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Africa Business in Brief

 

issue 545 | 12 May 2024

World

Geopolitics and its impact on global trade and the dollar

Global economic ties are changing in ways we have not seen since the end of the Cold War. After years of shocks – including the COVID-19 pandemic and Russia’s invasion of Ukraine – countries are reevaluating their trading partners based on economic and national security concerns. Foreign direct investment flows are also being re-directed along geopolitical lines. Some countries are reevaluating their heavy reliance on the dollar in their international transactions and reserve holdings. All of this is not necessarily bad. Given the recent history of events, policymakers are increasingly – and justifiably – focused on building economic resilience. But if the trend continues, we could see a broad retreat from global rules of engagement and, with it, a significant reversal of the gains from economic integration. New trade restrictions have increased sharply – more than tripling since 2019 – while financial sanctions have also expanded. The geopolitical risk index has spiked in 2022 following Russia’s invasion of Ukraine. And private sector concerns about fragmentation – gauged by the number of mentions in corporate earnings calls – have surged. Despite these trends, there are not yet clear signs of deglobalisation at the aggregate level.

Source: International Monetary Fund

Africa

AfCFTA, ZenPay to develop portal for seamless intra-African trade

A portal to facilitate intra-African trade is to be developed by the African Continental Free Trade Area (AfCFTA) Secretariat in collaboration with ZenPay Limited, a wholly owned subsidiary of Zenith Bank Plc. The digital platform, according to a statement, will be known as Smart AfCFTA, and will streamline and unlock vast opportunities for trade across the African continent, providing information like trade indicators, market trends, custom tariffs, trade agreements, Rules of Origin, market access requirements of relevant jurisdictions, export potentials, export diversification indicators and contact details of business partners in target markets and other trade-related information about Africa. Speaking at the recent signing of the agreement in Lagos, the Chairman of ZenPay, Mr Ebenezer Onyeagwu, emphasised that, “This initiative is not driven by profit but by the need to support the AfCFTA. It aims to create a unified African market, enhancing economic integration and standardising customs and practices. As we advance this agenda, we expect to see significant growth and improvement in intra-Africa trade.” He noted that, “In Africa, intra-African trade constitutes only about 20% of total trade, with the rest going overseas, despite Africans making up 18% of the world population but contributing less than 5% to global GDP. By trading within Africa, we anticipate building prosperity across the continent.”

Source: Business Post Nigeria

Africa

African countries want all standards harmonised

The African Organisation for Standards (ARSO) has said all countries on the continent must harmonise their standards to effectively trade under the African Continental Free Trade Area (AfCFTA). Speaking at the 38th International Organization for Standardization Committee for Conformity Assessment workshop organised by the Uganda National Bureau of Standards, Dr Hermogene Nsengimana, the ARSO Secretary General, said if the AfCFTA dream is to be achieved, all countries must ensure that their standards are harmonised to reduce duplication. “We should borrow a leaf from the East African Community where they started harmonising standards. We need to move together if we want to push intra-continental trade,” he said, noting there has been an attempt to harmonise agro-processing, pharmaceuticals, automotive and transport standards at the continental level. “We have over 1 800 standards. By June, 200 would have been harmonised. This will reduce duplication and we are also trying to make standards simple for traders,” he said. Trade across Africa continues to be disrupted due to variances in product standards and country specifications.

Source: Monitor

Africa

Surge in service sector investments to bolster intra-African services sector

A recent report highlights a significant shift in global investment dynamics favouring the services sector, with analysts predicting a positive impact for intra-African services. A global shift in foreign direct investment (FDI) dynamics, with investors globally increasingly favouring the service sector over traditional manufacturing, could favour Africa, according to Tanzanian-based analyst, Musila Muoki. According to a new report by the United Nations Trade and Development Organization, the global FDI shift is being shaped by “trends in global value chains, technological advancements, geopolitical dynamics and environmental concerns. From 2004 to 2023, the share of cross-border greenfield projects in the services sector jumped from 66% to 81%,” the authors of the report released on 23 April explain. The trend has been echoed in Africa, where greenfield service sector investment has surged, with FDI inflows as a share of the continent’s GDP being 69% in 2023, up from 40% a decade earlier. While the global shift carries concerning implications for manufacturing, the pivot towards service trade comes at a time when efforts are being made to bolster intra-African trade under the African Continental Free Trade Area Agreement.

