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Cash crisis tops Sudan’s economic woes

Many shops and service providers have stopped accepting bank cards, preferring cash

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sudan
Exchange rates are displayed at a foreign currency brokerage office in Khartoum.

Women queue for hours under the scorching heat in the hope of withdrawing cash from an ATM in the Sudanese capital, Khartoum. Sometimes it works, sometimes it doesn’t.

The hunt for cash has become a national sport in Sudan, where a deep economic crisis helped spark months of protests against veteran president, Omar Al-Bashir. Bashir’s departure last month, has done little to rescue the economy.

“I’ve been waiting on average, two hours a day for the last eight days (to withdraw cash),” says Halima Souleiman as she stood in an ever-lengthening queue of women on a Khartoum street.

“Each time, the money in the machine has run out.”

Rumours had spread that an armoured van had arrived to load the machine with cash, leading to a rush of customers.

“Today I’m hoping it will work,” says Halima, an unemployed biology graduate.

When she finally made it to the machine, she emerged smiling with a wad of banknotes.

Our Iftar, the meal that ends the daytime fast observed by Mulims during Ramadan, “will be bigger tonight”, she said.

Power cuts, Inflation

With withdrawals limited to 2,000 Sudanese pounds (around $40, 36 euros) a day, the cash shortage tops the list of Sudan’s economic woes.

It has been accompanied by persistent power cuts, fuel shortages and spiralling inflation.

Sudan is one of the poorest countries in the world — the United Nations last year, ranked it 167th out of 189 on its Human Development Index.

The economic crisis far predates the protests against Bashir that broke out in December.

It was exacerbated by widespread corruption and huge spending on a military response to multiple regional rebellions under Bashir’s repressive rule.

In 2011, South Sudan won its independence, taking with it, three-quarters of the country’s oil receipts and dealing a heavy blow to public coffers.

Sudan has also endured two decades of U.S sanctions over human rights violations and alleged support for “terrorist” groups.

The sanctions were lifted in 2017, but the country remains on the State Department’s blacklist of state sponsors of terrorism.

The potential penalties have kept foreign investors away.

Inflation has reached nearly 70 percent and Khartoum’s foreign debt stands at more than $55 billion (49 billion euros).

The International Monetary Fund has forecast its GDP will shrink by 2.3 percent in 2019.

Four months of mass demonstrations have only added to its woes, disrupting supply chains and aggravating shortages that have set the price of basic goods skyrocketing.

The lack of liquidity has been fuelled by the plummeting value of the Sudanese pound and the “lack of confidence in the banking system”, says Ibrahim Onour, a professor of finance and economics at the University of Khartoum.

The pound was devalued three times in 2018. At official rates, the dollar bought 6.75 pounds in 2017. It now buys more than 47.

On the black market, a dollar buys 55 pounds.

Some have started to withdraw pounds to convert them into other currencies.

That “has caused a rise in prices which in turn has led to more demand for liquidity”, Onour says.

Cheques, cards not accepted

Mondather al-Rifai, a 30-year-old trader, showed cheque books he says are now useless — nobody accepts cheques any more as the banks are reluctant to back them.

“I deposited my money in the bank but I cannot withdraw it anymore, or only in tiny tranches,” he said.

Many shops and service providers have stopped accepting bank cards, preferring cash, an Asian restaurateur said on condition of anonymity, adding that business was down by half.

“Most suppliers no longer accept credit cards or cheques”, making it difficult for restaurants to accept them either, he said.

Those who do accept cheques sometimes demand a 20 percent mark-up, he added.

Some are placing their hopes on a three billion-dollar credit line pledged by Saudi Arabia and the United Arab Emirates to help provide liquidity and ease the chronic shortages of basic goods.

Onour urged caution.

“This aid falls far short of the current needs of Sudan,” he says.

“Each time, the money in the machine has run out.”

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World’s biggest marine diamond mining vessel to be financed by African banks

Nedbank Namibia, RMB Namibia, Standard Bank, ABSA and Bank Windhoek agreed to provide 80% of the funding for the ship

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African banks to finance World’s biggest marine diamond mining vessel
(File photo)

Five African commercial banks have partnered in a $375 million financing deal to build a new diamond mining vessel for a subsidiary of Anglo American’s diamond unit, De Beers. 

Nedbank Namibia, RMB Namibia, Standard Bank, ABSA and Bank Windhoek agreed to provide 80% of the funding for the ship, which will be the world’s largest of its type. 

Debmarine Namibia – a 50-50 joint venture company between De Beers and the government of Namibia – will provide the balance of $94 million. 

