Ghana named among World’s ten fastest Growing Economies

Kwame Nkrumah Cirlce, Accra.  © EnterpriseAfrik

IT'S THE last place in the world you might expect to find green shoots, so whisper it quietly — Ethiopia is starting to BOOM.

Its economy, though still small, is now growing nearly TEN times faster than our own in the UK.

And it's not just Ethiopia — seared into the West's minds by the 1985 famine which sparked Live Aid — that is being transformed.

Ghana's output, or GDP, is expected to rise by nine per cent in 2012 — almost rivalling that of China.

Zambia, whose footballers won the Africa Cup of Nations last month, is storming the economic league too.

In all, seven of the world's top ten fastest growing economies between now and 2015 will come from Africa.

The growth rates across the continent are distorted by how poor the countries have been until now.

But big business has taken note of the opportunities. Just ask Diageo, the British company behind Guinness.

In January the company bought Meta Abo, Ethiopia's biggest brewer, for nearly £150million.

Tim Ohlenburg, senior economist at the Centre for Economics and Business Research, says: "Africa has a lot of natural resources such as oil and copper at a time of high commodity prices.

"But a middle class is also beginning to emerge, with a purchasing power, so they are becoming big and attractive markets."
Nigeria has been a big player for years thanks to vast oil reserves. But previously poor countries are catching up.

Economic output across sub-Saharan Africa was just $322billion in 2000. It is now FOUR TIMES higher at $1.22trillion — half the level in the UK.

China has been leading the way, investing billions of yuan in a bid to bag most of the rich resources Africa has to offer.

Four years ago China struck an eye-watering deal to give the Democratic Republic of Congo $6billion.

This included China building 2,400 miles of road, 2,000 miles of railway, 32 hospitals and 145 health centres.

In return the Chinese got to take away ten million tons of copper and 400,000 tons of cobalt.

China is also the biggest market for Ethiopia, where coffee makes up almost half of its exports.

And the superpower is also busy in the more established South Africa. Just last month, Jin Yi, vice-president of Chinese car firm FAW, met with Eastern Cape Premier Noxolo Kiviet to celebrate a deal to build a local factory.

And western multinationals are catching up.

Shell is now one of those beating a door to east Africa and Mozambique, where one of the world's biggest gas fields has been found.

Mobile phone giants such as Vodafone also see huge potential. The number of mobile phone subscribers in Africa is going up by 20 per cent every year.

Banks are also piling in. Barclays made £910million in Africa last year and has 14.5million customers there.

Richard Dowden, director of the Royal African Society, said: "Just because bad stuff is happening in places like Zimbabwe, it doesn't mean there aren't good things happening in places like Ghana."

Forecast of annual GDP growth 2011-15


1. China 9.5%

2. India 8.2%

3. Ethiopia 8.1%

4. Mozambique 7.7%

5. Tanzania 7.2%

6. Vietnam 7.2%

7. DR Congo 7%

8. Ghana 7%

9. Zambia 6.9%

10. Nigeria 6.8% 

Source: The Sun 

Inefficiencies in Banking sector holding back Africa’s Growth

In its report entitled “Challenges of African Growth, opportunities, constraints and strategic direction”, the World Bank clearly points out that a key constraint to growth in Africa is indeed the structure of African financial sectors as this generally influences private sector activity, economic growth and poverty alleviation. 

We would also concur with the World Bank that a vibrant, competitive and efficient financial sector that reaches the majority of an economy’s population is a cornerstone of sustained high levels of economic growth and development. In this note, we have taken a broad look at financial sector developments across sub-Saharan Africa. However, we have also centred our arguments on Zimbabwe; a country that we believe is currently facing serious liquidity constraints. The main constraints are outlined below:

Inefficiencies in the banking sector

It still remains a fact that African financial sectors, especially in low-income countries, are among the least developed in the world. We note that interest rate spreads throughout the region have largely remained high, with little indication of converging with global levels at a median of around 13% (Latin America 7%, South Asia 5%, South East Asia 6%).

We opine that the main factors causing high spreads include high operating costs (including energy), perceived risk from policy frameworks and lending environments, lack of competition, and high concentration.

In the case of Zimbabwe, the use of multiple currencies in the economy (USD/ZAR/BWP) has simply meant a limited supply of liquidity in the market and therefore high minimum lending rates (MLRs) of around 15% per year. We also highlight that some banks remain largely under-capitalised, thereby limiting lending activity. In addition, the prevalence of non-performing loans in banks’ portfolios also adds to costs as banks compensate for the cost of foregone interest income by charging higher lending rates to performing loans.