Source: The Citizen

East Africa

East African securities regulators agree to develop regional frameworks for sustainability linked financing and carbon credit markets

The regional capital markets regulators, under the umbrella of the East African Securities Regulatory Authorities (EASRA) have resolved to develop a regulatory framework for sustainable finance with a view to developing a harmonised regional framework. The framework will provide standards for regulating sustainability linked issuance of securities, use of proceeds, projects evaluation, and reporting. As testament of the iron-clad commitment of the regulators towards contributing to the net-zero agenda, regional regulators will also conduct a regional study on the carbon credit market with the view to gaining an understanding of the existing stakeholders and the regulatory framework, which would then inform an East African regional carbon credit framework for domestication at national level. Speaking at the meeting, the Chairperson of EASRA, Ms Josephine Okui Ossiya, who is also the CEO of the Capital Markets Authority Uganda said that EASRA was keen on developing a new strategic plan for the next five years (2024 – 2029). To ensure that the plan meets the long-term funding needs of the region, it will be anchored on the East African Community Vision 2050, the African Union Agenda 2063 and the United Nations Sustainable Development Goals.

Source: Capital Markets Authority

Côte d'Ivoire

Montage Gold discovers large gold deposit in Côte d'Ivoire

Canadian mining company Montage Gold has made a significant gold discovery at the Koné mining project, located in Côte d'Ivoire. Construction of the Koné mine, with an expected lifespan of around 20 years, is set to start in the last quarter of 2024, with production scheduled to commence in 2027. The processing plant at the Koné project is projected to have an annual capacity of 11 million tonnes of ore. Martino De Ciccio, CEO of Montage Gold revealed: “The mineral resources of this deposit, the largest mine in the country to date, are estimated at 5 million ounces, or 155.5 tonnes of gold with an average grade of 0.72g/t.”

Source: Energy Capital & Power

The Gambia

IMF staff reaches staff-level agreement on the first review of the ECF arrangement

An International Monetary Fund (IMF) team, led by Mr Ivohasina Fizara Razafimahefa, conducted discussions with the Gambian authorities in Banjul from 23 April to 3 May 2024, and reached a staff-level agreement on the first review of the programme supported under the 36-month Extended Credit Facility (ECF) arrangement, which was approved in January 2024 for total access of SDR74.64-million (about USD98.4-million). Subject to approval by the IMF’s Executive Board, the completion of the review would enable a disbursement of SDR8.29-million (about USD10.9-million), bringing the total disbursement under the arrangement to about USD21.8-million. At the conclusion of the discussions, Mr Razafimahefa issued the following statement, in part: “The authorities remain committed to their reform agenda; their efforts have been commendable. The introduction of a new foreign exchange policy has allowed the official exchange rate to closely reflect market developments and alleviated foreign exchange shortages. Governance and structural measures are advancing, including the adoption of the anti-corruption bill and the oversight of state owned enterprises.” 

Source: IMF

Ghana / India

India, Ghana agree for early operationalisation of Unified Payment Interface on Ghana interbank payment systems

India and Ghana are working to link their payment systems, Unified Payments Interface (UPI) and Ghana Interbank Payment and Settlement Systems (GHIPSS), respectively, to permit users to make instant, low-cost fund transfers on a reciprocal basis. The two countries have also delved into discussions regarding the possibilities of a memorandum of understanding on digital transformation solutions; local currency settlement system and the opportunities offered by the African Continental Free Trade Area Agreement. "They agreed to work expeditiously towards the operationalisation of [the National Payments Corporation of India’s (NPCI)] UPI on Ghana's GHIPSS within a period of [six] months," the Department of Commerce said on the social media platform X (formerly twitter). India's UPI has already reached countries including Singapore and the United Arab Emirates. Talks are also on with Nigeria for the same. These issues were discussed during the visit of a seven-member Indian delegation led by Additional Secretary in the Department of Commerce Amardeep Singh Bhatia to Accra, Ghana from 2-3 May. The NPCI International has recently announced its partnership with the Bank of Namibia to support them in developing a UPI-like real-time payment system in the African nation.

Source: The Economic Times

Guinea

IMF Executive Board approves USD71-million in emergency financing support and concludes 2024 Article IV consultation with Guinea

The Executive Board of the International Monetary Fund (IMF) has approved a disbursement of SDR53.55-million (about USD71-million) under the Exogenous Shocks Window of the Rapid Credit Facility to help Guinea address urgent balance-of-payment needs associated with the fuel depot explosion. The emergency spending, which will be reflected in the revised budget law for 2024, includes transfers to affected households; the decontamination of the explosion site; the construction of housing, school, and health infrastructure; the rehabilitation of damaged public buildings; and the start of construction work on a modern and safe fuel depot. Guinea’s growth is expected to decelerate to 4.1% in 2024 amid fuel shortages and rebound to 5.6% in 2025, sustained by a resilient mining sector. Policies for 2024 aim at mitigating the impacts of the fuel explosion while minimising deviations from medium-term growth and economic development objectives. The executive board also concluded the 2024 Article IV consultation with Guinea.

