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South Africa GDP Growth Slows to 0.2%

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South Africa Economy
  • South Africa GDP Growth Slows to 0.2%

South Africa’s economic growth slowed in the third quarter as factory production and trade contracted, complicating the government’s task of boosting output to avoid a possible credit-rating downgrade to junk next year.

Gross domestic product expanded an annualized 0.2 percent in the three months through September compared with upwardly revised growth of 3.5 percent in the preceding quarter, the statistics office said in a report released on Tuesday in Cape Town. The median of 19 economist surveyed forecast 0.6 percent growth compared with unrevised expansion of 3.3 percent in the second quarter. The economy expanded 0.7 percent from a year earlier.

S&P Global Ratings last week affirmed the nation’s BBB- assessment, the lowest investment-grade level, while warning that political turmoil has distracted from reforms to boost growth. The economy will probably expand at the slowest pace this year since a 2009 recession. Slow growth will make it more difficult for Finance Minister Pravin Gordhan to meet his pledge to narrow the budget deficit to 2.5 percent of GDP by 2020, from a projected 3.4 percent this year, and to limit government debt, according to Nicky Weimar, an economist at Nedbank Ltd.

“The only conclusion you can draw from a 0.2 percent growth rate is that there is no momentum and it seems to suggest there is very little underlying confidence,” Weimar said by phone. Ratings companies want to see “that we start to implement the sort of policies that will get us to a faster growth rate,” she said.

Factory output, which makes up about 13 percent of GDP, contracted by an annualized 3.2 percent from the previous quarter and trade shrank by an annualized 2.1 percent, the statistics office said. Mining production rose 5.1 percent and the finance industry expanded by 1.2 percent.

Gordhan, 67, has been leading efforts to avoid a cut to junk while wrangling with President Jacob Zuma over control of the Treasury and state-owned companies. That and delays in passing new mining and anti-money laundering laws and a failed attempt by senior African National Congress officials last week to oust Zuma have fueled perceptions of political turmoil and policy uncertainty.

High Unemployment

Low commodity prices, the worst drought in more than a century and weak export demand have weighed on output and the economy will probably expand 0.4 percent this year and 1.2 percent in 2017, according to the central bank. That won’t create the jobs required to reduce the nation’s 27 percent unemployment rate, Governor Lesetja Kganyago said on Nov. 30.

“It’s certainly not enough growth to assist with the social issues like unemployment or income growth and this will keep ratings agencies nervous about the country’s rating,” Kevin Lings, chief economist at Stanlib Asset Management Ltd. in Johannesburg, said by phone. “It’s clear that South Africa is facing a crisis in economic activity.”

The rand gained 0.6 percent to 13.6511 per dollar by 10:37 a.m. in Johannesburg on Tuesday. Yields on rand-denominated government bonds due December 2026 fell three basis points to 8.95 percent.

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.

Economy

Once Again The National Grid Collapsed

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power project

Nigeria’s electricity transmission system, also known as the National grid, has suffered another system collapse, plunging Lagos, the country’s commercial capital, Kano and other major cities into a blackout.

The collapse, which occurred about 11.00 am on Tuesday, was confirmed by two of the country’s electricity distribution companies in separate messages to their customers.

“We regret to inform you that the power outage being experienced across our franchise – Kaduna, Sokoto, Kebbi and Zamfara states – is as a result of the collapse of the national grid,” Kaduna Electric said on Twitter.

Eko Electricity Distribution Company Plc, in a text message to its customers, said: “Dear customer, there is a partial system collapse on the national grid. Our TCN partners are working to restore supply immediately. Please bear with us.”

The grid, which is being managed by the government-owned Transmission Company of Nigeria, has continued to suffer system collapse over the years amid a lack of spinning reserve that is meant to forestall such occurrences.

Spinning reserve is the generation capacity that is online but unloaded and that can respond within 10 minutes to compensate for generation or transmission outages.

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Economy

FG Consider Diversification To Generate Revenue

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Naira

As revenue from oil nosedives following incessant global price fluctuations, the Federal Government is now channeling efforts to the development of minerals in the mines and steel industry to shore up foreign exchange earnings.

