African Business News

Africa’s export markets set to boom in the wake of ports expansion

With Africa’s overall port utilisation capacity now exceeding 70%, ports authorities and terminal operators are actively calling for partners in development to equip Africa’s ports and harbours for post-neo-panamax shipping requirements. As international trade volumes increase at growth rates of 6-8% per year, expansion projects in Africa follow suit and gain momentum. Trade facilitation and port reform aim to propel Africa’s export markets to compete on a global stage. The establishment of modern and efficient seaports has climbed to the top of Africa’s transport agenda to enable port connectivity and increase cargo throughput so much so that port and corridor expansion is not only creating new business opportunities for port city development across the sub-Saharan region but now also opening up new access to hinterland areas and strategic trade corridors.

Against this backdrop, the 6th annual African Ports Evolution Forum unites ports authorities, terminal operators, investors and government from more than 29 countries to boost intra-African trade, reduce port congestion, increase port connectivity and throughput and identify new business opportunities to boost expansion and modernisation.

Port expansion and upgrade projects currently underway across Africa are valued in the billions. The value of ports projects underway in Tanzania currently total US $13.6 and Mozambique has already witnessed investments of US $8.3 billion towards ports upgrade and expansion in 2017 alone. African Ports Evolution Forum explores the myriad opportunities now available for the generation of new revenue streams at African ports through concessions, systems upgrades, expansion projects and more, unlocking qualified channels for ports’ respective development pipelines in line with the 2040 Vision for Africa’s transport sector. The 2040 Vision for Africa's transport sector is an integrated African continent where transport infrastructure and services enable the free movement of goods and passengers by providing efficient, safe, secure, reliable and seamless transport options.

The Honourable Joe Maswanganyi, South Africa’s Minister of Transport will deliver the keynote address at the event this October and will be joined by Africa’s maritime leaders including Nozipho Mdawe, Secretary General of the Ports Management Association of Eastern and Southern Africa (PMAESA) and The Honourable Nancy Karigithu, Principal Secretary for Shipping and Maritime Affairs at Kenya’s Ministry of Transport, Infrastructure, Housing and Urban Development, among others.

Two co-located events take place alongside the African Ports Evolution Forum 2017: the African Rail Evolution Forum focussing on rail rehabilitation and maintenance and Trade and Investment Kwa-Zulu Natal’s Export Week promoting KwaZulu-Natal's export businesses and industries. Over 100 exhibitors will showcase their products and services to a qualified audience of hundreds of Africa’s leading maritime decision makers.

Morocco’s Current Account Situation Positive Despite Rising Energy Imports: BMI

“Morocco’s current account deficit widened to 4.4% of GDP in 2016, up from 2.1% of GDP in 2015, amid rapidly rising imports and sluggish exports. We now forecast the current account deficit to shrink to 3.5% of GDP in 2017 and 3.3% in 2018, benefiting from the recovery of key exports sectors,” reads the report.

Sector-Wide Export Growth

Export growth is rising in Morocco. BMI attributes this growth to strong government support and an improving macroeconomic outlook among eurozone trading partners.

“The all-important phosphate sector has been on a positive trajectory since the start of the year, with exports expanding by 8.5% y-o-y over January-May 2017. While we expect prices to remain relatively subdued over the coming years, investment by state-owned company Office Cherifien Phosphates (OCP) will support production growth and exports.”

The auto sector is also predicted to stay on a steady growth track owing to Morocco’s position as a “destination of choice for foreign auto companies.” The report, however, points out that over the first few months of 2017, growth has been modest.

Spain and France accounted for 45 percent of Morocco’s total exports in 2016 and, while this is not expected to change for the current year, Morocco’s strategic expansion into Sub-Saharan Africa is predicted to play a key role in future export growth.

Regarding Imports

BMI is predicting import growth to remain “robust” over the coming years, despite a recovering agricultural sector decreasing the need for food imports. This is expected to lessen the effect of high energy imports but not affect import growth adversely.

“Morocco is a net energy importer, with energy accounting for close to 25% of Morocco’s import bill in 2014. Therefore, the country has been a net beneficiary from the slump in oil prices since H214. As oil prices recover, demand for energy imports will also pick up.”

The report explains that the government’s plan to introduce renewable energy sources will effectively diminish the need for energy imports but cautioned this will take years to manifest itself.

Risks to External Stability?

BMI’s research indicates that the risks to external stability will remain low for the foreseeable future. They attribute this to Morocco’s continued strategy of nurturing foreign investment in the auto, aeronautic, energy, and tourism sectors, and the continued implementation of business-friendly reforms.

“Morocco can also rely on strong remittances infows. In 2016, the balance of current transfers (remittances account for the bulk of it) came in at 7.9% of GDP, and we expect more gains over the coming years. At a time when Morocco is planning to gradually move towards a flexible exchange rate regime, strong ?nancing capacities support our view for a positive transition.”

Kenya launches national trade policy to boost forex earnings

Kenya on Monday launched a National Trade Policy that aims to boost the country’s foreign exchange earnings, a senior official said Monday.

The new policy adds impetus to the robust trade policy reforms that the country has pursued under regional and multilateral trade arrangements.

“The new trade policy articulates provisions that are geared toward promoting efficiency in the growth of domestic trade through transformational measures that address the constraints impeding against the development of the wholesale, retail and informal sectors,” said National Treasury Cabinet Secretary Henry Rotich.