Source: IMF

Kenya

Power line linking Kenya to southern Africa set for 2025

A key power line linking Kenya to Zambia through Tanzania is set for completion in November 2025, raising hope for cross-border electricity imports and exports among nations covered by the high-voltage grid. The Tanzania Electric Supply Company (TANESCO), the country’s power utility, confirmed that the 400 kV Tanzania-Zambia line will be completed in November 2025. The project seeks to connect the Eastern Africa Power Pool (EAPP) with the Southern African Power Pool (SAPP). Contracts for the transmission line were signed in July last year. “This project aims at extending the 400 kV transmission backbone in the south-western parts of Tanzania to allow regional power trade between [SAPP] and [EAPP],” said TANESCO. “The project is expected to be completed in November 2025,” added the firm. Kenya is a member of the EAPP alongside 12 other countries, namely Uganda, Tanzania, Rwanda, Burundi, and the Democratic Republic of the Congo (DRC). Others are Egypt, South Sudan, Sudan, Somalia, Libya, Ethiopia and Djibouti. Completion of the line will allow Kenya and other countries within the EAPP to sell and buy power from SAPP countries, which include South Africa, Tanzania, Angola, Mozambique, Lesotho, Eswatini, Zambia, Zimbabwe, Malawi, Namibia, Botswana, and the DRC.

Source: The EastAfrican

Kenya

SEZ companies get KES1.9-billion tax incentives in nine years

Firms operating in Kenya’s special economic zones (SEZ) were exempted from paying KES1.98-billion in taxes and other levies in the nine years to 2023, Parliament was told. The incentives include protection from corporation tax, withholding taxes, and value-added tax and are offered to developers and enterprises in SEZs to encourage local investment. The Kenya Revenue Authority (KRA) told the Parliamentary Committee on Finance and National Planning that for the period 2015 to 2023, a total of KES4 085 454 461 was computed for the 37 SEZs. “From the computed tax, a total of KES1 987 249 558 was exempted from tax. Thus KES2 090 251 963 was paid in taxes by the SEZs entities that have been issued with customs codes and are operating from the customs area,” David Ontweka, KRA Deputy Commissioner for Policy and Customs, said. The KRA management appeared before the committee chaired by Molo MP Kuria Kimani to respond to questions filed by Mbeere North Member of Parliament Geofrey Ruku on tax foregone in the SEZs. Mr Ruku had sought a detailed schedule of tax exemptions for each category of exempted taxes between 2015 and 2023 and for each SEZ enterprise.

Source: Business Daily

Kenya / Europe

Kenya, EU launch talks on data sharing

Kenya has commenced talks with the European Union (EU) that if successful, could see local data protection standards recognised and classified as of a similar level with those of the union members in a move that will pave the way for the free flow of personal data between both jurisdictions without any additional regulatory restrictions. Among the benefits that Kenya would stand to gain if the adequacy decision were reached include a boost in digital trade, access to Europe’s vast data economy estimated to be worth over EUR800-billion by 2025, as well as an increase in accessibility of data in a range of areas such as research. The development would also unlock investment opportunities in business process outsourcing and digital services exports. The EU Deputy Head of Mission to Kenya Ondrej Simek told delegates, at the recent three-day Network of African Data Protection Authorities (NADPA) conference in Nairobi, over the next three months, the EU representatives in Kenya will be working closely with local authorities to explore the possibility of building a safe data bridge between the two economies.

Source: Business Daily

Kenya / Italy

Italian firm eyes biogas from Kenya dumpsites

Italian oil company Eni Kenya BV is seeking to set up biogas plants in Kenya, which will utilise waste dumped at five major landfills in the country. The company has already done a feasibility study to assess the viability of the project and is awaiting necessary approvals from the government to go ahead with its implementation. "In 2023, in support of the subsidiary Eni Kenya BV, Eni Rewind conducted a feasibility study aimed at assessing the potential for biogas production in five urban waste landfills located in Kenya," said the firm's parent company, Eni, in its latest annual report. "The feasibility study concluded in October (2023), and discussions with local authorities are ongoing to define the next steps of the project," it said. There are hundreds of major waste landfills across the country, but the Dandora dumpsite in Nairobi is perhaps the most well-known. The landfills attract tonnes of garbage annually and have become not only an eyesore in the major towns but also pose serious health and environmental risks. Eni, formerly Agip, has been operating in Kenya for decades. The firm currently runs a biofuel plant in Makueni with an installed capacity of 15 000 metric tonnes.