The ship, to be known as the AMV3, will be the seventh in the Debmarine Namibia joint venture’s fleet, which mines high-quality diamonds from the ocean floor using hi-tech surveying equipment. 

The AMV3 has the capacity to add 500,000 carats of annual production from 2022, and is expected to contribute 2 billion Namibian dollars ($137.64 million) a year in taxes and royalties to the Namibian treasury in its first five years of production.

“The highest quality diamonds in the world are found in our ocean,” Debmarine Namibia Chief Executive Otto Shikongo said in a statement. 

“With this investment, we will be able to optimize new technology to find and recover diamonds more efficiently and meet growing consumer demand”.

Nedbank Namibia, which facilitated the arrangement, will contribute 40% of the financing and will also provide currency hedging for the deal, according to Karl-Stefan Altmann, an executive at Nedbank Corporate and Investment Banking and Treasury.

Mining, of which uranium and diamonds are a major part, contributed 14% of Namibia’s gross domestic product in 2018, according to the latest annual report of Namibia’s Chamber of Mines. 

Diamonds also accounted for 14% of Anglo American’s core profit in 2018.

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Business News

Zimbabwe’s inflation soars, stocks hit record high

Stocks are rising because local investors are desperate to hedge against inflation

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Zimbabwe's inflation soars, stocks hit record high | News Central TV
(File photo)

Zimbabwe’s stock market has hit a record high, for all the wrong reasons as the country’s Industrial Index rose 5.6 per cent on Monday to extend its gain this quarter to 80 per cent.

Stocks are rising because local investors are desperate to hedge against inflation, which accelerated to 98 per cent in May. Prices are rocketing amid a scarcity of foreign exchange, which is causing shortages of fuel, medicine, and other imported goods.

In Zimbabwe, investors’ fears about inflation are heightened by a plunging currency.

The RTGS$, which the government de-linked from the U.S. dollar in February, has sunk about 57 per cent since March on the black market.

On the streets of Harare, the capital, it trades at 9.7 against the greenback. That compares with the central bank’s official and much stronger rate of 6.08.

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Africa News & Updates

Anadarko, Mozambique to proceed on $20 billion LNG export project

The gas liquefaction and export terminal in Mozambique will be the the largest single LNG project approved in Africa.

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An Andarko official looks on as Mozambique and Andarko seal LNG deal

U.S. energy firm, Anadarko Petroleum Corp on Tuesday, gave the go-ahead for the construction of a $20 billion gas liquefaction and export terminal in Mozambique, the largest single LNG project approved in Africa.

The announcement had been expected after Anadarko flagged the decision date last month.

“As the world increasingly seeks cleaner forms of energy, the Anadarko-led Area 1 Mozambique LNG project is ideally located to meet growing demand, particularly in expanding Asian and European markets,” Chief Executive Officer Al Walker said in a statement.

Anadarko has agreed to be taken over by Occidental Petroleum Corp. Once that deal goes ahead, Occidental has agreed to sell assets including the Mozambique LNG project to French oil major and large LNG trader Total SA. 

Natural gas use is growing rapidly around the world as countries seek to meet rising energy demand and wean their industrial and power sectors off dirtier coal. 

The project, which has committed long-term supplies to utilities, major LNG portfolio holders and state companies around the world, underscores the industry’s conviction that LNG demand will soar in years to come despite a slump in prices this year. 

Low prices for the gas that is super-cooled for transportation prompted fears final investment decisions (FIDs) such as Anadarko’s would be delayed or scrapped. But enough long-term buyers were gathered to underpin the project’s financing.

LNG prices slumped this year as a jump in supply from new terminals in the United States, Australia and Russia were not totally met by higher demand in Asia. 

The trade is also nowhere near as developed as the market for crude oil, causing erratic price movements and is expected to be transformational for Mozambique, beset by economic crisis, conflict stemming from a civil war and governance malaise, whose annual gross domestic product is just $13 billion. 

According to the government of Mozambique, the project is expected to create more than 5,000 direct jobs and 45,000 indirect jobs. 

With a 12.88 million tonne per year (mtpa) capacity, Mozambique LNG is one of the largest greenfield LNG facilities to have ever been approved. It involves building infrastructure to extract gas from a field offshore northern Mozambique, pump it onshore and liquefy it, ready for further export by LNG tankers. 

On the African east coast, the liquefaction plant will be able to sell LNG to both the lucrative Asian market, home to 75%of global LNG demand, and to the flexible European market, which helps balance global LNG trade by soaking up excess supply. 

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