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German Investors Bet on Positives in SA

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Cape Town – President Jacob Zuma’s State of the Nation address (SONA) and the ensuing debate on it in parliament, show the great emphasis the South African government places on attracting investors and avoiding further downgrades by ratings agencies, Walter Lindner, German ambassador in SA, told Fin24 on Friday.

In his view, this focus by the SA government shows the realisation that economic matters touch all lives.

“The emphasis of the SA government on the economic topic is important for us. Of course there is a lot of talk about what is working well in the country and what not. This is fair, because only when governments improve can it lead to greater and greater benefits from implementing that which works,” said Lindner.

While the European Union as a whole is SA’s biggest trading partner, Germany as a single nation is South Africa’s second largest trading partner after China. In 2015 bilateral trade between SA and Germany was €15bn.

Accordingly, German investors account for one of the biggest investment groups in SA. Apart from investments in the motor vehicle industry, they are also active in, among others, the chemistry and renewable energy sectors.

There are about 600 German companies in SA, providing a total of about 100 000 jobs. These companies include global players like Siemens, Mercedes Benz, Volkswagen and BMW. There are also many family-owned small- and medium-size enterprises invested in SA over many decades. Lindner emphasised that these companies would not be in SA if they did not see opportunities here.

“Investors come and do their own checks and won’t come to a country just because a government tells them to,” Lindner said.

He said many of these businesses are planning substantial increases in their investments in the country. Although there will always be some things that could be improved, this shows how important it is to see the positive aspects of SA, Lindner said.

Investors usually want security, easy economic conditions for doing business, infrastructure, a stable working environment, a good legal framework and certainty on what they can expect.

In this environment labour unions also have a necessary role to play, in his view.

“A secret to success in Germany is that reason prevails between labour unions and employers. If employees ask for too much, the company will end up having to close. Therefore, one needs a respectable balance between labour and employers,” explained Lindner.

“Such a balanced view should take into consideration that strikes could lead to a company losing market share to a competitor. One must be aware that you could maybe get more money for a certain time, but then there might not be a company left after a while.”

To Lindner the German model of having workers represent at least a third of decision makers on company boards is a good one, because it brings a sense of ownership in the decision making process.

“Of course there will always be conflicting interests between labour and employers, but the German approach is just a model to show even in the labour sector you need to respect your partners,” he said.

As for the view that SA can be seen as the gateway to the rest of Africa, Lindner said this point is still valid as SA is the only industrialised hub in Africa. At the same time no country can afford to rest on its laurels and allow its competition to gain the upper hand.

“Governments must ensure a country remains in a good position and perform well,” said Lindner.

“South Africa is a unique country with a sad apartheid history. Of course this had to be corrected. Germany is supportive of an inclusive economy and supports black economic empowerment. Yes, there have been injustices of the past, but it is still important for both sides to profit.”

For the future of SA one must invest in training people and he is proud of what some German companies have managed to do in terms of their BEE score cards – especially regarding education and skills programmes.

“In a world where commodity prices are down, I think if it also important for SA to look at attracting investors in areas like manufacturing and tourism. Investors are important for growth and the creation of jobs,” said Lindner.

“Yes, there are challenges in SA, but there are also positive things, otherwise there would not be 600 German companies active in the country. We are here to help overcome them.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Economy

AfCFTA: Nigeria-South Africa Chamber Advocate Single Africa Passport, Free Visa

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African Continental Free Trade Area (AfCFTA)- Investors King

The Nigeria-South Africa Chamber of Commerce (NSACC) has called for a single Africa passport and a free visa to ensure the success of the Africa Continental Free Trade Area (AfCFTA) agreement.

Speaking on Thursday in Lagos during the chamber’s September Breakfast Forum, with the theme: `Perspectives on the Africa Continental Free Trade Area in Relation to Nigeria’, its President, Mr. Osayande Giwa-Osagie noted that AfCFTA would boost intra-African trade by 22 percent, adding that its implementation would impact positively on the Nigerian economy.

AfCFTA is a single continental market that adopts free flow of goods, services, and capital, supported by the free movement of persons across Africa.

Giwa-Osagie however said Nigeria must diversify its economy in order to harness the gains of the agreement.

“Current intra-African trade rated at 15 to 17 percent is low and the AfCFTA is expected to boost intra-African by 22 percent. Challenges to its implementation are lack of infrastructure, political instability and lack of economic diversification.

“This gives rise to the need for Nigeria to diversify its economy to harness the gains of the agreement. Given the importance of the free movement of people, there is a need for a free visa for Africa and a single Africa passport.

“While the implementation would help boost the Nigerian economy, the impact would be limited if there are no free movement of people,” he said.