Source: Business Daily

Mali

Mali’s CIF-funded investment plan: A beacon of hope for renewable energy

Like most West African countries, Mali relies heavily on fossil fuels but has significant potential in solar and wind energy.  Mali’s strategy is oriented towards fostering the development of renewables even though their share, except for hydro, remains rather low. In 2020, Mali adopted the Desert to Power National Roadmap quantifying its country-level targets, identifying priority actions required to achieve the targets and singling out an initial set of priority activities. The key targets include additional solar capacity of 399 MW by 2025 and 977 MW by 2030. In March 2021, the Climate Investment Funds (CIF) unveiled the Renewable Energy Integration (REI) Program, designed to surmount the barriers hindering renewable energy integration in the energy system. This first-of-its-kind CIF-REI programme envisions supporting low-and middle-income countries that are transforming their energy systems to absorb ever-growing levels of variable renewable energy generation. 

Source: AfDB

Mozambique

Mozambique’s Coral South FLNG passes performance test

Mozambique’s Coral South floating LNG (FLNG) facility has reached a critical milestone, successfully passing a performance test achieving production above 3.4 million tonnes per year. Dual mixed refrigerant LNG process technology and equipment developed by global industrial gases company Air Products passed the evaluation, enabling maximum efficiency, increased reliability and reduced environmental impact. In addition to its proprietary equipment and technology, Air Products provided technical advisory services for the installation, commissioning, start-up and performance testing of the facility. The Coral South FLNG facility produced its first cargo in November 2022. Mozambique is currently considering the development of a second FLNG plant offshore – Coral North – which could reach a final investment decision this year by operator Eni and its partners.

Source: Energy Capital & Power

Namibia

World Bank loan to Namibia supports renewable energy integration

Monday, 6 May marks the approval of Namibia’s first ever World Bank financed energy project, aimed at improving the reliability of the country’s transmission network and enabling increased integration of renewable energy into the country’s electricity system. The USD138.5-million project will be implemented by the national electricity utility, NamPower. “The World Bank is delighted to support Namibia’s commitment to expand domestic energy generation with renewable solutions, consistent with the country’s Second Harambee Prosperity Plan. This project will support NamPower to develop future renewable energy projects,” says Satu Kahkonen, World Bank Country Director for Namibia. The project is structured around three components: (i) the development of the second Auas-Kokerboom transmission line, (ii) the development of a utility scale Battery Energy Storage System facility; and (iii) the technical assistance activities to support NamPower develop bankable renewable energy projects and enhance the socio-economic benefits of their projects. 

Source: World Bank

Nigeria

Nigeria plans additional rules to combat illegal trading in digital assets

Nigeria plans to soon roll out additional rules to combat illegal trading in digital assets and ensure that those dealing in such instruments are registered, the head of the Securities and Exchange Commission (SEC) said. The SEC Director General, Emomotimi Agama, recently told major blockchain and cryptocurrency associations in Nigeria that the naira currency needs to be delisted from peer-2-peer trading to avoid manipulation. Agama made the comments as the central bank announced new charges on domestic money transfers to tackle cybersecurity. Officials have clamped down on cryptocurrency, which they blamed for weaknesses in the naira. The Nigerian currency has hit record lows due to dollar shortages as crypto transactions in the country have flourished. In 2022, the SEC released a set of rules for digital assets, in a bid to try to find a middle ground between an outright ban on crypto assets and their unregulated use. Nigeria is one of the biggest markets for crypto trading. Its use, mostly by the country's tech-savvy youths, has boomed in recent years, especially as severe dollar shortages made it difficult for Nigerians to pay for goods and services abroad.

Source: Reuters

Senegal

IMF staff concludes visit to Senegal

A team from the International Monetary Fund (IMF), led by Mr Edward Gemayel, conducted a mission to Senegal from 26 April to 3 May 2024, to take stock of the recent economic and political developments and lay the ground for the second review under the existing IMF-supported programme. At the conclusion of the mission, Mr Gemayel issued the following statement, in part: “The Senegalese economy in 2023 proved resilient despite challenges. Notwithstanding political tensions surrounding the presidential election and external pressures, growth surprised on the upside (4.6%), reflecting a good agricultural campaign and a strong tertiary sector. Inflation also saw a faster-than-anticipated decline, dropping to 5.9%. Elevated energy subsidies (F.CFA620-billion or 3.3% of GDP) and higher interest payments were offset by cuts in investments in order to contain the fiscal deficit at 4.9% of GDP, in line with the programme target. Additionally, the government has built liquidity buffers in anticipation of the presidential election, contributing to a rise in central government debt (73.4% of GDP) above the West African Economic and Monetary Union ceiling. The current account deficit remained large (18.8% of GDP), reflecting continued weak exports of goods.” 

