Tag Archives: Finance

ECA executive secretary Claver Gatete: Only a regional approach can deliver fast development

Rwanda’s former minister of finance Claver Gatete takes over as the executive secretary of the UN Economic Commission of Africa at a time of great change for the continent.

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Claver Gatete takes over the leadership of the United Nations’ Economic Commission for Africa (ECA) at a pivotal juncture, as we approach the halfway stage of the UN Sustainable Development Goals (SDGs) and as Africa enters the second decade of its development blueprint Agenda 2063.

The long shadow of Covid-19 still hangs over the global economy with countries around the world, but especially in Africa, trying to recover from the supply chain shocks, sky-high inflation and the subsequent interest rate hikes. Adding to the current instability is the war in Ukraine – arguably a symptom of a re-ordering in the 70-year old rules-based, neoliberal order that had, seemingly, been entrenched in the wake of the last major disruption, the Second World War.

Into the mix comes the latest, harrowing manifestation of the long running conflict in the Middle East and its potential to spill over with incalculable consequences for the world. The need for finance Also on the table is the stark fact what while Western countries, especially in America and Europe, have been able to run large deficits and inject large amounts of cash to kick-start growth, those in Africa and the wider developing world continue to be bogged down by a lack of concessional or affordable financing.

To add to their woes they also face existential threats from climate-related events, hence the urgent demand for a greater say in the global economic and political structures that do not serve them fairly. This is the maelstrom that Gatete steps into as executive secretary of the UN agency, which wasspecifically set up to “promote the economic and social development of its member states, foster intraregional integration, and promote international cooperation for Africa’s development”.

In pursuit of this mandate, the Commission offers advice to member states, helps to strengthen macroeconomic policy and supports efforts towards regional and sub-regional integration. Perhaps the best summary of what the ECA has been responsible for was provided by the late Professor Adebayo Adedeji, the celebrated former head of the organisation, in his presentation – History and Prospects for Regional Integration in Africa” in 2002. He said that the ECA had been involved in “the establishment of virtually all the major existing African regional integration arrangements (ARIA) namely, the Economic Community of West African States (ECOWAS, 1975), the Preferential Trade Area for Eastern and Southern Africa (PTA, 1981) which was subsequently transformed into COMESA, the Central African Economic Community (CAEC, 1983) and the African Economic Community (AEC, 1991)”.

When we met Gatete in Victoria Falls, Zimbabwe, he offered a practical assessment of what the ECA’s role should be during this dramatic moment in the history of the continent. Its more routine task is to support macroeconomic management, which he explains includes fiscal management, supporting the real productive sectors and fostering a balance between payments and monetary policy.

“Everything you do has an implication on the monetary side. Whatever decision you take definitely has an implication because if you have to accumulate more debt or more deficit, it has implications. So we help countries to manage their own macroeconomic situation, because that’s what is going to actually stabilise the country,” he says.
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Nigeria set for two aggressive interest rate hikes in Q1 – Reuters poll

By Vuyani Ndaba
February 23, 20245:37 PM GMT+1Updated 20 hours ago

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JOHANNESBURG, Feb 23 (Reuters) – Nigeria is set for two aggressive interest rate hikes within a little over a month to subdue inflation and boost the naira after a couple of missed monetary policy meetings, a Reuters poll found on Friday.
A survey taken in the past week suggests that Nigeria’s monetary policy rate will be hiked 225 basis points to 21.00% on Feb. 27, in Governor Olayemi Cardoso’s first monetary policy meeting since he took office a couple of months ago.

There was no clear majority in the sample of 15 analysts, with one expecting a 50 bps hike to 19.25% and one a 1,000 bps increase to 28.75%.
That sets the stage for Cardoso to possibly act aggressively, though some doubt authorities have the appetite.
“We expect significant policy tightening and the announcement of de facto system-wide tightening measures,” wrote Razia Khan at Standard Chartered.
“We think both steps are needed to attract greater foreign portfolio investment and anchor inflation expectations,” she added.

A 175 bps jump to 22.75% is expected in March.
Consumer inflation in Africa’s biggest economy quickened for the 13th straight month in January to 29.90%, raising the cost of living to unbearable levels for many in the continent’s most populous nation.
The Central Bank of Nigeria (CBN) has not had a policy meeting since July, putting it out of kilter with the rest of the continent’s key central banks that hold meetings almost every second month.

“Reassuringly, the CBN has announced that it will hold its first two MPC meetings of the year in quick succession, on February 27 and March 26,” wrote analysts at Barclays.
“This suggests to us that it is aware it is well behind the policy curve, and will need to deliver at least two strong doses of policy tightening.”
The naira fell to its weakest level at 1,680.5 per dollar on Wednesday in the official spot market amidst a chronic shortage of the U.S. currency.

