Current Trade News

Falling costs and improved sales networks mean that small-scale solar power for households or micro-businesses is taking off across Africa. Crucially, this is fast becoming a self-sustaining sector that can generate its own revenues, and allowing numerous companies of all sizes to cater for demand on a commercial basis.
The reasons for this change in the landscape for small-scale solar are not hard to find. As consultancy Kleos Advisory put it in a recent report on the sector: “In 2010 a typical solar unit could replace a kerosene lamp for around three hours per day – hardly a replacement for grid power. Today an affordable solar unit can power a 32-inch television with satellite, 24 hours a day. In five years’, time affordable solar units are expected to be able to power all the key routine devices many Africans have in their homes, such as mobile phones, TVs, fans, lights and the Internet.”
The widely used pay-as-you-go model for the sector enables consumers to buy a small solar unit with a rechargeable battery pack on a rent-to-own basis. They make repayments via mobile phone at a cost similar to those of buying kerosene for lighting and paying someone else for phone recharging. Typically, they can pay off the costs of the solar unit and other equipment in around 18 months and then own it outright.
GOGLA, an association representing the off-grid solar industry, estimated in 2019 that over 5m pay-as-you-go sales had been made in Africa since 2015, with more than 1m sales in the first half of 2019 alone.
Sustainable business
Kleos, whose report was carried out in collaboration with small-scale solar provider Azuri Technologies, says this means that up to 25m people are getting the benefits of off-grid power via this model without any direct government or development institution financial support, and with the prospect of a rapid rise in uptake over coming years.
However, there is little prospect that household-scale solar installations could power heavier duty equipment, such as washing machines or hair dryers – and this is not going to be a solution for powering cookers anytime soon. Kleos says that for most off-grid Africans using small-scale solar this won’t be a problem because they have limited power needs or have access to a diesel generator to run any more power-hungry equipment. But, at the moment, that is unlikely to include the very poorest Africans.
This has led to some criticism that proponents of small-scale solar are overstating the benefits to those without electricity access, because the poorest remain excluded. They might be able to acquire a simple solar powered lamp, or even a non-rechargeable battery powered torch with a long lifespan, but not a generator or a solar system.
A report published in February 2020 by consultancy 60 Decibels, and backed by UK development finance institution CDC, notes that despite the growing availability of financing, the poorest were underrepresented among users. Some 37% of off-grid energy customers around the world live below the $3.20 a day poverty line, compared to 60% of the population as a whole in the developing markets in which 60 Decibels operates.
“These data suggest that whilst off-grid energy offers tremendous promise to bridge the global energy divide, to do so we need to see more accessible financing options, lower prices, smarter subsidy, and wider distribution,” the report says.
Supporting the sector
CDC Chief Executive Nick O’Donohoe says greater inclusivity is needed but there are Africans who are so poor that it is hard for energy businesses to serve them on a commercial basis and they will continue to require aid, grant support or subsidies.
However, this shouldn’t detract from the benefits off-grid solar has brought. “There are probably 50m low-income Africans that have access to power who wouldn’t have been able to afford it before. And in most cases, it’s replacing kerosene in homes. So, it’s a win-win by any standards,” he says.
One element of CDC’s support for the sector has been its investment in M-KOPA, one of the world’s largest pay-as-you-go solar energy companies. The company’s off-grid solar home systems now operate in over 750,000 low-income households in Kenya and Uganda.
CDC invested $11.6m of equity in M-KOPA in 2016 and a further $7m in 2017. In 2017, CDC also provided $20m of debt financing, as part of a $55m local currency facility with Stanbic, FMO and Norfund.
Source: African Business Magazine.
Central and commercial banks across Africa are working together to increase liquidity and improve access to finance in an effort to keep the economies within which they operate functioning during the Covid-19 lockdown.
Interest rates have tumbled and capital reserve requirements been cut to encourage companies and individuals to keep borrowing and investing. However, the huge uncertainty generated by the pandemic has deterred potential customers from accessing credit, underlining that there is a limit to what banks can do.
