REPORT OF THURSDAY 17/10/13
by Dario Galluccio
This Blog is sponsored by http://www.reflexecogroup.com
Kenya: Standard Bank, ICBC raise $108m debt facility heavy fuel plant
Standard Bank Group and the Industrial and Commercial Bank of China (ICBC) have concluded a $108 million debt financing package with Triumph Kenya to construct a 83MW heavy fuel oil plant in the east African nation. As mandated co-lead arrangers, CfC Stanbic Bank, a member of Standard Bank Group, provided $28 million of debt funding while ICBC supplied $80 million. The ICBC finance portion will be for the plant, currently being built 25km from Nairobi.
Kenya Power also signed a 20-year agreement with Triumph to purchase power from the plant, which will be a crucial supplier to the utility during times of drought when the country’s hydroelectric generating capacity becomes constrained.
The World Bank’s Multilateral Investment Guarantee Agency (MIGA) will provide $102.5 million in breach of contract insurance should Kenya Power fail to honour its 20-year power purchase agreement with Triumph. MIGA’s insurance will also cover the Government of Kenya’s obligations under the Government of Kenya Letter of Support.
Kenya has historically relied on hydropower for most of its electricity needs and has a current installed generating capacity of 1,672 MW, compared with peak power demand of 1,330 MW. The nation’s economy has expanded at an average rate of 4-5 percent over the last 3 years.
Africa: Middle-income status is not bye bye poverty
Transitioning to middle-income status does not signal the end of poverty as the majority of the world’s poor still live in middle-income countries, the World Bank and the IMF have said at their latest Development Committee meeting, a forum that advises the two institutions.
In many developing countries, growth has been accompanied by rising inequality,” a communiqué from the meeting said, warning that if countries do not sustain the building of “shared prosperity”, growth will eventually be obstructed — causing instability and reducing upward mobility. “Job-creation, especially for youth and women, and private sector development are key for inclusive growth,” the meeting agreed.
Middle-income countries — defined as nations with a per capita gross national income of US$1,026 to US$12,475 — account for one-third of global GDP and 73 percent of the world’s poor people. (Ghana, with a per capita income of US$1,563, is considered among lower middle-income countries.)
The World Bank Group has in recent times been warning about growth in developing countries not impacting ordinary citizens, particularly in Africa — one of the fastest-growing regions of the world. In its latest edition of Africa’s Pulse, a twice-yearly analysis of the issues that are shaping Africa’s economic prospects, the bank said inequality in Africa remains “unacceptably high and the rate of reduction unacceptably slow”.
To ensure Africa’s growth benefits its people, the bank advises that more attention should be paid to areas like agriculture, where the poor are mostly found. It also endorses social safety nets, like direct cash transfers to the most vulnerable segments of society.
Nigeria: Fitch rates economy stable
Fitch Ratings, an international independent rating agency, rated Nigeria’s economic outlook as stable. The agency also affirmed the country’s long-term foreign and local currency IDRs and senior unsecured bond ratings at ‘BB-‘ and ‘BB’ respectively, while the short-term foreign currency IDR was rated ‘B’ and Country Ceiling at ‘BB-‘. This vote of confidence on the prospects of the Nigerian economy is coming a few days after another respected international rating agency, Standard & Poor’s also affirmed a strong and positive rating for the management of the economy.
According to the agency, the affirmation reflects the following key rating drivers, a gross domestic product (GDP) growth of 6.4 per cent in the first half of 2013, noting that though lower than the level in 2012, the country showed resilience in the face of exogenous shocks.
The agency noted the non-oil economy had slowed but still grew by 7.9 per cent in 2012 and 7.6 per cent in the first half of 2013. The agency expressed optimism that non-oil growth should pick up in the second half of 2013, as normal weather had resumed and the authorities had responded to the security problems. Reforms to the electricity and agriculture sectors could start to boost potential growth.
Other key drivers of the rating, as highlighted by the agency, included inflation rate, which had remained in single digits all year – the lowest in five years and the longest stretch of single digit inflation since 2008. Also, policy rates were unchanged and the Central Bank of Nigeria (CBN) had the twin aims of achieving single-digit inflation and maintaining exchange rate stability. Fitch also adjudged public finances as remaining comfortable and estimated a general government deficit of around 1.8 per cent of GDP this year and next.
Ghana: Fitch downgrades … From B+ to B
Fitch has downgraded Ghana from a B to a B, largely because of the government’s difficulty in managing the rising wage bill and of the increased debt to GDP ratio pose short-term challenges to the economy. Ghana was put on a B (negative) outlook in February this year and has since been under continuous assessment by Fitch, which had expressed concern over several factors affecting the short-term health of Ghana’s economy.
While experts recognise Ghana’s bright prospects in the medium term, it is believed that the government will struggle with controlling the fiscal situation over the next 18 months.
The outlook for post-2015 looks much better,” a sources,close to the rating agency, said, citing Ghana’s removal of subsidies on petroleum products as helping the fiscal situation, but continued subsidies on utilities, especially power, posed challenges for fiscal stability and growth going forward.