David Omojomolo, Africa economist at Capital Economics, wrote that the latest devaluation may be enough to put the balance of payments on a stable footing, though as things stand the currency has continued to weaken on the parallel market.
A poll last month suggested economic growth in Nigeria would be 3.0% this year and 3.7% next.
“Nigeria needs to take a leaf out of Kenya or Zambia’s book – and ‘tighten’ monetary policy with rate hikes,” said Charlie Robertson, head of macro strategy at FIM Partners.
Stabilising the naira is probably the most pro-growth move the CBN could make, so interest rate hikes would benefit Nigeria more than harm it, he added.

Reporting by Vuyani Ndaba; Editing by Jan Harvey

Source: Reuters, 23rd February 2024

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IMF approves new $941 m loan for cash-strapped Kenya

Kenya President William Ruto speaks during a plenary session at the COP28 U.N.   –  Copyright © africanews Peter Dejong/Copyright 2023 The AP. All rights reserved.

The International Monetary Fund has granted Kenya a new loan of more than $941 million to help reinforce the finances of the cash-strapped East African nation.

Kenya is grappling with a host of economic challenges including a vast debt mountain, cost of living crisis and tumbling currency.

The IMF said in a statement published on Wednesday that its executive board had approved the $941.2 million loan, with an immediate disbursement of $624.5 million.

Total payments under various credit facilities amount to about $2.6 billion, it added.

The Washington-based agency said it forecast Kenya’s economic growth at around 5 percent this year, from an estimated 5.1 percent in 2023.

“Kenya’s growth remained resilient in the face of increasing external and domestic challenges,” said Antoinette Sayeh, IMF deputy managing director and acting chair, said in the statement.

The credit arrangements for Kenya “continue to support the authorities’ efforts to sustain macroeconomic stability, strengthen policy frameworks, withstand external shocks, push forward key reforms, and promote more inclusive and green growth”.

According to the latest Treasury data released this month, Kenya’s public debt stands at 10.585 trillion shillings ($65.5 billion).

In December, Kenya ditched a promise to buy back a portion of a $2 billion Eurobond that is due to mature in June.

Instead, Finance Minister Njuguna Ndung’u said the country had paid $68.7 million in interest on the bond, sidestepping a potential default.

“In its unwavering commitment to upholding a resilient sovereign credit rating and facilitating access to new development financing, Kenya remains dedicated to fulfilling all debt obligations with international lenders,” Ndung’u said.

President William Ruto had announced a plan in November to buy $300 million of the Eurobond, saying public debt had “become a source of much concern to citizens, markets and our partners”.

Ruto has imposed a raft of new or increased taxes to try to replenish government coffers, but they are deeply unpopular among people struggling with rising costs for basic goods, and several have been challenged in court.

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UNDP launches “timbuktoo” initiative in Davos to revolutionize Africa’s startup ecosystem

Annalena Baerbock, Federal Minister of Foreign Affairs of Germany; H.H. Prince Faisal bin Farhan Al Saud, Minister of Foreign Affairs of Saudi Arabia; Christopher A. Coons, Senator, USA; Yusuf Tuggar, Minister of Foreign Affairs of Nigeria; Elina Valtonen, Minister for Foreign Affairs of Finland; and Jens Stoltenberg, NATO Secretary-General, in a session of global security on 16 January. Image: World Economic Forum

Davos 2024

In Davos, the United Nations Development Programme (UNDP) launched the “timbuktoo” initiative in collaboration with African countries. The initiative, unveiled during a special session at the 24th Annual Meeting of the World Economic Forum, aims to be the world’s largest financing facility, uniting catalytic and commercial capital to bolster Africa’s startup ecosystem.

H.E. President Paul Kagame of Rwanda, H.E. President Nana Akufo-Addo of Ghana, the Secretary-General of the African Continental Free Trade Area Secretariat, HE Wamkele Mene, and UNDP Administrator Mr. Achim Steiner presented the initiative to global corporate leaders and African financial institutions. The timbuktoo initiative is poised to spark the African Startup Revolution, leveraging Africa’s youth demographic and innovative talent.

The initiative targets critical gaps in the African startup ecosystem, collaborating with governments, investors, corporates, and universities to foster innovation. H.E. Paul Kagame pledged an immediate contribution of US$3 million to kickstart the timbuktoo Africa Innovation Fund hosted in Kigali, with a billion-dollar target to create opportunities for Africa’s youth.

H.E. Nana Akufo-Addo emphasized the need for supportive structures to enable young Africans to create innovative businesses, contributing to job creation and sustainable economic growth. Administrator Steiner highlighted timbuktoo as a new development model, focusing on startup-friendly legislation, global-class startup building, de-risking capital, and UniPods (University Innovation Pods) across Africa.