Although there will undoubtedly be a deep recession and widespread job losses across the continent, central banks have introduced a range of measures to see banks through the immediate crisis, while cushioning the impact on domestic economies as much as possible.
They have eased capital reserve requirements, many of which were introduced in the aftermath of the 2008 global economic crash. They have also made low interest loans available to help see banks through the crisis, while reducing benchmark lending rates.
The Central Bank of Kenya’s two-pronged stimulus strategy – lowering capital requirements and slashing interest rates, to allow banks to lend more of the reserves that they do hold and encourage them to borrow more from the central bank – has been replicated in other countries.
For instance, the National Bank of Rwanda reduced its reserve requirement ratio by a fifth, from 5% to 4%, and lowered the Central Bank Rate from 5% to 4.5%. The Bank of Tanzania reduced its statutory minimum reserve requirement ratio from 7% to 6% and its discount rate from 7% to 5%.
By contrast, banks in the most developed banking market on the continent, South Africa, must hold just 2.5% of their deposits as reserves.
However, the situation in Nigeria is even more challenging. The Central Bank of Nigeria (CBN) has asked banks to expand lending to support an economy affected by both the coronavirus pandemic and the associated collapse in oil prices. (See pages 52-53.)
The IMF forecasts that the Nigerian economy will contract by 3.4% this year but other sources predict that the fall in GDP will be more than twice as big. Much depends on how quickly oil prices recover.
Yet at the same time, the CBN requires them to hold a massive 27.5% of deposits as reserves, one of the highest rates in the world. The central bank introduced strict protection measures to avoid the bank collapses that plagued the Nigerian banking sector in the past. They have had a big impact in increasing confidence in the industry. Yet such requirements also restrict Nigerian banks’ room for manoeuvre in crises such as the current coronavirus pandemic.
The CBN has devoted its energy to putting a N3.5trn ($9bn) stimulus package together. The money is being passed on to commercial banks, to be lent to businesses at low rates.
There could still be an increase in lending. Zenith Bank expects its loan book to grow by 2% this year, although this is a big fall on last year’s 22%.
The crisis has greatly reduced Nigerian banks’ access to foreign currency but they have been buoyed by a fall in the ratio of non-performing loans (NPLs) from an average of 11% at the start of 2019 to 6.5% this February. This figure is widely expected to increase rapidly over the course of this year but at least it is starting from a lower base.
Multilateral banks are seeking to support African economies through the crisis. In early June, the African Development Bank (AfDB) approved a $288.5m loan for Nigeria to help mitigate the impact on companies and individuals; cushion Abuja’s finances from the oil price crash; and help the government to identify the scale of the outbreak within the country.
Ebrima Faal, the AfDB’s senior director for Nigeria, said: “The proposed programme will ensure that the fiscal position and the economy are sufficiently supported to weather the Covid-19 shocks, thereby limiting its potential adverse impact on livelihoods and the economy more generally.”
Deft negotiations
Despite central bank supply-side support measures, all the main credit ratings agencies forecast big falls in access to finance in Africa, because demand is likely to remain weak.
Even where commercial banks offer low interest finance, corporations and individuals may be reluctant to take on loans. There is also likely to be an increase in bad loans and it remains to be seen how understanding banks will be over debt renegotiation at a time when they are under severe financial pressure themselves.
In late May, Kenya’s Equity Group increased its bad debt provision from KSh410m ($3.83m) in the first quarter of 2019 to KSh3.12bn ($29m) for the same period this year in order to cope with the expected financial impact of the crisis.
CEO James Mwangi said that the pandemic had “introduced unprecedented uncertainty within the global financial systems, prompting us to adopt a conservative approach – fortifying our balance sheet and assuring ample liquidity to support our customers”.
Other banks have made similar provisions and analysts think even more money may need to be set aside as borrowers’ ability to repay loans weakens further.
The biggest bank in Kenya by assets, KCB Group, has allowed borrowers to suspend debt repayments for three months. However, the impact may not be as great as some fear. The Kenya Bankers Association forecasts that the ratio of bad loans will rise from 12.4% to 14% over the course of the lockdown.