Mr Jesuseun Fatoyinbo, Head, Trade and Transactional Services, Stanbic IBTC Bank, said the business community needed more clarification on tariff reduction or elimination under the agreement.

According to him, the little information available to corporate organisations with regards to tariffs may lead to holding back on investments.

“We have noted increased interests from global multinationals and other corporates in setting up facilities in Africa aimed at serving the continent and exporting abroad.

“So more transparency around tariff reductions both in terms of timelines and details of goods could prompt companies to act,” he said.

Fatoyinbo also called for more attention to the digitisation of trade processes across the continent. “Currently, trade in Africa is largely reliant on physical documentation and this is a major impediment. Policymakers need to prioritize regulatory amendments that allow for the digital signatures, a digital certificate of origin, digital bills of lading, and other documentation,” he added.

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Nigeria Borrows $4 Billion Through Eurobonds as Order Book Peaked at $12.2 Billion

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Eurobonds - Investorsking

The Federal Government of Nigeria has raised a fresh $4 billion through Eurobonds, according to the latest statement from the Debt Management Office (DMO).

Nigeria had set out to raise $3 billion but investors oversubscription peaked at $12.2 billion, enabling the Federal Government to raise $1 billion more than the $3 billion it announced.

DMO said “This exceptional performance has been described as, “one of the biggest financial trades to come out of Africa in 2021” and “an excellent outcome”.

Bids were received from investors in Europe, America, Asia and several local investors. The statement noted that the quality of investors and the size of the Order Book demonstrated confidence in Nigeria.

The Eurobonds were issued in three tranches, details, namely seven years–,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.

The DMO explained that the long tenors of the Eurobonds and the spread across different maturities are well aligned with Nigeria’s Debt Management Strategy, 2020 –2023.

The Eurobonds were issued as part of the New External Borrowing stipulated in the 2021 Appropriation Act. DMO noted that the $4 billion will help finance projects state in the 2021 budget.

Nigeria’s total debt stood at $87.239 billion as at March 31, 2021. However, with the $4 billion new borrowing, the nation’s debt is now $91.239 billion. A serious concern for most Nigerians given the nation’s weak foreign revenue generation and rising cost of servicing the debt.

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CIBN Banking and Finance Conference 2021: Structural Transformation and Growth

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Coronation Merchant Bank - Investors King

Today we highlight one of the sessions, ‘Economic Recovery’, at the recently concluded CIBN Banking and Finance conference. This was a hybrid event in Abuja, Lagos and partially virtual last week. The Covid-19 disruptions have created demand and supply shocks in the global system while unlocking new opportunities for growth.

Given the pre-existing financing challenges and growing spending needs, many developing countries are in dire need of financial support. As a result of the pandemic, the financing gap for the sustainable development goals increased by 70% (over USD4.2bn). The speaker on this session, Amina J. Mohammed, Deputy SecretaryGeneral of the United Nations and Chair of the United Nations Sustainable Development Group focused on structural transformation, technology, finance and sustainability.

Recent developments such as the allocation of the USD650bn in Special Drawing Rights (SDR) were highlighted during the session. Although the SDR offers improved liquidity into the system, Africa is set to receive only USD32.2bn (or 6.4% of the total amount). Therefore, it is important that the funds are channeled towards well-targeted sectors that can contribute to sustainable development.

The banking and finance sector plays a crucial role. The Africa Continental Free Trade Area (AFCFTA) agreement offers an opportunity for the financial sector to work within a continental market of 1.2 billion people. According to Amina J. Mohammed, three main actions areas will reshape the financial sector and support stronger recovery.

The first, better customer engagement with a dynamic range of relevant products and services that go beyond bank-based financing mechanisms and offer innovative financial products tailored to specific needs of business ecosystems. Second, the adoption of new operating models to drive efficiency and inclusion. Third, a deliberate focus on enabling sustainable development investing.

Furthermore, Nigeria’s banking and finance industry is well positioned to drive specific UN sustainable development goals such as inclusive and affordable credit, especially for micro, small and medium-sized enterprises. The industry can also provide support towards climate change.

Technology also featured in the discussion points. Undoubtedly, technology is a catalyst for growth across economies and the pandemic has further exposed the deficit within the sector across developing countries. Investments in digital infrastructure need to be rapidly expanded and scaled up to boost socio-economic development.

The speaker commended the FGN’s efforts on its push towards sustainable economic recovery. Some policy and regulatory reforms highlighted include, regulation of fintechs and related services to strengthen payment systems and regulate data protection; the green bonds which Nigeria first issued in 2017 in support of green projects, including solar energy and the modernisation of the Nigerian stock exchange that has given rise to a new operational structure and leadership.

These are laudable steps. However, we note that there is still room for improvement. To achieve double-digit GDP growth and sustainable development, structural transformation should remain on the FGN’s priority list.

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