Poor credit culture

The lending environment across Africa is also characterised by a poor credit culture, poor contract enforcement, and lack of protection of creditor rights.

Coupled with a lack of collateral and inability to prove creditworthiness on the part of potential borrowers, these have resulted in a higher perception of risk and higher external finance premiums. In Zimbabwe, for example, good information is scarce in the absence of a national credit bureau.

Furthermore, the value of the collateral, which is real estate in most cases, tends to be overstated and inevitably harder to realise if the need arise. Given the fact that the lender of last resort lacks adequate funding capacity, default risk and more importantly, counter party risk remain elevated.

Low levels of savings

Saving rates in Africa have remained far below that of other developing regions. In the early 1970s, for example, the average savings rate in sub-Saharan Africa was higher than in South Asia. However, while the savings rate in Africa has trended downward, South Asia has experienced a sustained upward trend so that by 2003, the average savings rate had exceeded 20%, compared to a mere 9% for Africa. Even though the saving rates for most countries bounced back in the following decade, for some countries the falls were sustained. In Zimbabwe, for example, as at 3 February 2012, total banking sector deposits were US$3.5 billion (including inter bank deposits).

Low levels of banking penetration

It still remains a key feature that a disproportionately small fraction of the population across the region is served by formal financial institutions. Data on access to financial services is scarce, and most conclusions reached are from anecdotal but compelling evidence. Low penetration is partly a result of income levels, although an increasingly affluent urban middle class is now emerging. The low proportion of people with bank accounts also reflects infrastructure problems that have resulted in the limited development of branch networks, especially within remote rural areas. Few countries are served by more than two branches per 100,000 people.

Despite the above-mentioned constraints related to banking in Africa, we have begun to see some pockets of success across the African continent, suggesting some improvements in a number of fronts. We highlight our key findings as follows:

E-banking slowly driving financial inclusion

One of the biggest success stories with regards to financial inclusion in sub-Saharan Africa is M-Pesa’s mobile wallet in Kenya. This has successfully penetrated some of the most deprived economies and simultaneously spurred unprecedented demand in a very short amount of time. M-Pesa now provides international money transfers between Kenya and other African countries and even the UK. Countries such as Kenya, South Africa and much of the North African region are now facing 100% m-banking penetration. However, in countries such as Burundi, the Central African Republic, Eritrea, and Rwanda the penetration is far less, standing at roughly 35%.

China-Africa partnerships yielding some rewards

We have also seen Chinese-African partnerships being extended to banking activities. A good example is the US$5.5 billion acquisition of a 20% stake in Standard Bank by the Industrial and Commercial Bank of China (ICBC). Along with other players like Stanchart, it is our view that such partnerships are broadly cementing a financial services gateway between Africa and China.

Regulation and liberalisation more developed

Some banking sectors, such as Nigeria, are benefiting from market reform. Nigeria’s banking sector has gone through consolidations over the years, leading to the emergence of streamlined, better capitalised banks that have been able to enhance their services and are in a better position to compete and meet customer demands, while seeking to develop their international presence, both within the region and overseas.

In conclusion, we believe that the various constraints highlighted in this note need to be addressed in order to reinvigorate economic growth in sub-Saharan Africa. Nonetheless, banks in Africa are evolving and we continue to see vast opportunities for emerging market investors.

 Imara is an investment banking and asset management group renowned for its knowledge of African markets.

Source: How We Made In Africa

Citi expects clients to double Nigeria Investment

LAGOS - Citibank expects annual investment flows into Nigeria through its banking platform to double to around $2 billion this year, as multinational firms and foreign funds expand operations, its country officer told Reuters on Thursday.

Lagos the commercial Capital of Nigeria

Emeka Emuwa also said Africa's second-biggest economy was witnessing an increasing mix of trade and investment from Africa and Asia, though the bulk was largely from Europe and the United States.

Contributions to trade and investment flows from Africa and Asia were likely to overtake Europe and North America over the next 4-5 years, he said in an interview in his office in Lagos.

"In 2011, we saw flows of almost $1 billion, made up of both portfolio flows and FDIs (foreign direct investment). We expect this to double this year, a lot of which will come from the portfolio side and foreign companies expanding ... in the country," Emuwa said.

He said Citi, which has been in Nigeria for 27 years, had been focused on institutional banking and public sector finance, but was looking to develop consumer banking and equity brokerage over the next three years.