Many central banks, including in Kenya and South Africa, have repeatedly cut their headline interest rates in an effort to maintain access to finance but customers are understandably reluctant to take on more debt at this time.
Kenyan banks already report a big fall in the volume of lending on the back of lower demand and they have already restructured a high proportion of their loans. Demand for sovereign bonds has therefore soared as banks have sought out the lowest risk investments.
This policy does have a downside: Moody’s cut its outlook for Equity Group, KCB and Co-operative Bank of Kenya from stable to negative because of their increased exposure to a single borrower, in the form of the government.
South African measures
Some mitigation measures have had a rapid positive impact on the markets. For instance, under advice from the country’s central bank, South African banks decided to suspend dividends for this year.
This led to an immediate 10% rise in bank stock prices on the Johannesburg Stock Exchange, as investors calculated that the boost to bank finances more than compensated for the loss of dividend income. Other banks across the continent have also opted for a moratorium on dividends for the year.
Banks must prepare for big falls in earnings but current projections feel like guesswork rather than concrete estimates. South Africa’s Absa says that its profits will be at least 20% down but all banks could face much bigger falls, as lower benchmark rates mean lower earnings, exacerbating the fall in transaction volume and higher rates of loan default. However, stress tests carried out by PwC concluded that South Africa’s big five banks would all be able to withstand the crisis, even under the worst-case scenarios.
Changing bank culture
The huge rise in digital banking over the past few years has allowed banks to continue operating and customers to continue accessing services despite the closure of branches. Indeed, many banks have actually increased the level of their digital investment to cope with the anticipated rise in demand.
It may take some time for figures on the scale of the actual increase in demand to be published. Some Ghanaian banks have removed the fees they charged on e-banking transactions to both boost the uptake of e-banking and support their customers during the pandemic.
It was widely reported in Nigeria that Access Bank had decided to permanently close more than 300 branches and make 75% of its 28,000-workforce redundant, but this has been denied by the bank. A spokesperson said that the bank has only closed branches temporarily, as instructed by the CBN, to reduce the risk of Covid-19 infection.
Access Bank has had 29m customers since last year’s acquisition of Diamond Bank, giving it perhaps the biggest customer base of any African bank. Some rationalization of the bank’s network is possible as the two systems are merged.
In common with many other sectors, African bank employees have worked from home wherever feasible. In many cases, this appears to have worked better than executives had anticipated and some banks say that they may retain higher levels of home working in the long term. This can reduce infrastructure costs and allow employees to integrate work and home life more easily.
The chief executive of South Africa’s Investec, Fani Titi, said: “We have established that we can work very effectively from outside of the building. In the fourth quarter of the year we may see an increase. But I don’t think we’ll ever get back to a situation where you will have approximately 95% of your people in one place.”
How many of the changes, quite a few positive, induced by Covid-19 will remain in place once the lockdowns have been completely lifted? Time will tell but as often happens, changes are often forced by circumstances and Covid-19 may have changed banking culture in Africa to quite an extent.
Source: African Business Magazine
AFRICAN MARKETS starts today the roll-out of a new “Major Shareholders” section on the updated company profiles of listed companies. The section is based on regulatory filings.
This new feature is now available on the company profiles of the below Exchanges:
• Botswana Stock Exchange (Botswana)
• BRVM (Ivory Coast)
• Ghana Stock exchange (Ghana)
• Malawi Stock Exchange (Malawi)
• Nairobi Securities Exchanges (Kenya)
• Nigerian Stock Exchange (Nigeria)
• Zimbabwe Stock Exchange (Zimbabwe)
These are the first markets that we present. Other markets will follow.

Our platform is continuously evolving. The updated company profiles are just some of the new features we have been working on recently. In the coming weeks, we plan to unveil new tools that will help investors, globally, build strong investment cases on Africa and, hopefully, cross the last frontier.
