Category Archives: Business

South Africa’s Bidvest Group profit rises on food business African conglomerate Bidvest Group reported an 8.6 percent rise in annual profit on Monday, buoyed by its food service business.

Bidvest, whose business spans auto showrooms, shipping and catering, said diluted headline earnings per share totalled 1,882 cents in year to end-June, slightly better than the mean estimate of 11 analysts in a Reuter’s poll.

Headline EPS is the most widely watched profit measure in South Africa and strips out certain one-off items.

Bidvest is largely insulated from tough economic conditions at home thanks to its large food business in Asia and Europe, where it makes about half of its sales.

Sales rose 11.6 percent to 204.9 billion rand ($15.41 billion).


Africa: Uhuru Kenyatta to Revive Ailing African Peer Review Mechanism

Kenya’s President Uhuru Kenyatta is leading efforts to give a fresh impetus to the African Peer Review Mechanism (APRM), which was initiated 12 years ago to institutionalise good governance and democratic leadership on the continent.

The Kenyan leader, who was elected APRM forum chairperson in June, will convene a summit of heads of state on September 11 to resolve the problems that have frustrated the initiative, including failure by states to fund activities and reluctance by some countries to be peer-reviewed.

The APRM was the brainchild of former South African president Thabo Mbeki, who led other African heads of state in signing onto a programme that would see countries agreeing to be assessed by fellow African countries and encouraged to improve their governance.

It was seen as a major step towards ensuring Africans were finding solutions to African problems, and taking charge of the continent’s destiny. With the APRM defining “good governance” and “democracy” in the African context, it was envisaged to enable African countries to conduct their own appraisals, have constructive dialogue with each other and share best practices among themselves.

In APRM, the region’s leaders not only saw an African-owned and African-driven system that would help Africa improve its governance; but they also saw a political tool that could help them keep the West from poking its nose in its affairs.

It helped many countries to open up the political space and its reports have been used by donors, foreign investors and nations such as Ghana to build their international reputation as reformers and well-governed countries.

However, the APRM has faded fast from the collective memories of most Africans because a number of the 35 countries that have signed up -don’t pay their minimum $100,000 annual contribution.

Last year, Djibouti requested to be reviewed, but APRM said it was too broke to travel to the country to conduct the review – which costs anything between $1 million to $3 million. Another problem facing APRM is that very few countries that have signed up are not willing to be reviewed. To date, only 17 out of 35 member countries have been reviewed. In 2006, Ghana completed its first review, followed by Rwanda and Kenya in 2007.

Algeria and South Africa did their review in 2008 while Benin, Uganda, Nigeria and Burkina Faso in 2009. Mali, Mozambique and Lesotho followed in 2010, Mauritius in 2011, Ethiopia; in 2012 and the last countries to be reviewed were Sierra Leone, Tanzania, Zambia in 2013.

And those that have been reviewed more often than not refuse to implement the recommendations and reforms proposed by the review team.

S.Africa to impose 10 pct steel import tariff – industry group Africa’s government will impose a 10 percent import tariff on steel imports to protect the struggling industry, with the possibility of hiking them further, an industry body said on Monday. Cheap imports from China are hurting steel makers in South Africa, which currently does not have import duties on steel. As many as 200,000 jobs are at risk due to a global supply glut of the commodity, ArcelorMittal South Africa has warned.

“The first application for tariffs at 10 percent of the WTO bound rate will be signed off next week with conditions which are not yet finalised,” Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said in a statement, without giving a firm date for a tariff hike.

The World Trade Organisation (WTO) allows countries to raise tariffs by up to 10 percent to protect local industries.
The government declined to comment, but said in a statement it was considering “various tariff applications”. Chief executives in the steel industry and labour unions also said the government in a meeting on Friday had committed to introducing a 10 percent tariff on imported steel to protect the industry.

One of the conditions for the tariff hike was that the steel industry could not raise the price of steel to “unaffordable levels”, SEIFSA said in the statement, without giving details. ArcelorMittal South Africa has warned it could close a plant that employs 1,200 people while smaller rival Evraz Highveld Steel and Vanadium has been placed in the hands of administrators.

“It is a crisis that I have never seen, it’s unprecedented in my history in the steel industry,” SEIFSA President Ufukile Khumalo told reporters. ArcelorMittal Chief Executive Paul O’Flaherty told Reuters last week the firm was willing to cap its profit margin if the government imposed import duties on imported steel.

Jobs are a sensitive issue in South Africa, where unemployment is around 25 percent, and the government has urged the industry not to shed jobs. In a statement, the trade and industry and the economic development departments urged steel companies to submit anti-dumping applications to South Africa’s International Trade Administration Commission, which has the power to raise tariffs.

The government will have a follow-up meeting in about four weeks when companies have submitted their anti-dumping applications.