Headlines on Nigeria this year have been dominated more by an upsurge in violence by Islamist sect Boko Haram in the north than by investment flows. More than 250 people were killed by the group in January, according to Human Rights Watch.

But the violence is taking place hundreds of kilometres north of the commercial hub Lagos and the southeastern oil fields. Emuwa said the unrest was not impacting investment.

"From 2010 to 2011, what we saw coming through our own channels grew by a multiple of 5-6 times on the portfolio side and foreign direct investment," Emuwa said.

"If you use investment flows, current and potential, to measure the sensitivity of Boko Haram, I'd say I haven't yet seen ... an adverse impact," he said, adding that investors see it as something to consider, but not enough to change their investment plans.

Analysts say northern Nigeria, where most of Boko Haram's attacks have taken place, contributes such a small portion to the country's GDP that its broad economic fundamentals have not been affected by the instability.

Citi has 12 branches in Nigeria and is looking to expand.

"We don't have any consumer banking at all, our business is entirely institutional (but) given the growth in consumer incomes in Nigeria, it is a new and growing segment for us," Emuwa told Reuters.

"We will focus on where there's a concentration of income," he said, adding the consumer banking side would start with employees of companies that hold corporate accounts at Citi.

Source: Reuters

WAMI signs $2 million grant agreement on Capacity Building

Accra, – The West African Monetary Institute (WAMI) and the African Capacity Building Foundation (ACBF), have signed a $2million grant agreement to strengthen the ability of the Institute and stakeholders to attain the monetary union goal by 2015.

The move is aimed at facilitating the preparatory activities for the West African Monetary Zone (WAMZ) among member countries.

The deal was clenched in Accra by Mr John Tei Kitcher, Acting Director of WAMI who signed on behalf of the Institute whilst Dr Fannie Leautier, Executive Secretary of ACBF initialled for her outfit.

The grant will support the implementation of WAMI’s medium-term Strategic Plan (2010-2015), which is based on five core pillars of Macroeconomic Convergence, Research and Statistical Harmonisation; Trade and Regional Integration; Financial Sector Integration; Payments System Infrastructure, and Institutional and Capacity Building.

WAMZ was formally launched by the Heads of State and Government of Ghana, The Gambia, Guinea, Nigeria and Sierra Leone in December 2000, with the objective of establishing a single currency. The membership was increased when Liberia joined the Zone in February 2010.

The WAMZ agreement provides for the establishment of other institutions including WAMI, which has the primary mandate of undertaking all necessary tasks that will lead to the setting of the West African Central Bank.

Dr Leautier said ABCF support to WAMI promises long-term results in the sub-region, which includes improving the quality of statistical data and enhancing reporting standards in line with the global best practices.

The other benefits comprise the enhancement of macroeconomic surveillance with the convergence criteria and other structural benchmarks.

There will also be the development of an electronic library to facilitate the conduct of relevant research; enhancement of the capacity of the central banks in monetary policy management; increasing financial system stability and reducing fraud as well as stepping up WAMI’s organisational efficiency and effectiveness.

These efforts Dr Leautier said are expected to improve in the long-run ECOWAS Member States economies and lead to a higher Gross Domestic Product growth.

“Let me emphasise that for ABCF, our partnership with WAMI is a strategic and mutually beneficial one that promotes Africa’s development agenda.

Mr Kitcher said the monetary union was to commence in January 2003, after a convergence process, “however, following the inability of member countries to meet the minimum stipulated criteria, the launching of the union has suffered three postponements with the new date scheduled for January 1, 2015”.

He said the Institute had increased its resources four-fold through external partners, while reducing the contribution of member countries.

WAMI is developing payment systems in The Gambia, Guinea, Liberia and Sierra Leone with an African Development Bank grant of $30 million.

“We have also played a pivotal role in the establishment of the College of Banking Supervisors of the WAMZ to promote regional financial stability,” he said.

Mr Kitcher said the ongoing Greek financial crisis and its impact on the Euro zone and the global economy, highlighted the need for more robust technical preparations for aspiring monetary unions, including the WAMZ.

Some WAMI’s key achievements from July 2008 to December 2011 are the enlargement of the membership of the WAMZ with the admission of the Republic of Liberia by convening a Heads of State Summit in February 2009. It had also convened seven Convergence Council meetings of the WAMZ.