Source: African Markets
29 / 07 / 2020 - Mozambique, Total to Export Gas By 2024
Mozambique plans to start exporting liquefied natural gas (LNG) by 2024 ahead of Tanzania, after Total SA secured a $14.9 billion debt facility for the construction of an LNG processing plant in Cabo Delgado Province, in the deep waters of Ruvuma Basin north of the country.
The debt financing agreement, which is the country's first onshore development, was signed on July 15, 2020.
Tanzania's LNG project -- in the natural gas-rich offshore Ruvuma Basin -- in the southeastern part of the country -- still awaits the final investment decision (FID) after the government grants project approval.
Mozambique's FID for the $20 billion LNG project was made in June 2019 and building works started in August the same year.
Total SA's chief financial officer Jean-Pierre Sbraire said Mozambique's senior debt facility -- the biggest in Africa to date -- includes funds from eight Export Credit Agencies (ECAs), 19 commercial banks and a $400 million senior loan from the African Development Bank Group (AfDB).
"This is a first in class transaction that sets a new standard for mega-projects on the African continent," said AfDB's acting General Counsel Souley Amadou on the collaboration of project sponsors, Mozambique's government, the financing parties and advisors.
Total SA is leading a consortium of firms in the project that will have a gas plant and an export terminal on the Afungi peninsula.
Total acquired a 26.5 per cent stake in the Mozambique LNG project from Occidental Petroleum for $3.9 billion in September 2019.
"The project will facilitate the development of gas-fired electricity and will play a key role in providing reliable affordable energy for the country and the wider region," said Wale Shonibare, AfDB's director for Energy Financial Solutions, Policy and Regulation.
Dorothy Tembo is the acting Executive Director of the International Trade Centre, (ITC) a joint agency of the United Nations and the World Trade Organization. In June, the ITC launched a report titled "COVID-19: The Great Lockdown and its Impact on Small Business." In an interview with Kingsley Ighobor, Ms. Tembo discusses the report, the role of women and youth in post-pandemic recovery in Africa, among other topics. These are excerpts from the interview.
What key messages does your newly released report on COVID-19 and micro, small and medium-sized enterprises (MSMEs) convey?
The first is that MSMEs matter, and they must be at the center of any post-pandemic recovery effort. Second, there is a disruption of the global supplies that these MSMEs are a part of. The third message is that, going forward, we need to think carefully about how we support MSMEs, making sure we push in a direction of more resilient value chains that can withstand disruptions in the future.
The report states that MSMEs, especially in poor countries, are disproportionately affected by the pandemic. Why is this the case?
Poor countries face huge economic challenges. The pandemic compounded an already bad situation. For years, these countries have cried out for assistance to build infrastructure that supports economic development. In these countries, businesses are relatively small and cannot access finance. Some of these countries are landlocked and therefore the cost of doing business is much higher than in the others.
The Africa Union's Silencing the Guns 2020 campaign, if successful, could strengthen countries' resilience in recovery. Is that correct?
Absolutely. If we could have a situation where peace reigns in countries, that would be an opportunity to consolidate development efforts.
Your report paints a gloomy picture of the situation of MSMEs in Africa. For example, one in five small firms would be bankrupt within five months and $2.4 billion worth of exports is expected to be lost this year. Any good news at all?
You're right. We should not underestimate the impact of COVID-19 on countries. But I think there is a glimmer of hope. The current situation presents an opportunity to reflect on what to do going forward to enable MSMEs become more resilient. There are potential opportunities.
First is the possibility for countries and companies to start innovating, because small enterprises tend to be agile and able to adapt. For example, some companies we are working with are able to conduct e-commerce and have survived. So, innovation is a possibility in terms of existing value chains or in doing something completely new.
Second, we have an opportunity to rethink how we develop more resilient value chains that can accommodate future difficult situations.
Third is to explore more sustainable production options that, in the long term, are cheaper and environmentally friendly.
The final point is, there is an opportunity for countries to consider their product range. Many countries depend on a single or a few commodities. They could now look at a broader product range as well as diversification of markets. Africa can look at the opportunities that come with the African Continental Free Trade Area (AFCFTA) in terms of value add, within the continent, even as countries look at the global markets.