South Africa: Eskom wins R1.3 billion French solar loan
France is to lend €100-million (R1.3-billion) to South African state company Eskom to help finance a 100 megawatt (MW) concentrating solar power plant near Upington in the Northern Cape. Eskom and the French Development Agency (AFD) agreed, during French President Francois Hollande’s state visit to South Africa, to facilitate the signing of the loan.
Eskom chief executive Brian Dames said in a statement that the Upington CSP project, one of Eskom’s first commercial-scale renewable energy projects outside of its existing hydro portfolio, “puts us on a path towards reducing our carbon footprint and investing in a sustainable energy future”. The Upington CSP project is expected to deliver an annual energy production of 525 GWh and will be sufficient to power 200 000 homes.
Ghana: Government to review utility tariff hikes
With worries over the tariff increment, President John Mahama has announced that government has set up a technical committee to review the recently announced tariff hikes. The technical team will consider the issue and make recommendations to government in order to avert threats and ultimatums issued by organized labour since the Public Utility Regulatory Authority (PURC) announced the increases a fortnight ago. President Mahama who was speaking at the launch of the 4th Ghana Policy Fair appealed to the organized labour groups to withdraw their ultimatum while government attempts to deal with the issue.
Nigeria: Agreements establishment of local transformer assembly plant
As part of its 4Africa Initiative, Microsoft Corporation has announced the expansion of the Microsoft Ventures partnership programme into Africa. Microsoft Ventures was introduced in June this year as a coordinated global effort to offer tools, resources, expertise and routes to market for startups through partnerships with accelerators around the world.
The company has selected 88mph as its first African accelerator partner. 88mph was chosen for its proven model of helping launch and secure funding for innovative African startups. Together, Microsoft and 88mph will work to provide startups with mentorship, technology guidance, seed funding, joint selling opportunities and more.
Microsoft Ventures takes a holistic approach to helping startups get off the ground through a community evangelism programme including Microsoft BizSpark, an accelerator program and a seed fund that works with startups worldwide.
The expansion into Africa was conducted as part of the recently launched Microsoft 4Afrika Initiative and will therefore prioritise startups in key sectors including agriculture, education and healthcare. Startups will be selected based on the globally established criteria of Microsoft Ventures: Applying companies must have a full-time founding team, a bold vision for tackling a real problem, technologically driven solutions and less than $1 million raised, Microsoft International said.
Ghana: Atuabo gas project 72% complete
The Chief Executive Officer (CEO) of the Ghana Gas Company, Dr. George Sipa Yankey, says 72 percent works on the Western Corridor Gas Infrastructure Development project ongoing at Atuabo in the Western Region is complete. He said although the project would not be completed as scheduled in December due to initial financial constraints and loss of some construction materials in turbulent sea in South Africa early this month, his outfit was hopeful that the project would be completed by March next year.
Dr. Yankey said frequent meetings would be held by partners in the petroleum industry, especially those in the management chain, to share information on the project in order to increase understanding and transparency. He noted that the implementers of the project had assembled the best companies in the petroleum industry from Aecom in the US, Thermo Design Engineering from Canada, Yokogawa from Japan, Technip from France and Worley Parson from the United Kingdom to support Sinopec of China to complete the project.
He maintains that the gas infrastructure project was important to the development aspirations of the country since it would half the $3million dollars the VRA spent in purchasing crude oil daily for power generation.
Kenya: Coca-Cola increases stake in juice franchise
Coca-Cola Export Corporation has increased its stake in Kenyan subsidiary, Coca-Cola Juices Kenya Limited (CCJK), to 66.03 percent through bottling companies that sell its products in the region after local shareholders failed to participate fully in a rights issue. A report by Kenya’s Competition Authority’s Director General, Wang’ombe Kariuki, confirmed this saying: “The Competition Authority authorises the proposed acquisition of 66.03 percent of the issued shares of Coca-Cola Juices Kenya Limited by the Coca-Cola Export Corporation”.
The remaining 37.07 percent stake belongs to local shareholders including bottling firm like Kisii Bottlers, Mount Kenya Bottlers, Rift Valley Bottlers, Coast Bottlers and Nairobi Bottlers.
In the past, Coca-Cola functioned as a marketing support company to CCJK, leaving the production and supply function of its soda brands to the bottling firms. However, with the additional stakes acquired, the beverage company will deepen its role beyond publicity as the deal gives it full control of the local juice company.
- Ghana’s Medium Term Economic Outlook Is Strong (spyghana.com)
- Fitch ratings doesn’t reflect true state of economy – Finance Ministry (modernghana.com)
- Ghana most vulnerable to tightened global liquidity – Fitch (ghanabusinessnews.com)
- UPDATE 2-Fitch downgrades Ghana’s credit rating on spending worries (xe.com)
- Ghana Turns to Longer Term Debt After Fitch Cuts Rating – Bloomberg (bloomberg.com)
- Microsoft Ventures supports entrepreneurship in Africa (ochienggordon.wordpress.com)
- Coca-Cola raises stake in local juice company (businessdailyafrica.com)
- Diet Coke under pressure (kvue.com)
- Diet Coke under pressure (wwltv.com)
- Coca-Cola touts ‘safe, high-quality’ ‘carcinogen’ (wnd.com)