Africa currently holds just 0.2 percent of the global startup value, and 89 percent of venture capital comes from foreign sources, with 83 percent concentrated in four countries. timbuktoo seeks to revolutionize Africa’s knowledge-driven economy, turning ideas into pan-African enterprises, attracting global and local investment.

With private venture capital investments in Africa surging six times faster than the global average in 2022, a vibrant youthful population, and expanding tech startups, timbuktoo aims to mobilize US$1 billion to transform 100 million livelihoods and create 10 million new jobs. The initiative’s unique design blends commercial and catalytic capital to de-risk private investment, fostering a pan-African approach to supporting startups and strengthening the entire ecosystem.

Source: AfricaNews, 18th January  2024

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DFC Approves Over $3.3 Billion in Investments with a Focus on Africa in Q1 FY2024

 

The U.S. International Development Finance Corporation (DFC) has greenlit a series of strategic investments totaling more than $3.3 billion in the first quarter of Fiscal Year 2024.

The 17 approved transactions, spanning a diverse array of sectors, underscore the DFC’s commitment to advancing global development priorities, with a particular emphasis on fostering growth, sustainability, and empowerment across Africa.

Expanding Global Impact:

DFC’s Board of Directors approved nine transformative projects this quarter, reflecting the corporation’s multifaceted approach to development:

  1. Global Vaccine Access: The DFC will utilize its $1 billion loan facility with Gavi, the Vaccine Alliance, to broaden access not only to COVID-19 vaccines but also to routine childhood vaccines globally.
  2. Empowering Women in the Dominican Republic: A $200 million loan to Banco Popular Dominicano, S.A. aims to empower women entrepreneurs and small businesses in the Dominican Republic.
  3. Energy Security in Eastern Europe: DFC’s support of a €208 million loan to Bulgartransgaz EAD, facilitated by Citi, will enhance energy security in Eastern Europe, reducing dependence on Russian gas supplies.
  4. Small Business Financing in East Africa: A $320 million co-financing effort with Citi will empower CRDB Bank to enhance on-lending capabilities to small businesses in Tanzania and Burundi, with a focus on women-led enterprises.
  5. Clean Energy in Indonesia: A $126 million loan to PT Medco Cahaya Geothermal will boost Indonesia’s renewable energy production by developing geothermal power generation capacity.
  6. Climate and Energy Investment in India and the Indo-Pacific: An equity commitment to Eversource Climate Investment Partners II will drive climate change adaptation and energy transition projects across India and the Indo-Pacific.
  7. Global Food Security: A $250 million loan to Indorama Eleme Fertilizer and Chemicals Limited/SPV Line III will increase fertilizer production in Port Harcourt, Nigeria, strengthening global food security.
  8. Safe Water Access in Angola: DFC’s support of up to $250 million will enable the development of water treatment and distribution infrastructure in Southern Angola, providing reliable, safe drinking water to underserved communities.
  9. Education Access in Emerging Economies: A $250 million loan to a special purpose vehicle (SPV) established by Prodigy Finance Ltd. will enhance access to high-quality education for graduate students from developing nations.

Regional Focus on Africa:

In addition to these board-approved transactions, the DFC has greenlit targeted investments at the sub-board level, with a clear emphasis on Africa:

  1. Critical Mineral Supply Chains in South Africa: A $50 million equity investment in TechMet will support the development of a rare earth element processing facility in South Africa, enhancing global critical mineral supply chains.
  2. Women’s Economic Empowerment Worldwide: A $30 million follow-on loan to the IIX Women’s Catalyst Fund will support the issuance of the sixth IIX Women’s Livelihood Bond, promoting economic empowerment for women globally.
  3. Access to Higher Education in Ukraine: A $10.7 million loan to Ukrainian Catholic University will finance the expansion of the university’s campus in Lviv.
  4. Food Security in Zambia: A $10 million loan to Seba Foods Zambia Ltd. dba 260 Brands will strengthen the food value chain in Zambia by expanding storage and production capacity.
  5. Supporting Ukrainian Small Businesses: A $28 million loan portfolio guaranty to ProCredit Bank Ukraine will catalyze investment in Ukrainian small businesses, especially those in the agricultural sector.
  6. Infrastructure Growth in Zambia: An up to $17.1 million loan to African Eagle Hotels and Resorts will finance the construction and operation of an international hotel in Lusaka, Zambia.
  7. Clean Energy in Africa: Two $10 million loans to SIMA Commercial & Industrial Solar Green Bond B.V. will spur investment in small and medium-sized renewable energy projects across the continent.

Congressional Notification and Global Impact:

Many of these investments are subject to congressional notification, emphasizing the collaborative nature of these strategic endeavors. The DFC’s commitment to fostering sustainable development, economic empowerment, and infrastructure growth across Africa is evident in these diverse and impactful investments.

Source: Today News Africa, 10th January 2024

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