Many people believe that African youth can capably lead the innovation charge. What are your views on this?
I agree. This is something we have observed from our work with young people in Africa. If you look at some of the sectors where the shift has occurred, the digital side of things for example, it's the youth who are involved, and they are pushing the trend and showing their ability.
Also, the youth tend to think outside the box and can reposition themselves quickly. We must give them priority. They are the future and we cannot leave them behind.
Your report offers a 15-point plan of action. How do you ensure that your recommendations are implemented by the MSMEs, the business support organizations and the various governments?
The action plan provides some guidelines in terms of what the three stakeholder groups should be looking at, that is the immediate steps they can take. These guidelines were drawn from our engagement with different companies in different countries. And the guidelines speak to the core issues that are affecting these countries.
Countries see the relevance of what we're doing. They want to address the challenges they are facing. The ITC and others ensure that when countries decide to implement our recommendations, that we work with them to provide the necessary technical assistance or any required handholding.
Women constitute a huge percentage of Africans engaged in informal trade. Given that women are disproportionately affected by COVID-19, is it reasonable to suggest that they be given priority in any recovery assistance?
Absolutely, and not only because of COVID-19. Women's economic participation has been very limited. In most cases, women are not very engaged or allowed to participate in business. Even when they can participate, they're likely workers and when they own a business, they are small operations that cannot grow because of various reasons.
Women's businesses are likely to be closed as a result of the pandemic; therefore, any form of financial assistance to companies must consider the plight of women or be viewed through the gender lens. The ITC has designed a women's empowerment programme called SheTrades under which we aim to connect three million women to markets. Even now, women are unable to get the necessary information to access the resources being provided within the COVID-19 context.
Somebody told me a very interesting story about a border in southern Africa. At that border, two lines were formed: one for males and another line for females. The line for the males was cleared ahead of the one for the females. By the time the line for women was cleared, the men had been in the markets for hours and had sold their goods. These may appear simple, but they do have a huge impact on how business is conducted and how opportunity is lost.
What is the timeframe for connecting three million women to the market?
Our commitment is that by 2021 we will have connected three million women to the market. We have already gone beyond half of that number.
Given the disruptive impact of COVID-19, can you still meet the 2021 target?
I believe we can. For the simple reason that the demand to meet the Sustainable Development Goals (SDGs) is even higher now than before. I remain optimistic. We will keep pushing ourselves, understanding the challenges that we face.
How do you connect the women to the market?
We have identified some core issues that make women uncompetitive in business. One is a lack of access to finance. You still have some countries asking women for their husband's approval before accessing a loan. And interest rates for loans are too high and unaffordable.
Also, some policies don't support women's economic advancement. So, we are working with governments under the She Trades initiative to determine precisely the problems women face and try to address those problems. We must think differently regarding women's access to finance. Can we think of nontraditional ways that women can access finance?
Is such thinking going on?
Yes, it is. We are working with different partners. We are part of the SDG 500, which is an initiative that involves other UN agencies. We are collaborating with the private sector and some foundations. The objective is to mobilize about $500 million to support MSMEs, particularly those led by women, to access resources with minimal requirements.
Developing countries export a significant amount of inputs to other regions for the production of personal protective equipment (PPEs). In the context of the Africa Continental Free Trade Area, is ITC supporting Africa in producing PPEs?
Our support is much broader than just for PPEs because the foundation of the AfCFTA is trade liberalization. It's how Africa positions itself to maximize the opportunities in free trade.
In the current context, is there an opportunity for African countries to produce PPEs? Yes. And this is already starting to happen. But at what cost and are we in a position to produce to meet the demand of the entire continent? I believe there is scope for improvement because we are still importing from outside.
You were heavily involved in trade matters in your country [Zambia]. What are your views on Africa's free trade area?
I am a believer in free trade and Africa should embrace this opportunity. But what needs to happen is that the level of political commitment should increase. In operationalizing the agreement, participating countries must come through on their commitments. Africa is positioned to attract investments. It has resources for domestic production. It has human resources. We must now organize ourselves better.