The Institute prepared six statutes approved by the Convergence Council covering the West African Central Bank; West African Supervisory Authority; Single Economic Space and Prosperity Agreement; Banking Statute of the WAMZ; Non-Bank Financial Institutions Statute; Payment Systems Statute. In addition, The Fiscal Responsibility Act was also prepared.

WAMI has put in place reforms to strengthen the institutional mechanisms and internal control including the setting up Operations Committee and Corporate Services Committee and several policies.

The corporate body instituted the Ministers of Trade Forum and convened four meetings of the Forum to enhance trade related issues as well as a trade and investment forum in London in May 2011, which brought together Ministers, Governors of Central bank, investment bankers, financiers, and other private sector stakeholders.

In the area of knowledge and capacity building, recognising the need to support member countries in building capacity to implement the International Financial Reporting Standards (IFRS), WAMI in collaboration with Euro-money organised a high level training on IFRS. All participants were sponsored by WAMI.

WAMI organised a seminar with the Centre for Research on Political Economy on regional integration in West Africa, the outcome of which is being published as a book.

Source: Ghana News Agency

West African Monetary Institute draws lessons from the Eurozone crisis

Gov. Amissah-Athur, Ghana

The West African Monetary Institute, WAMI says it is already taking steps to ensure that member countries do not suffer the same predicament as those in the Eurozone.

The Institute has been mandated to undertake preparatory activities towards the establishment of the West African Central Bank and the introduction of the ECO currency.It says current volatilities in the world market coupled with the Eurozone economic crises provide enough lessons for the West African sub-region’s bid towards economic and financial integration.

WAMI’s Acting Director General, J.H Kitcher tells JOYBUSINESS plans are far-advanced to guard against the occurrence of the Eurozone crisis in the sub-region. “ Fiscal discipline is important and that is one key lesson that we’ve learnt from the Greek crises that countries must learn to live within their mean" he noted. 

Gov. C. Bank of Nigeria Sanusi

"Also is surveillance of the economy and multilateral surveillance and that is where the Africa Capacity Building Fund grant comes in handy because it is going to improve the capacity of WAMI to enhance its surveillance of the member countries’ economy. If the Greek economy had been properly monitored, these vulnerabilities would have come up earlier and remedial actions taken” he concluded.

Source: myjoyonline.com

Kenyan cbank leaves key rate unchanged

Kenya Central Bank in Nairobi

NAIROBI - Kenya's central bank left its key lending rate unchanged at 18 percent as expected on Wednesday, saying while inflation was expected to keep falling, credit growth needed to slow further and risks remained.

All analysts polled by Reuters had forecast the central bank would leave rates on hold. While most expect the next rate move to be down, they said the Central Bank of Kenya would pause to let past rises have their full impact on the economy.

The central bank's Monetary Policy Committee said in a statement that balance of payments pressures and the continued uncertainty in global financial markets due to the eurozone crisis remained the main risks to inflation and the currency.

It said forecasts for dry weather in most parts of the country and frost in February also presented risks to food supplies, while geopolitical risks could interrupt oil supplies and affect fuel prices globally.

Higher food and fuel prices were the main factors that pushed inflation in east Africa's biggest economy to a 2011 peak of 19.72 percent in November. The inflation rate has since declined to 18.31 percent in January.

Source: Reuters

Kenya sees 5 pct GDP Growth in 2012 with good rain

NAIROBI - Kenya's economic growth will speed up to 5 percent or more in 2012 if rains vital to the key farm sector do not fail and other shocks do not materialise, a senior Treasury official said on Tuesday.

He also said high market interest rates should fall in the next six months as the government reduces borrowing on local markets with the help of a foreign loan.

Politics, drought, economic challenges and high commodity prices have kept growth in east Africa's largest economy below its long-term potential of 6 percent per annum in recent years.

"We expect to see 5 percent plus growth. This is dependent on rains. Other sectors are still strong. The investments that we are making in infrastructure have a huge impact on growth," Geoffrey Mwau, economic secretary at the Treasury told Reuters.

"The other economies around us are also growing at about 6 percent, meaning that our exports which go there are not likely to suffer much."

Mwau, the Treasury's second highest official confirmed revised projections for 2011 growth at 4.5 percent -from an initial 5.1 percent projection- following disappointing third quarter growth numbers.

Kenya's military incursion into Somalia against the al Shabaab rebels and increasingly unpredictable weather patterns posed the biggest threats to growth this year, Mwau said.