Mwana Africa returns to diamonds

Pan African mining group Mwana Africa said it would restart underground mining at its Klipspringer diamond mine in South Africa and evaluate the viability of reprocessing residues at the mine after gold production from Zimbabwe stagnated.

Overall profit for the year to March fell sharply from $50 million (R636m) to $7m, underlining a difficult year with low gold and nickel prices.

“The past year has proved to be particularly challenging for the Mwana Group as a whole as the prices of our two principal products, gold and nickel, weakened and have continued to fall since the financial year-end,” Mwana Africa executive chairman Yat Hoi Ning said.

This has prompted Mwana Africa to focus on its diamond project in South Africa, the Klipspringer mine.

The company said the recovery of diamonds at the Klipspringer residue treatment joint venture had reached planned capacity, although the capacity was below anticipations.

“Consideration is now being given to the reprocessing of coarser tailings,” it said.

Current projects to “recover fine diamonds from old slimes residues” had continued although the company said the resource from slimes was limited, hence the move to reprocess other residues.

Progress has also been made during the period with restarting its nickel smelter facility and kick-starting the Trojan nickel mine.

Money to restart the projects was secured through a fully subscribed $20m bond issue.

It said resumption of smelting operations would give the company ample capacity to process its own concentrates into nickel leach alloy.

The Trojan nickel mine will focus on extracting ore from higher-grade bodies. The mine had mothballed in recent years owing to low nickel prices that rendered operations unviable. Mwana Africa also runs the Freda Rebecca gold mine, where production stagnated in the past year due to equipment failures and problems in accessing high-grade ore zones.

“These problems have now been rectified and I confidently expect that our underground and surface operations will attain their full potential during the 2016 financial year,” Hoi Ning said. – Tawanda Karombo

Investors place bets on Africa

From milk churning in Zimbabwe to rose growing in Ethiopia, private equity investments in Africa have returned to pre-crisis levels and should keep rising as funds seek big returns in far-flung markets.

Private equity deals in Africa totalled $8.1 billion (R103.1bn) last year, the second highest on record after the $8.3bn posted in 2007, according to the African Private Equity and Venture Capital Association (AVCA).

This year could be even bigger as investors tired of low returns in developed markets look to cash in on the rapidly emerging middle-class consumers in Africa.

Private equity deals in Africa between 2007 and 2013 earned 60 percent more than the MSCI emerging market index, AVCA said.

Traditionally private equity buyouts in Africa have been supported by development organisations but there are signs over the last year that global funds are taking more aggressive steps to tap into a continent of 1 billion people.

“The growth story in Africa is compelling,” said John van Wyk, the head of Africa at Actis, an emerging-market focused fund.

“Global funds are realising they need to have some sort of Africa strategy and that hasn’t always been the case,” he added.

Debut entries
Large US private equity firms, including TPG and Kohlberg Kravis Roberts (KKR), have made their first investments in Africa in the last year.

The New York State Common Retirement Fund, one of the largest US pension funds and worth about $180bn, said in April it could invest up to $5bn in Africa over the next five years to boost returns and diversify its portfolio.

TPG said in June it would invest up to $1bn in African companies under a tie-up with Sudanese billionaire Mo Ibrahim’s Satya Capital, which has interests ranging from health care in Nigeria to manufacturing in Tanzania.

Investments are focused on fast-moving consumer goods, financial services, health care and telecommunications.

Bigger funds are looking at infrastructure projects, including filling massive unmet electricity demand across Africa.

KKR last year invested $200 million in Afriflora, a rose farm in Ethiopia, one of Africa’s fastest-growing economies.

Though interest in Africa is rising it comes off a very low base with even large funds raising only about $1bn, a meagre sum compared with developed markets.

More money was raised in India last year than in all the 55 countries in Africa.

Low base
“While there has been more capital raised, its low compared to other geographies,” said Marlon Chigwende, the managing director of Carlyle’s sub-Saharan African business.

High returns are also far from guaranteed. Food and drinks giant Nestlé offered a dose of reality last month, saying it was cutting 15 percent of its workforce in Africa because it had over-estimated the growth of the middle class. Still, middle-class households in 11 key sub-Saharan African countries, excluding South Africa, are set to triple to 22 million by 2030, according to Standard Bank. “Things can take a long time in Africa so people should not expect instant results,” Chigwende added.

Many fund managers believe African investments have longevity because money is increasingly flowing to markets outside South Africa. Nigeria and Ethiopia, Africa’s two most populous countries, are often cited as new opportunity areas. Verod, a small Nigerian private equity firm, earned 15 times its investment this year when it sold its stake in GZI Industries.

While optimism is increasing, major obstacles remain, from huge infrastructure and skills deficits to lingering political instability. “There is risk everywhere. There is risk on Wall Street,” said Muvirimi Kupara, the head of Spear Capital, a Zimbabwean fund with interests in dairy processing.