Officials of the Federal Ministry of Mines and Steel Development said on Wednesday that while there had been concerted efforts to develop various minerals in the sector, much emphasis had been placed recently on the development of bitumen, barite and gold.

They told our correspondent in Abuja that the government through the mines and steel ministry was striving to diversify the Nigerian economy away from oil as the major foreign exchange earner for Nigeria.

They also confirmed that large quantities of gold had been discovered in various locations in Zamfara and Osun states.

Asked if the government had initiated programmes to explore the minerals and boost revenues now that the country’s income had plunged, the Special Assistant on Media to the Minister of Mines and Steel Development, Ayodeji Adeyemi, replied in the affirmative.

He said, “Indeed, the ministry has the mandate to generate revenue and diversify the economy through the mines sector.

“And bitumen is one of the key resources which the nation is abundantly endowed with, that has been identified for strategic development.”

To buttress his position, Adeyemi shared some recent presentations of the Minister of Mines and Steel Development, Olamilekan Adegbite, where the minister said his ministry was gathering data on some bitumen fields across the country to attract investors.

“A lot of people are interested in bitumen, which is coming from both local and foreign investors. However, we are still acquiring data in some of the fields,” the minister stated.

On barite, the minister said the mines and steel ministry was working on raising the quality of barite produced in Nigeria to an internationally acceptable standard, as certified by the American Petroleum Institute.

Adegbite said his ministry had contracted a consultant to help raise the standard in the local production of barite to ensure that oil industry players make use of barite produced in Nigeria as against importing the commodity from other countries.

He said, “Barite is a critical weighting material in drilling fluids used in the oil industry. We have a lot of barites but the issue is that it is not produced to API standards. However, we are putting a system in place which would be ready to launch in about July.

“We have got the millers who can produce barite to API standard. Hence we will be able to compete with foreigners and it would save Nigeria a lot of foreign exchange in import substitution.”

On the development of gold, officials at the ministry further stated that the commodity had been aggregated for the production of bullion bars and that this was the first time that such aggregation was happening in Nigeria.

They stated that the gold was sourced from artisanal miners, while the final refining to bullion was done in Turkey.

The sources stated that the ministry had registered two refineries that would now refine to LBMA standard when they come on stream. LBMA is the de facto standard, trusted around the world.

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Economy

Nigeria Sovereign Investment Authority Generates N160.06 Billion in 2020

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Naira Exchange Rates - Investors King

The Nigeria Sovereign Investment Authority (NSIA) generated revenue of N160.06 billion in 2020, according to the latest audited financial reports announced by the Managing Director of NSIA Mr. Uche Orji.

The NSIA income came from devaluation gain of N51 billion, and core income of N109 billion compared to N33.07 billion in 2019.

But Orji lamented: “Covid-19 adversely affected logistics around infrastructure projects, especially the toll road projects and the presidential fertiliser initiative.

Despite the pandemic, the Authority achieved 33 percent growth in Net Assets to N772.75 billion compared to the previous year’s performance of N579.54 billion.

Orji said the NSIA “received additional contribution of $250 million; and provided first stabilisation support to the Federal Government of $150 million withdrawn from Stabilisation Fund last year.”

The same year, the NSIA received $311 million from funds recovered from the late General Abacha from the United States Department of Justice and Island of Jersey for deployment towards the Presidential Infrastructure Development Fund (PIDF) projects of Abuja-Kaduna-Kano Highway, Lagos Ibadan Expressway and Second Niger Bridge.

In response to COVID-19, Orji said: “NSIA partnered the global Citizen, a not-for profit group, to form the Nigeria Solidarity Support Fund. Separately NSIA acquired and distributed oxygen concentrators to the 21-teaching hospital as part of corporate social responsibility; in addition to staffing support to the Presidential taskforce on COVID-19.”

In 2020, the NSIA “invested additional capital into NG Clearing, the first derivative clearing house in Nigeria to maintain NSIA’s shareholding at 16.5 per cent following the company’s rights issue of 2020″ Orji said.

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