The shilling lurched from one record low against the dollar to another last year as inflation surged, driving up import costs like oil and stoking widespread anger.

After months of dithering that earned policymakers plenty of criticism, the central bank stepped up to the plate in October, raising the policy rate aggressively to 18 percent in a series of hikes over three meetings.

While the move to raise rates dampened inflationary expectations and helped the currency regain most of its losses against the dollar, it prompted concerns over the risk of loan defaults and potential impact to economic growth.

Mwau said the government expected rates to start falling in the next six months after it substituted nearly half of its planned borrowing from the local market with a foreign loan, which is expected to be finalised soon.

SINGLE DIGIT INFLATION?

"We had planned to borrow 119 billion shillings from the domestic market. Out of that we are going to borrow about 50 billion from outside. That will mean there is less pressure in the domestic market, forcing interest rates to come down," he said.

Last year's rate hikes and improved food supplies after the long rains season kicks off in March would drive inflation to single digits, he said, from 18.31 percent in January.

"I expect that by June, if rain does not fail, we will get to single digit levels," Mwau said.

After the shilling rebounded from a record low of 107 against the dollar in October last year, Mwau said the government's aim was to manage the exchange rate between 80-85 per dollar, roughly where it has been so far this year.

"That is a reasonable exchange rate," he said.

On the mind of some investors are the country's first general elections to be held since a disputed poll in late 2007 sparked widespread violence.

Mwau said the poll, to be held by March next year at the latest, was not likely to heighten political risk with most Kenyans determined to move on from the past violence.

Rather, the main risks to the economy arise out of Kenya's war in neighbouring Somalia, which has provoked threats of revenge attacks from Islamist militants, and the weather.

"We have the weather and Somalia. Somalia is a serious one but we are managing it well with support from the international community," said Mwau.

Source: Reuters

Nigeria leaves key rate at 12 pct as expected

ABUJA - Nigeria's central bank kept its benchmark interest rate on hold at 12 percent on Tuesday, saying it expects any upward impact on inflation from removing fuel import subsidies to be short-term.

All but one of nine analysts surveyed by Reuters had expected rates to remain at 12 percent.

Nigeria Central Bank Governor Lamido Sanusi

Nigeria partly removed subsidies for petrol this month, increasing the pump price to 97 naira from 67 naira and pushing up the cost of transport, food and other goods.

Inflation eased to 10.3 percent in December, down from 10.5 percent in November but the impact of removing fuel subsidies is likely to send that figure higher.

The central bank expects inflation to increase to around 14-15 percent in the first half of this year, before reducing towards single digits by the end of 2013.

"It (central bank committee) commended the Federal Government on the partial removal of subsidy on PMS (petrol) which it noted will have salutary effect on the external reserves and exchange rates as well as on investments in oil and gas," Central Bank Governor Lamido Sanusi said, while announcing the Monetary Policy Committee decisions.

"The committee noted historically an upward adjustment in the price of PMS (petrol) has tended to have a short-term impact on the rate of inflation."

Nigeria's national assembly is considering a 2012 budget proposal put forward by President Goodluck Jonathan last month, which would raise overall spending but begin efforts to reduce the funds going to government and cut the fiscal deficit.

BENCHMARK OIL PRICE

The budget proposal was based on a benchmark oil price of $70 per barrel, anything earned over that level is put into the Excess Crude Account (ECA) as a buffer against potential oil shocks. Savings can also be used in a recently set-up sovereign wealth fund.

Nigeria's Senate said on January 20 it wanted to raise this benchmark price to $75, giving more money to government and less for savings. Sanusi urged lawmakers to keep a benchmark price at no more than $70.

The ECA contained more than $20 billion in 2007 but despite a period of record high oil prices since, the account has been drained and only contained $3 billion at the end of last year.

"There is a concern that the National Assembly may decide to raise the oil price benchmark ... which may not be much, but would indicate that large segments of the political elite are still opposed to the idea of fiscal consolidation," Samir Gadio, emerging market analyst at Standard Bank said.

Interest rates were hiked six times last year, rising from 6.25 percent to 12 percent between January and December, in an effort by the regulator to curb rising inflation and stabilise a weakening naira currency.

The naira has shown signs of recovering after CBN lowered its target band in November, due to prolonged naira weakness and high U.S. dollar demand.

The naira traded at 161 to the dollar on Tuesday, slightly weaker than the CBN's preferred trading band of 150-160 naira against the dollar, which was retained at Tuesday's meeting. The November move shifted the band from 145-155.

