Easter is over, harmattan sunshine is unrelenting in Accra and springtime is looming (sort of) in London. The new season comes with its share of challenges but all is not lost. There have definitely been bright spots as this month’s editorial will attest. Happy reading.
Security, in particular the threat from groups aligned with the Islamic State or with Al Qaeda, has been a persistent and tragic theme globally since the last Songhai editorial. Our region was no different in that regard. Al Qaeda in the Islamic Maghreb claimed responsibility for shootings in Grand Bassam, Cote d’Ivoire, which killed 22 and injured more than 30 people. Attacks in Nigeria’s Borno State by Boko Haram, which has referred to itself as the Islamic State West Africa Province (ISWAP), claimed 22 lives at least. In Cameroon’s far north too, killings linked to ISWAP occurred.
Notwithstanding the fear inspired by the attacks on its neighbours, a broad cross section of Ghanaian civil society has mobilised against the government’s “Interception of Postal Packets and Telecommunications Messages” Bill, recently submitted for parliamentary scrutiny. Provisions that have been interpreted as allowing the National Security Coordinator to intercept communications without court order for up to 48 hours have drawn the most ire. Intense public debate is expected to continue.
In Nigeria, government efficiency and therefore political risk ratings have suffered on the back of protracted delays in policy making, particularly in passing the 2016 budget. And although the National Assembly finally passed a bill last month, controversy continues, uncertainty continues. Parliamentarians gave their assent in March but stated that the document still contains inconsistencies, errors and omissions (if reduced from earlier versions). President Muhammadu Buhari now refuses to sign the bill into law until he receives full details of the budget instead of the highlights he has currently been given. Meanwhile, the USD1:NGN199 exchange rate peg continues though arguably policy is more coherent following the Central Bank of Nigeria (CBN)’s decision to raise the policy rate. At the previous monetary policy committee meeting, rates were lowered despite having missed inflation targets. Now, inflation sits above single digits and is rising but then so too are interest rates .
Sierra Leone has also spent recent weeks balancing the cost and purpose of government activity in a difficult environment. The country is recovering from a 25% of GDP drop in the size of the economy last year due to Ebola and historically weak export prices. Although the Ebola crisis has diminished in Sierra Leone, so too will donor support. Moreover, the disease has reared its head again in neighbouring Liberia and Guinea, and the external environment remains choppy. Growth is forecast to turn positive this year but only just. In response, the 2016 budget seeks to bolster government revenue through an increase in top bracket income tax rate and a tighter rein on the award of tax concessions.
Three doors down to the right, Ghana too grapples with austerity arithmetic. On the plus side, the deficit has shrunk from an estimated 10% to 7% of GDP since 2014, currency depreciation has moderated significantly and the TEN oil field is expected to grow oil production by almost a fifth and double gas output – most welcome news for the power sector. Nevertheless, Fitch has affirmed its B- rating for Ghana citing concern that elections this year will lead to spending slippages amongst other downside risks. It is indicative of the work still to be done restoring confidence in the policy environment. Set against this backdrop, Central Bank Governor, Dr Henry Wampah, exited his position in a surprise resignation. After three years at post, Wampah has left his successor, Abdul Nashiru Issahaku, formerly second deputy governor of the bank, to mend faith in the economy and decision making, and to pick up the pieces after a recent scandal hit the microfinance industry (leading to the forced closure of dozens of microfinance companies).
Alongside these difficulties was positive news regarding Tanzania’s economic outlook. To quote from the IMF, real GDP growth was an estimated 7% in 2015 and is expected to “remain close” to that in 2016. At the forefront of this expansion are industries such as transportation, communication, construction and finance. Another area that President John Magafuli seeks to expand is the tax base. His government has come down harshly on corporates seeking to evade taxes, with its first victim being London-listed Acacia Mining Plc, which has been ordered to pay US$41.25 million to the Tanzanian government. The fallout from the reputational risk for Accacia may not be an easy ride. According to Tanzania’s Tax Revenues Appeals Tribunal, “Acacia paid dividends to its shareholders worth USD 412.5-million between 2010 and 2013 but evaded a 10% withholding tax by declaring losses”.
Economies across the continent may be unhappily adjusting to the new normal of lower than expected commodity prices – indeed, Angola has just gone cap in hand to the IMF seeking what some have speculated could be a hefty bailout package- yet the rising middle class appears defiant. Visibly, investors are aware of the growth potential among consumers on the continent – McKinsey’s forecasts that household expenditure will reach US$1.4trillion come 2020 – hence the recent injection of fresh capital into e-commerce giant Africa Internet Group (AIG). AIG pools together 10 of the major consumer-driven e-commerce businesses on the continent and now has a market value of US$1billion, thanks to capital from the likes of Germany’s Rocket Internet, Goldman Sachs and AXA. It is now one of the most successful ventures in Africa to date, having expanded into 23 African markets, creating over 71 companies including e-commerce shop Jumia and food delivery service, Hellofoods.
Another sector which appears to be receiving much investor interest is the renewables sector, particularly solar. Senegalese – born global hip-hop artist Akon has been flying the flag for solar in his search for technical partners to build 15,000 microgrids across the Economic Community of West African States (ECOWAS). Similarly, in Ghana, Solar Power Solutions Ltd, a subsidiary of 3SIL has launched a US$50 mn manufacturing plant in Kpone to manufacture various inputs for the solar industry, such as the micro and macro solar grid systems. But clearly, you need power to make more power, so this move may be a response to renewed confidence in Ghana’s ability to resolve its long-standing power crisis which could be a boost for industry, a sector of the economy which has been on the wane in recent years.
Credit: SOnghai Advisory LLP