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Fri, 31 Mar 2017
Gordhan Dares Zuma: Fire Me, Because I’m Not Going Anywhere...

The minister of finance is digging in his heels, national Treasury is battening down the hatches and South Africans are holding their collective breaths.

If President Jacob Zuma wants to get rid of Pravin Gordhan he will have to fire him and take responsibility for the consequences — the minister of finance will not resign.

That is the unequivocal and clear message from 40 Church Square in Pretoria, headquarters of national Treasury, after 48 hours of political drama during which speculation of Gordhan’s removal from Cabinet and a broader reshuffle of the executive went into overdrive.

According to two sources with intimate knowledge of Treasury’s tactics, Gordhan knows Zuma wants to get rid of both him and his deputy, Mcebisi Jonas. They, along with their senior staff, have, however, decided “not to walk away from this battle” — and that the next move belongs to the president.

“If Zuma wants Gordhan and Jonas to go, he will have to fire them. They will not leave … and there is pressure on them to resign. The ball is in his court,” a source with direct knowledge of discussions at Treasury told Huffington Post South Africa.

Another first-hand source said Gordhan was “steadfast” in his conviction to remain at post and that he “reassured” Treasury staff of their shared mission and responsibilities.

According to HuffPost’s sources, the under-fire Gordhan will dig in his heels, mobilising public and political support by emphasising the rule of law and the imperative of sound and prudent management of the fiscus to the benefit of all South Africans.

The Guptas’ news channel, ANN7, earlier reported that Zuma has decided to fire Gordhan, while Bloomberg cited sources in the South African Communist Party (SACP) saying Zuma has already informed its leadership of the planned Cabinet changes. There has been no communication from the presidency and spokesperson Bongani Ngqulunga has not answered any calls.

Discussions on Tuesday afternoon at Treasury apparently centred around the president’s determination to get rid of the minister and deputy minister and the African National Congress’ (ANC) negative reaction to it. The party’s leadership -– it is uncertain who exactly relayed the message -– allegedly told Zuma his choice of Brian Molefe as replacement was unacceptable.

“The ANC, however, does not have a uniform position on who should replace Gordhan if he indeed goes,” one source said.

The source added Gordhan and Jonas’ visit to the High Court was designed to show they are still in charge at Treasury, as a show of strength and unity and that they take ownership of the legal action challenging the Guptas, the controversial family close to Zuma.

Treasury’s statement was also carefully and purposefully crafted, explaining the importance of the overseas visit, giving insight into questions asked by foreign investors and fund managers and explaining the impact of political instability on government’s borrowing abilities.

Gordhan met with 60 representatives of eight fund managers and 28 other investors in London and was asked about economic growth, fiscal management and political instability.

The meeting lasted eight hours.

“Investors expressed concerns about the political environment [...]

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Wed, 29 Mar 2017
Plummeting oil revenue hits Lusophone prospects

Angola and Mozambique may have very different economies but their current economic problems have the same two root causes: low energy prices and economic mismanagement.

Low oil prices have slashed Angolan revenues and slowed the development of gas and coal projects in Mozambique. At the same time, Maputo’s borrowing resulted in default in January, while Luanda’s continued opacity and state control has not created an economy sufficiently robust to weather the period of low oil prices more comfortably.

Most forecasters have become more pessimistic about the two countries’ prospects. The World Bank has downgraded its forecasts for Mozambican growth in 2017 and 2018 by 2.5% and 1.4% respectively, to the still respectable figures of 5.2% and 6.9%.

It forecasts growth of just 1.2% and 0.9% in those years for Angola. There is little likelihood of strong growth in Angola for the foreseeable future. The Angolan kwanza and Mozambican metical were both among the 10 biggest depreciating currencies in the world in 2016, losing 18.9% and 33.2% of their value against the US dollar respectively.

Readers of African Business will be well used to this refrain, but the long-term answer is of course economic diversification. The rapid improvements in Mozambique’s transport infrastructure – and not just with regard to coal transport – offer some hope, while the tourism and agriculture sectors have huge scope for growth.