Foreign exchange reserves stood at $34.10 billion on January 27, up from 32.64 billion a year ago, according to the CBN.

The central bank kept its 200 basis point corridor around the benchmark interest rate, so its recommended deposit rate is 10 percent and its lending rate is 14 percent. The cash reserve required to be held by banks was left at 8 percent of deposits.

Source: Reuters

DR Congo targets 6 pct growth in 2012

KINSHASA - Democratic Republic of Congo is aiming for at least six percent growth in 2012, down from estimated seven percent growth in 2011, Finance Minister Matata Ponyo Mapon said on Thursday.

Volatility in global markets represent the biggest risk for growth for the country, Ponyo said at a press conference.

"The risk of a drop in economic activity following a degradation of the global perspective could be amplified by an internal risk of a political nature," he added.

President Joseph Kabila was declared winner of November 28 elections rivals said were rigged. Election observers said the polls were marred by fraud and poor organisation. Full results of parliamentary elections on the same day have been delayed.

"Our dream remains the realisation of double-digit economic growth," Ponyo said. "Everything is possible in the medium-term, which is why the government is already investing in improving the business climate."

Congo has some of the most coveted resources in the world, ranging from copper in its southern Katanga province to tin and coltan used in mobile phones and other hi-tech gadgets. Investors include China, with whom it signed a $6 billion deal to finance the construction of mines and public infrastructure.

Ponyo said the government aimed to bring annual inflation down to nine percent in 2012 from 15.4 percent last year, and to increase foreign reserves from $1.2 billion to $2.1 billion during 2012.

He also said the government was hopeful of unblocking the latest $90 million tranche of a $560 million loan facility from the IMF, delayed over a failure to publish mining contracts as part of an internationally backed transparency drive.

"We've discussed this question with (state mining company) Gecamines, and lately we've discussed it with the prime minister. I believe a solution is on the way," he said.

Gecamines last year refused to hand over contracts relating to joint ventures with international partners, despite ministers promising to publish the deals.

IMF country representative Samir Jahjah said the latest IMF loan, intended to boost the country's foreign reserves, could be delayed until May even if mining contracts are published.

"At this stage we need to have a new government to engage a discussion... We would still need to wait for a new prime minister that is coming from these elections... " Jahjah said.

The electoral commission delayed the results of legislative polls engulfed in allegations of fraud across the country. That has led to fears that the Supreme Court validation of the process - expected in March - could in turn be delayed.

Source: Reuters

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Rwanda November inflation will not exceed 8 pct

Coffee beans washing station, Kigali.

KIGALI - Rwanda's year-on-year inflation rate will not exceed 8 percent in November and will remain in single digits at year-end, the central bank governor said on Monday.

"Inflation in the region is coming down. We are seeing signs of the economy rebounding," Claver Gatete, governor of the National Bank of Rwanda, told reporters.

"In the case of Rwanda, the last figure that we have is for October which is 7.8 percent. And we believe that that figure for (November) will not exceed 8 percent.

"And by the end of the year it will still remain in single digits, with the economy growing by 8.8 percent," Gatete said.

Rwanda has fared better than its east African neighbours, including Kenya, Uganda and Burundi where surging food and fuel prices have helped drive inflation well into double digits.

The central African nation raised its key lending rate last month to 7 percent from 6.5 percent to prevent the rising inflationary pressures in the region hurting its economy.

That increase was the second 50 basis point rise since early October and followed higher than expected economic growth and inflation forecasts.

Source: Reuters

Kenya 2011 economic growth seen at 4.5-5.0 pct

NAIROBI - Kenya's economy is expected to grow by between 4.5 to 5.0 percent this year, higher than the 4.0 percent the government previously estimated, the minister for planning said on Monday.

Planning Minister Wycliffe Oparanya also told Reuters east Africa's biggest economy will expand by at least 5 percent in 2012 due to better rains in recent months compared with earlier this year, and the recovery of the shilling.

"I see growth at roughly 4.5 to 5.0 percent. Unfortunately we are unable to reach the 6.5 percent we had targeted this year," Oparanya told Reuters in an interview.

"Rising food prices and high oil prices has affected our growth this year. But we are very hopeful that with a lot of rain our economy is going to recover. We see an even better growth of not less than 5 percent in 2012."

Kenya has grappled with a tough 2011 as drought hurt the agriculture sector, fuelling inflation in the country, while exports to Europe and northern Africa dwindled due to financial and political woes facing the regions.

