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South Africa faces downgrade threat

The ratings agency is most likely biding its time for more clarity on South Africa’s upcoming election on May 8

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Photo Credit: Biznews

South Africa breathed a sigh of relief on Friday as ratings agency Moody’s announced they were not publishing a scheduled review of the country’s debt rating.

Moody’s did not give a reason for the delay or indicate when its review of South Africa’s debt rating would be published.

The ratings agency is most likely biding its time for more clarity on South Africa’s upcoming election on May 8, says John Ashbourne, Senior Emerging Markets Economist at Capital Economics.

“The timing of it is always very unclear, but it is very likely there will be a downgrade in South Africa. Our view is that it won’t have a huge economic effect”, he adds.

“If you look at what has happened to other countries in Latin America and elsewhere that had their last investment grade taken away, we didn’t see a really sharp change in bond yield or performance that lasted.”

A possible downgrade would result in the country being excluded from the widely-tracked local currency World Government Bond Index, Fitch and S&P both reduced local currency debt to junk status in 2017, according to Capital Economic’s most recent Africa Economic update.

When South African sovereign foreign currency debt lost its second investment grade rating, that prevented some investors from holding these bonds and there was only a small and temporary sell-off in the country’s financial markets.

For now, South Africa retains its position in Citigroup Inc.’s World Government Bond Index.

Moody’s rating of South Africa’s foreign and local currency debt also remains on the lowest level of investment-grade at Baa3, with a stable outlook.

As fears of an immediate ratings downgrade eased, South Africa’s Rand fell against the dollar. At 1053 GMT on Monday, the rand traded at

R14.23 per dollar, slipping 1.8% from its New York close on Friday.

The near collapse of energy giant, Eskom, which provides 90% of South Africa’s electricity but is straddled with R419m ($29.7m) debt, has also led to shaky economic confidence, wary investors and growing fissures between government and an Eskom workforce fearful of privatisation.

A potential demotion to junk status could still affect South Africa’s ability to raise capital by issuing sovereign bonds on international financial markets.

It would also leave just 2 countries in the continent, Mauritius and Morocco with a rating just above “junk status”.

Spillover from a downgrade could also affect Botswana, who sits lonely at the top with an A-class rating, and is heavily dependent on its neighbour for imports.

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Zimbabwe’s business community calls for economic reform

The Movement for Democratic Change (MDC) had initiated a massive protest against worsening economic conditions

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Zimbabwe’s business community calls for economic reform
Zimbabwe President Emmerson Mnangagwa. (Photo by Jekesai NJIKIZANA / AFP)

The Zimbabwe business community has called on its government to urgently address ordinary people’s concerns in order to avoid continuous loss of production time through protest shutdowns.

The Movement for Democratic Change (MDC) had initiated a massive protest in central Harare to express growing impatience with the government’s failure to remedy a deepening economic crisis that has pushed many to the edge.

The government, however, insists that the pain caused by its tough policy measures was necessary for an economy which is reeling from decades of mismanagement under former President, Robert Mugabe.

Police moved on Thursday to impose an unpopular ban on the demonstration, setting the stage for ugly clashes with MDC followers.

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Nigeria’s state oil firm awards crude oil swap deals to 15 firms

The awarded oil firms include Vitol, Trafigura, oil major, BP and local downstream companies

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Nigeria's state oil firm awards crude oil swap deals to 15 firms
NNPC Towers, headquarters of Nigeria's state oil firm in Abuja, Nigeria. (File photo)

Nigerian state oil company, NNPC, has announced that 15 companies have won the right to swap the country’s crude oil for fuels, following a tender for the deals.

About 132 companies made a bid for the deals. The tender for the one-year contracts effective from the 1st of October and dubbed direct sale, direct-purchase (DSDP), was issued in March.

Nigeria is almost entirely reliant on imported fuel due to years of neglect at its own refineries.

It has leaned heavily on the swap arrangements to get fuel, particularly gasoline, as other would-be importers struggle to make money due to price caps.

The Nigerian National Petroleum Corporation says the companies that won the bids are made up of a consortium of 15 companies including Vitol, Trafigura, oil major, BP and local downstream companies.

Since the scheme’s inception in 2016, replacing a program that paid subsidies to importers, the NNPC has said it had saved the country $2.2 billion and supplied some 90 per cent of its import requirements.

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Zambia rejects donor aid amid its worst drought

The government says it has enough corn, the country’s staple food, to last until the next season and won’t need to import

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Zambia declines donor aid amid its worst drought
(File photo)

Zambia is experiencing its worst drought since 1981, but its government insists that a state of national emergency will not be declared.

Neither will donor assistance be accepted. A Southern Africa Development Community report last month, forecast 2.3 million Zambians will be food-insecure by March after large parts of the southern and western areas of the country received the lowest rainfall since 1981.

Over the same period, the report forecast Zambia will experience an 888,000-ton cereal deficit.

The Zambian government says it has enough corn, the country’s staple food, to last until the next season and won’t need to import.

Retail prices for the cornflour that Zambians consume mostly are already the highest since at least, 2003, according to data from the national statistics agency.

In July, prices were 41 per cent higher than the same time last year, helping to push inflation to 8.8 per cent, the highest since November 2016.

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