However, Ruth Bookbinder, Africa analyst at risk analysis company Verisk Maplecroft, says: “Productivity gains in agriculture remain limited at 3.2% per annum. There is some interest in agribusinesses but the sale of large tracts of land is always contentious and projects struggle to get off the ground. The manufacturing sector continues to underperform, partly due to a high minimum wage, which is likely to deter investors.”

Angola may be the third biggest economy in sub-Saharan Africa but it has made even less progress on diversification. Although there are plenty of other hugely oil-dependent countries, Verisk Maplecroft rates it as the least diversified economy in the world.

Just a few years ago Luanda was the focus of a big property boom and immigration from Europe, as the economy blossomed on the back of oil revenues, at least for the wealthy, although poverty levels and income inequality were always very high. However, the jobs have begun to dry up and there have been numerous reports of empty properties in gated communities.

The official Angolan exchange rate has fallen from 97 kwanza to the US dollar in 2014 to 165 now, although the black-market rate is more than three times as high. This has pushed up the already high cost of imports. The rate of inflation increased from 17.3% at the start of 2016 to 45% by the end of the year.

Some reports suggest that the government is running down its foreign exchange reserves at an alarming rate. The central bank has responded by repeatedly raising interest rates, which now stand at a record 16%. Luanda has improved its finances by cutting expenditure, including the reduction of fuel subsidies, which are eventually to be phased out.

IMF [...]
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Wed, 29 Mar 2017
How can Africans trade more with other Africans?

Global companies were supposed to be more efficient, leveraging resources from across the world, from places where they are best sourced, to create value on an unprecedented scale. That seemed to be the case in fact.

Western multinationals used cheaper labour in underdeveloped countries to manufacture products that relied on inputs from all over the world and technologies developed in their more expensive labour markets. Studies now suggest these advantages are being lost. Labour is no longer as cheap in many places.

In China, for example, lifestyles are becoming increasingly aspirational – more Chinese are now seeking the good life and consequently demanding higher wages. In addition, local firms are now themselves employing the technologies developed in the more advanced labour markets – think Safaricom and M-Pesa in Kenya.

As the Economist put it in January, “the companies at the cutting edge are local, not global.” As a result of these and other factors, such as the strong dollar, the profits of multinationals are falling.

Thus, it is increasingly difficult to make a business case for the global company, at least in the form of costly brick-and-mortar operations in numerous countries. And the reduction of global ambitions among the multinationals has coincided with resurgent populist nationalism in the developed world.

In response, the trend is increasingly towards localisation – a global company leverages its well-recognised brand but adapts it to the local conditions of the host country. General Electric, the American industrial giant, is a case in point.

In May 2016, Jeffrey Immelt, its chairman and chief executive, put the strategy succinctly: “Globalisation is being attacked like never before […] in the future, sustainable growth will require a local capability inside a global footprint.”

Wasted opportunities

Other than in the large economies of Nigeria, South Africa, Egypt and Kenya, it hardly makes business sense for a multinational to build an entire supply chain in an individual African country. A cement manufacturer in Nigeria could easily supply the entire West African region.

A bank in South Africa, where capital is abundant but opportunities scarce, could deploy capital in African countries desperate for investment. It should be easy to sell fertiliser produced in Morocco anywhere it is needed on the continent.

So why have long-established Western conglomerates on the continent not seized this opportunity? Instead, most build independent country operations ship out primary commodities to their home countries in Europe or elsewhere, and subsequently ship back finished goods into African countries.

True, those in the fast-moving consumer goods sector do some manufacturing in-country and sell to the domestic market. But their operations are rarely regionally integrated.

African governments are partly to blame. Border restrictions, currency controls, incongruent trade regulations and so on stifle intra-African trade.

Governments say they want to promote such trade, but make little effort to do so. Even in the East African exception, where progress is being made in infrastructural integration, worries about the increasing dominance of Kenya have been a source of grumbling, for instance by Tanzania.

The challenge for companies

Still, if intra-African trade is to be lifted from its current paltry [...]

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