Inflation rose for the 13th straight month to 19.72 percent in November.

Source: Reuters

Ghana inflation ticks higher in Oct, still on target

ACCRA  - Annual inflation in Ghana edged higher to 8.56 percent in October, the national statistics office said on Wednesday, adding the West African nation was still on track to keep price growth in single digits for the rest of the year.

The modest rise from September's figure of 8.40 percent was seen allowing the Bank of Ghana to keep the prime rate on hold when it meets next month, although mounting price pressures could prompt a monetary tightening early 2012.

The Bank of Ghana kept its prime lending rate unchanged at 12.50 percent in October, saying at the time it expected its end-of-year target of nine percent inflation to be maintained.

"The target is achievable as the bank continues to implement policies towards its target," government statistician Grace Bediako told a news briefing.

"However, there are some external factors that are out of the control of the bank and could pose a challenge to the target."

Analysts say a rise in spending before a presidential election next year could add to inflationary pressures, while the cedi currency has fallen to all-time lows as risk-averse investors pull out of frontier markets in Africa and elsewhere.

"Cedi weakness, rising producer prices and growing fears over the government's fiscal discipline could increase the chance of a rate hike early next year as inflation ticks higher," said Nalini Cundapen at Societe Generale.

Bediako said non-food items, led by transport, rose 11.32 percent, while food inflation stood at 4.03 percent. Ghana is just coming out of its harvest season, which tends to keep a temporary lid on food inflation.

"What we are seeing in Ghana in terms of price stability is pretty much unprecedented in the recent past. One wonders though, how long the good news will last," said Razia Khan at Standard Chartered, also noting the likelihood of higher spending pressures next year.

President John Atta Mills will seek re-election in December 2012, when he is expected to face 2008 rival and main opposition candidate Nana Akufo Addo.

Ghana is still putting the finishing touches to its 2012 budget. Finance Minister Kwabena Duffuor told Reuters this month he expected the fiscal deficit to narrow next year from the 5.1 percent of national output targeted for 2011.

December 2010's start of commercial oil production is due to lift Ghana's economic growth to close to 14 percent this year, one of the fastest rates in the world, before it eases to around eight percent in 2012.

British oil form Tullow Plc, operator of Ghana's Jubilee offshore field, revised down its forecast for average 2011 production to 79-81,000 barrels a day from 82,000-84,000 bpd, citing mechanical issues with wells in Jubilee.

It also said it would now only reach production of 120,000 bpd "sometime during 2012", a delay on its earlier indication that the level would be achieved at the end of this year.

Source: Reuters

Five trends driving Africa’s economic growth

Standard Bank analyst Simon Freemantle has identified five key trends that will propel Africa’s ongoing economic reinvigoration in the next four decades.

“Naturally Africa’s sheer size as well as often vastly differing economic and political dynamics . . . renders generalisation problematic. However, the broad thrust of these trends is incorporating the majority of the continent’s emerging and aspiring economies,” says Freemantle.

The five trends are:

Trend 1: A larger, younger and more affluent population

Africa’s population growth will average 2.2% over the next decade, compared to 0.9% in Asia. It is expected that Africa will have a population of almost 2 billion by 2050. Rapid population growth also means that the populace is exceptionally young. Sub-Saharan Africa’s median is age 18.6, compared to 32 for the BRIC countries.

Coupled with strong economic growth, population growth will support the emergence of the continent’s consumer base. Consumer growth is being supported by a rising middle class. According to Freemantle, around 150 million Africans have entered the middle class since 1990, with a further 40 million households to become middle class by 2015.

Trend 2: Africa’s transformational urban swell

It is estimated that about 40% of Africans currently live in urban areas. By 2050 more than 60% of the continent’s population will be urbanised. Nigeria will see 140 million new urban entrants in the next 40 years. Countries such as South Africa and Angola will be more than 80% urbanised by 2050. Although this will lead to an influx of people into megacities such as Lagos, Kinshasa and Cairo, 70% of all urban growth in the next two decades will take place in smaller towns and cities.

Trend 3: Leapfrogging through technology

Africa’s population has vigorously embraced technology in general, and telecommunications in particular, as a means to boost socio-economic prosperity. By the end of 2010, there were over 500 million mobile subscriptions in Africa; by 2015, it is expected there will be almost 800 million. Nigeria is already the world’s tenth-largest mobile market. More Africans are also connecting to the internet. While internet penetration is still relatively low (around 120 million users) growth rates have been profound. Internet costs remain excessively high, limiting uptake. A range of mostly private-funded fibre optic cables set to land, or having already landed, on Africa’s east and west coasts are set to lower costs for African internet users.

