group rallies behind Zambia and plans up to USD150-million in budget support as country succeeds with debt restructuring

African Development Bank (AfDB) Group president Akinwumi Adesina has completed a two-day official visit to Zambia where he met with President Hakainde Hichilema to discuss further support for the country as it emerges from a successful USD6.3-billion debt restructuring for bilateral debtors, under the Group of 20 (G20) Common Framework on debt treatment. President Hichilema noted that while his government had made a significant achievement on official creditor debt, more work needs to be done to tackle debt owed to local and external commercial creditors including Eurobond holders. “We have lost a lot of time under the ‘python of debt’. We want to now unlock growth and prosperity for our people,” said President Hichilema. Adesina congratulated the Government of Zambia for reaching an agreement with its bilateral creditors under the G20 Common Framework on debt treatment. The agreement puts Zambia back on the path for economic recovery and sustainable debt management. The bank chief outlined several measures including an initial up to USD150-million in budget support for consideration for approval by its board of directors; and several other investment projects in key sectors of the economy, including agriculture, energy, and transport. 

Source: AfDB

Zambia

Zambia and UNCTAD sign deal to modernise customs procedures

The Government of Zambia, through the Ministry of Commerce, Trade and Industry (MCTI) has signed an agreement with the United Nations Conference on Trade and Development (UNCTAD) to modernise customs procedures using the Automated System for Customs Data (ASYCUDA). The ASYCUDA is an integrated customs management system for international trade and transport operations in a modern automated environment. It has advanced software applications which are designed and developed for customs administrations and the trade community to comply with international standards when fulfilling import, export and transit related procedures. The Zambia Revenue Authority (ZRA) is a key beneficiary of the system which is being provided under the MCTI Zambia Border Posts Upgrading (ZBPUP) Project, funded under the 11th European Development Fund, Common Market for Eastern and Southern Africa (COMESA) Trade Facilitation Programme. The ASYCUDA support to the ZRA is valued at EUR548 000 and will involve strengthening of existing automated customs processes through harmonisation of clearance processes in all customs offices and ensuring that there is adherence to the agreed customs and trade facilitation principles and procedures.

Source: COMESA