News

16/01/2018

For South Africa

At the end of December 2017, Cyril Ramaphosa was elected as the new Leader of the African National Congress (ANC) party for the next five years. Jacob Zuma, the previous leader of ANC, who is currently the President of South Africa is being called to step down. This important political development will definitely have a bearing on the next Presidential election in South Africa which is due in 2019.

However, there are concerns that the two different factions in the leading South African political party could disrupt policy and economic progress and thus, leaving SA in a state of "policy paralysis".  To avoid "policy paralysis", a commitment to fiscal discipline, addressing governance and financial problems at state-owned enterprises and tackling state capture would be needed. This would also sustain higher consumer and business confidence levels.  The rating agencies are waiting for the budget speech in February 2018, to review their current stance with a view to providing a further rating to South Africa.



The recent political change at the level of the ANC has a positive impact on the South African economy.  A revival in business sentiment boosted the rand as one of the best performing currencies among emerging market peers over the past three months.  Investors responded positively to the election of Ramaphosa as new ANC president. The currency was further boosted by improved commodity prices and a weaker dollar. The local unit is currently trading at R12.36/$, nearly 11% firmer against the dollar, relative to a year ago.

Economic growth is projected to pick up at a moderate rate in 2018-2019 as stronger activity in trading partners will boost exports.  Assuming that business confidence improves and policies are more stable and clear, investments will support further growth.  South Africa is highly dependent on external financing and thus remains vulnerable due to low investor confidence and possible further credit ratings downgrades.  The forthcoming Budget in February 2018 and Ramaphosa’s stance on policies will determine the potential growth or deterioration in 2018.  South Africa’s economic growth is still very much balanced on a knife edge and assuming political stability the GDP Growth rate and inflation rate are expected to be 1.9 and 5.2 respectively in quarter 4 this year.

Economic forecast for 2018 (assuming political stability):

Overview

Actual

Q1/18

Q2/18

Q3/18

Q4/18

GDP Growth Rate

2.00

1.1

1.1

2.7

1.9

Unemployment Rate

27.70

28

27.8

27.1

26

Inflation Rate

4.60

4.7

5

5.1

5.2

Interest Rate

6.75

6.5

6.5

6.5

6.75

Balance of Trade

13024.40

3302

2482

1820

472

Government Debt to GDP

51.60

54

54

54

54

Source: https://tradingeconomics.com/south-africa/forecast

Social development is also a key factor for South Africa in 2018.  Unemployment remains high at 27%.  The Government is revisiting ways of providing more bursaries and assistance for more affordable education.  These changes might however not be implemented within this year due to budgetary constraints.  Due to the severe drought in the Western Cape, more financial assistance is required in the affected areas for these purposes and is currently seen as the main priority.  The drought has reduced the exports of farm products and also increased the unemployment rate.  In so doing the economy as a whole has also been affected putting pressure on potential growth.

On the international level, South Africa has been ranked 61st on the Global Competitiveness Index 2017-2018 and remains one of the most competitive countries in Sub-Saharan African. As per the World Bank

Doing Business Report 2018 and Mo Ibrahim Index of African Governance 2017, South Africa has been ranked 82nd and 6th respectively.

2018 will be a challenging year for South Africa in terms of political, social and economic situation.

For Kenya  

Kenya remains a key regional player in East Africa and is a major communications and logistics hub, with an important Indian Ocean port and strategic land borders with Ethiopia, South Sudan , Uganda , Tanzania and Somalia .

Last year, there was a lot of tension due to the Presidential election and these political uncertainties have not inspired confidence to the business.  For this year, the Kenyan is expecting the political situation to return to normal

The economic growth of Kenya has decelerated in 2017 due to drought, weak credit growth, security concerns, rise in oil prices, political instability. However, the GDP growth for 2018 is expected to grow at 5.3% due to the completion of infrastructure projects, resolution of slow credit growth and strengthening of the global economy and tourism sector.

With its young and growing population, dynamic private sector, skilled workforce, improve workforce, new constitution and pivotal role in East Africa, Kenya has the capacity to improve its economic situation. However, it is important for the country to solve many social issues for instance poverty, inequality governance, skill gaps between markets requirements and education programs amongst others.

There was a decline in FDI projects down at 57.9% as well as the Capital Investments which declined by 55.5% in Kenya.  This can be explained by uncertainty with Brexit, political situation, amongst others. Nevertheless, with significant increase in FDI inflows since 2010, Kenya became one of the largest recipients of FDI in Africa.

The sectors attracting FDI are Telecommunication, Banking and Tourism, Construction (Real Estate), Renewable and Geothermal Energy, Infrastructure, Agriculture and Manufacturing. Europe remains the leading source of FDI to Kenya at 45%, where 23% are from the United Kingdom followed by France and Netherland. Asia, is the second largest investor to Kenya with China, India and Japan being the main players

On the international level, Kenyan has been ranked 91st out of 137 countries on the Global Competitiveness Index 2017 – 2018 where the most problematic factors for doing business are corruption, access to financing and tax rates.  As per the World Bank Doing Business Report 2018 and Mo Ibrahim Index of African Governance 2017, Kenya has been ranked 80 and 13 respectively.

The Kenyan expect that 2018 will be the year of economic and political stability to boost the investment and productivity of the country.

For Ivory Coast

Despite some fears during the first semester 2017 relating to a series of mutinies in the army, foreign investments have been constant in the Ivory Coast with multinationals setting up subsidiaries and large construction sites being visible across the main city, Abidjan. Even though some prominent sectors such as cocoa trading encountered some difficulties linked to its low market value on the stock exchange, once more a growth rate of 8,1% is expected for the Ivory Coast for the year 2017 - 2018.



Considered as an economic giant in West Africa, coupled with the business opportunities, that the Ivory Coast has also emerged as the platform for several international forums and conferences focusing on the development and future of Africa.

Some of those international events hosted in Abidjan include The Africa 2017 Forum, the Belgian Princely Mission, Africa – EU business Forum and Summit, the Africa Green Forum, AfricTalents Forum, the Mauritian BOI Mission, ICASA 2017 (AIDS Forum) amongst others.  These events have strengthened the country’s position as the hub to boost development throughout the continent.

In 2017, the sectors of construction, IT and Agro-industry were those that attracted the most Foreign Direct Investment (FDI).  With regards to the source of FDI, Morocco is on the top list followed by France, USA, England and China. It is expected that in 2018, leisure and Hotel sectors will witness an investment boom, with international brand names such as Accor Hotel, Hilton, Movenpick, Ritz, and 4 seasons, due to invest in luxury hotels in Abidjan. Major investments are also expected in the field of transport infrastructure (Urban train, roads, dams).

On the international level, as per the World Bank Doing Business Report 2018 and Mo Ibrahim Index of African Governance 2017, the Ivory Coast has been ranked 139th and 20th respectively.

As far as Ivory Coast is concerned, the outlook for 2018 is optimistic, based on the numerous projects in progress, as well as the implemented measures on the continental level, to facilitate projects financing namely in Agro-industry, infrastructure, energy and education sectors.