What support is ITC providing MSMEs in Africa in these trying times?
Our mandate includes working with MSMEs in support of economic development in developing countries. We support countries to better understand what has confronted them [COVID-19] these last few months. Through surveys, we have information on issues specific to certain countries. Our report builds on those efforts. We have the action plan, but alongside that, we work directly with businesses so they can navigate these challenging times.
We work with businesses to find different ways of managing the business-to-business interaction that used to be face-to-face. Now businesses use online platforms to trade. We have continued to provide consolidated information through the Global Help Desk, which is a one-stop shop for all trade-related information.
What message do you have for business owners in African MSMEs?
It's a difficult time for MSMEs, for sure. They must ensure they remain resilient in this difficult period. To survive, they must build on their innovative spirit.
Source: Africa Renewal
Kenya is reluctant to seek extension of safeguards that protect the country from importation of cheap sugar from the Common Market for Eastern and Southern Africa (Comesa).
The EastAfrican has learnt that with only seven months to the expiry of the safeguards, Kenya has realised that having lobbied for an extension twice in the past, securing another could be a tall order and that the country cannot peg the survival of the sugar industry on protection from competition.
"Kenya has not applied for an extension of the safeguards. If it will to do so, it must present the request at the meeting of the Comesa Trade and Customs Committee, which brings together technical experts from all member states," Mwangi Gakunga of the Comesa secretariat told The EastAfrican.
The safeguards allow Kenya to limit duty-free imports from Comesa countries to a maximum of 350,000 metric tonnes annually because the country is unable to compete with other member states on a duty-free quota free terms.
The government has, therefore, resolved to lease the factories hoping to turnaround the companies, which have collapsed under the weight of years of mismanagement, corruption and influx of cheap imports.
The Agriculture and Food Authority (AFA) is looking for investors to enter into long-term leases for Chemilil, Nzoia and South Nyanza sugar companies alongside Miwani and Muhoroni sugar companies, both of which are under receivership.
"The objective is to facilitate turnaround of these companies to profitability through modernisation and efficient management, which will in turn enhance competitiveness in Kenya, the East African Community, Comesa and the global sugar market," said Anthony Muriithi, AFA director general in a public statement.
To make the factories attractive to investors, the government has restructured their balance sheets including writing off massive debts, tax waivers and penalties amounting to a staggering $572.5 million.
The leasing of the companies, which the government argues is a form of privatisation, comes after the country banned the importation of raw cane and brown sugar -- the latter has rendered local mills uncompetitive due to a significant surge in imports from Uganda.
Early this month, Agriculture Cabinet Secretary Peter Munya said that unscrupulous businessmen and traders were taking advantage of the Covid-19 curfew to smuggle raw cane and brown sugar into the country through the Busia border.
Also, millers who had also obtained temporary permits to import raw cane from Uganda from September to December last year, were also illegally still importing the raw cane.
"The country may soon be faced with a sugar glut occasioned by this increased importation and an eventual collapse of the industry," said Mr Munya in press statement on July 2.
In its report, the Sugar Task Force recommended among other, establishment of production zones for particular mills and merging of some underperforming ones to attract investors.
Dr Emmanuel Manyasa, economist and country manager Twaweza East Africa, said that leasing is just a "painkiller" for an industry faced with high production costs, uneconomic dependence on smallscale farmers and whose fortunes are bound to be hit by the expiry of the Comesa safeguards.
"Privatisation failed because investors know the industry is controlled by sugar barons and they cannot make money. Even leasing is not sustainable until we deal with the cartels," he told The EastAfrican.
Kenya's sugar production cost is estimated at more than $600 per metric tonne, twice that of other key sugar-producing Comesa countries, making the country an attractive export market.
According to Dr Manyasa, Kenya might fail to seek for an extension considering that Article 61 of the Comesa treaty stipulates the country must proof it has taken the necessary and reasonable steps to overcome or correct the imbalances for which safeguard measures are being applied.
"Removal of the Comesa safeguards will kill the industry totally," said Dr Manyasa.