Source: IMF

Somalia

Navigating the impact of financial conglomerates on Somalia's tax system

In the past decade the financial services sector in Somalia has witnessed a large growth in financial conglomerates comprising banks, mobile network operators and money transfer operators. The taxation of Somalia’s financial services sector, however, has not yet been fully developed but the various enterprises comprising a conglomerate are liable for multiple taxes including payroll tax, value-added tax, corporate income tax, regulator fees, bank levies, capital gains tax as well as the putative financial transactions tax. Taxation of payroll has also started. To simplify tax collection, conglomerates are generally liable to a lump sum tax on a monthly basis. This is likely to yield much less revenue than a financial services tax, and there is substantial tax evasion. The implications of this arrangement - adverse and desirable - are discussed in this article. From the revenue point of view, financial conglomerates could increase Somalia’s tax base due to their handling of large volume of financial transactions. This increase is unknown but could be substantial, as great as [20%] of the current tax rate. Data availability would also expand as a result of the generation of extensive information on customer transactions, which could be utilised by tax authorities to identify potential tax evaders, detect hidden income and ensure accurate reporting.

Source: International Monetary Fund Public Financial Management Blog

South Sudan

South Sudan: Midstream investment to bolster production

To bolster its midstream capacity, South Sudan is seeking to construct new pipeline infrastructure, fuel product storage tanks and crude oil storage facilities to facilitate oil exports and reduce dependence on neighbouring Sudan. The country has ambitious plans to increase current oil production to 230 000 barrels per day (bpd) in the short term and 450 000 bpd in the long term. South Sudan’s official energy event – the South Sudan Oil & Power (SSOP) 2024 conference and exhibition – invites investors to explore and engage with opportunities across the country’s midstream sector, leveraging its immense oil resources to drive industrialisation, socioeconomic development and economic diversification. The primary pipeline carrying oil from South Sudan through Sudan for export – the PetroDar pipeline – has been hampered by stoppages since February. The PetroDar pipeline transports approximately 100 000 bpd of South Sudan’s heavy sweet Dar Blend crude oil from Blocks 3E and 7E in the Palogue and Adar Yale oil fields in the Melut Basin, to the Bashayer Marine Terminal in Port Sudan on Sudan’s Red Sea coast. The pipeline, which stretches more than 1 500 km, is controlled by the Dar Petroleum Operating Company and serves as an important source of revenue for South Sudan.

Source: Energy Capital & Power

Uganda

Majority of Microfinance Institutions do not meet lending standards, says FIA

Half of Microfinance Institutions and Savings and Credit Cooperatives (SACCOs), which translates to about 50%, do not meet international lending standards, the Financial Intelligence Authority (FIA) has said. This, according to FIA and Uganda Microfinance Regulatory Authority is risky for a country that was just recently removed from the grey list. Speaking during sensitisation on international financial standards, Mr David Ngobi, the FIA Acting Director for compliance and training, said there is non-compliance in lending standards among some Microfinance Institutions, with many disregarding FIA rules and the Anti-Money Laundering Act. For instance, he said, many Microfinance Institutions and SACCOs are not reporting large cash transactions, and suspicious transactions nor conducting risk assessments of customers. Uganda had been put on the grey list due to deficiencies in dealing with money laundering and terrorism financing. Mr Ngobi said several Microfinance Institutions and SACCOs use financial technologies but do not assess risk, noting that: “FIA had put emphasis on high-risk institutions such as banks” but going forward, they would target micro-lenders, SACCOs and Deposit-Taking Institutions to increase monitoring and screening fraud capacity.

Source: Monitor

Zambia

Zambia to establish USD6-million Mining Technology hub

Zambia is allocating USD6-million towards boosting mineral production and enhancing sustainability, productivity and safety in mining operations through the establishment of the Mining Technology (MinTech) hub. The MinTech hub will serve as an innovation and collaboration centre for the mining industry, offering training and capacity-building programmes to promote the adoption of new technologies and best practices. “We are the major producers of a variety of minerals, but specifically copper,” said Zambia’s Minister of Science and Technology Felix Mutati. He emphasised the government’s commitment to value addition in mining, particularly emphasising the potential for producing electronic car batteries. Funding for the project will be provided by the United Nations Development Programme (UNDP), with support from various partners. “We will front a lot of technical capacities that are needed and bring in some equipment and we hope the private sector, particularly those in the mining sector, will come on board because this will benefit them hugely,” said UNDP Africa Director Ahunna Eziakonwa.

Source: Energy Capital & Power