Trend 4: Africa’s dormant resources potential

In addition to Africa’s considerable precious and base metals wealth, the continent is becoming a more important player in the world’s energy markets. At the end of 2010, Africa had 9.5% of the world’s crude oil, and 8% of the world’s natural gas reserves. The continent, however, still holds considerable untapped reserves, with recent discoveries in Ghana, Uganda and potentially Namibia attracting strong interest.

Meanwhile, with food anticipated to become the “new oil” of the 21st century, Africa’s immense and largely dormant, agricultural potential is gaining elevated attention. In order to feed the world’s population in 2050, food production will have to increase by 70%, necessitating a total average investment in developing world agriculture of US$83 billion.

Trend 5: Africa’s deepening financial sector

The financial services sector is responding rapidly to the continent’s altering economic reality. Although the majority of Africans remain locked out of the financial system, the growth projections for the sector are stellar. At current growth rates, Africa’s financial services sector could make up around 20% of the continent’s collective GDP within the next decade, compared to 10% today. Much of the new growth will come from retail banking. The expansion of financial services has the ability to create new jobs, establish a formal identity of millions of market participants, and provide greater safety than predominant cash-based systems.

Source: How We Made It In Africa

Africa’s ten most expensive cities

A number of African cities feature in this year’s rankings of the most expensive places for expatriates.

Luanda, Angola

According to Mercer’s 2011 Cost of Living Survey, Luanda is the world’s most expensive city for expatriates, followed by N’Djamena in third place. Libreville (12) has slipped five places from the 2010 rankings. Niamey remains at 23 whereas Victoria (25) in the Seychelles dropped 12 places as the Seychelles rupee has weakened against the US dollar. In South Africa, Johannesburg (131) and Cape Town (158) have leapt 20 and 13 places in the ranking respectively, reflecting the strengthening of the South African rand. The least expensive cities in the region are Tunis (207) and Addis Ababa (211).

“Finding good and secure accommodation for expatriate employees is a real challenge in most of the African cities on the list and costs can be significant compared to other regions. Accommodation prices are currently at record levels in cities like Luanda and this is generally the main reason why we find so many African cities high up in the ranking,” commented Nathalie Constantin-Metral, a senior researcher at Mercer.

The top 10 most expensive African cities are listed below:

N'Djamena, Chad 

1. Luanda, Angola       
2011 overall ranking: 1
2010 overall ranking: 1

2. N’Djamena, Chad
2011 overall ranking: 3
2010 overall ranking: 3

3. Libreville, Gabon
2011 overall ranking: 12
2010 overall ranking: 7

4. Niamey, Niger
2011 overall ranking: 23
2010 overall ranking: 23

5. Victoria, Seychelles
2011 overall ranking: 25
2010 overall ranking: 13

6. Ouagadougou, Burkina Faso
2011 overall ranking: 28
2010 overall ranking: 67

7. Djibouti, Djibouti
2011 overall ranking: 39
2010 overall ranking: 62

8. Lagos, Nigeria
2011 overall ranking: 41
2010 overall ranking: 62

9. Dakar, Senegal
2011 overall ranking: 44
2010 overall ranking: 32

10. Khartoum, Sudan
2011 overall ranking: 44
2010 overall ranking: 141

Ghana's central bank targets an appreciation of 5 percent in its currency

Ghana's central bank targets an appreciation of 5 percent in its cedi currency this year, the bank's deputy head said on Tuesday.

Inflation is likely to remain below 10 percent at the end of 2011, Millison Narh told a conference. "We have a 5 percent (cedi) appreciation target for the rest of the year. We do not expect (deviation) of more than 2 percent plus or minus," he said.

"We are expecting that by the end of the year, we will still be recording single-digit inflation."

The Bank of Ghana surprised many analysts by shaving a further 50 basis points off its prime policy rate to bring it to 13 percent in May -- 550 basis points lower than its late 2009 level.

Ghana's annual inflation stood at 9.02 percent in April and the International Monetary Fund has warned the country of inflation risk. Reuters.

• Monetary unit: Cedi
• Main exports: Gold, cocoa, timber, tuna, bauxite, aluminium, manganese ore, diamonds
• GNI per capita: US $700 (World Bank, 2009)