Speaking during the opening of the Kenya Trade Week, Rotich said currently most of foreign exchange earnings are from foreign direct investments.

“The national trade policy will help to increase volume of exports so that we increase foreign exchange earnings,” he said.

He said the policy will provide a coordinated approach on how the government addresses trade issues in order to improve the business climate for Kenyan manufacturers.

Rotich said that the policy will help reverse the recent trend where the pace of growth of imports is growing faster than the growth of exports.

“This is putting a lot of pressure on the Kenyan shilling as importers need foreign currency to buy imports,” he said.

Industry and Trade Cabinet Secretary Adan Mohammed said this will contribute to strengthening of regional integration and will in turn anchor Kenya as a dependable and predictable trading partner.

Mohammed said trade policy was launched at a time when the global trade landscape is facing emerging challenges. Over 70 percent of global trade is made up of manufactured goods.

“Intra-Africa trade averages about 12 percent whilst Kenya’s share of both the global pie as well as in Africa has been facing serious bottlenecks leading to a huge balance of trade deficit with most of our trading partner,” said Mohammed.

The East African nation’s trade imbalance has been increasing in the past decade largely driven by demand for manufactured goods that are imported.

Rotich said that trade imbalance is a serious issue that the government wants to address. He noted that the manufacturing sector presents the best hope for Kenya to increase its exports.

The government data indicates that the manufacturing sector contributes about 10 percent of Kenya’s gross domestic product (GDP).

“We plans to double the figure to 20 percent in the next five years by implementing a number of measures,” Rotich said.

Besides the policy, the Kenyan government also launched the Buy Kenya Build Kenya Strategy; Guidelines for Kenya’s Trade and Investment Missions; the National Export Development and Promotion Strategy for Kenya 2017-2022; the National E-Trade portal; The National Trade Facilitation Committee (NTFC); and The State Department for Trade Website.

East Africa containerised trade volumes grow 1% Q1 2017

The 2017 First Quarter East Africa Trade Report issued by Maersk Line Eastern Africa - a member of A.P. Moller-Maersk - reveals that aggregate trade levels in the region have improved slightly since 2016, resulting in overall year-on-year growth of 1%.
According to the company's MD, Steve Felder, in line with what was reported last year, there continues to be a noticeable disparity in performance between the two core trade corridors of East Africa. Container trade in the Northern Corridor, which serves Kenya, Uganda, South Sudan, and parts of Rwanda, expanded by 1%, whereas the Central Corridor, serving Tanzania, parts of Rwanda, Burundi, Zambia, Malawi and DRC, saw a contraction of 12%.

“While conditions in the East Africa region have continued to be challenging due to political instability, ongoing macro-economic headwinds and drought conditions affecting certain countries, we’re seeing healthy competition between the two corridors, both fighting for position in terms of some of the ‘swing’ countries that could export or import cargo through either corridor, specifically Rwanda, Burundi, Uganda.”

The Northern Corridor

While the Northern Corridor (serving Kenya, Uganda, South Sudan, and parts of Rwanda) import market experienced year-on-year growth of 6% in the first quarter, it declined slightly (by 1%) from the last quarter of 2016, says Felder. “In Kenya, liquidity is still very tight, caused by last year’s interest rate capping on the bank lending rate. In the next quarter we are expecting to see a slowdown in the import market as we approach the Kenyan elections on 8 August 2017, based on a natural cycle that we see in every election period, whereby the market drops by around 20% as importers seek to remain liquid, as opposed to having their cash tied up in inventory.”

Felder goes on to say that a number of factors have resulted in a fairly sluggish start to the year with regards to exports, culminating in a decline of 10% compared with the same period last year. “The poor performance exhibited by exports is largely a result of the drought that’s taken hold of Kenya and Uganda, severely impacting the agro-economy and exports of agro-based products, which are the main exports from the Northern Corridor.

“In Kenya, which represents around two-thirds of containerised demand in the corridor, tea – the biggest export in containers by volume – saw a market drop of about 20-25% during the first quarter. There was also a reduction in soda ash volume – an input material for the manufacturing of glass – given the changes in market demand, as well as fish exports from Lake Victoria due to over-fishing.”

Encouraging developments

Felder does, however, point out some encouraging developments in the budget in order to stimulate local beneficiation and value-adding manufacturing. “An important factor, impacting largely in a positive way, are duty changes from the most recent budget. For example, the reduction in corporate tax for vehicle assembly companies, duty exemption on goods exported to special economic zones (SEZ) and imports by enterprises licensed under the SEZ Act to be exempted from import declaration fees.”

In terms of other developments in the Northern Corridor, Felder says there is still some sluggishness in the Ugandan economy, accompanied by static private sector activity, while the South Sudan situation has yet to improve, characterised by political instability and a shortage of foreign currency, resulting in many infrastructure projects coming to an untimely standstill.

Continued slowdown in the Central Corridor

The containerised market in the Central Corridor (Tanzania, Burundi, Zambia, Malawi, DRC, and parts of Rwanda) represents a very different picture to that in the Northern Corridor, having contracted in both directions, says Felder. “Compared to the same period in 2016 last year, the Northern Corridor import market experienced growth of 6% in the first quarter 2017 versus the first quarter of 2016. This is, however, a decline of 1% from the last quarter of 2016.

“In the domestic Tanzanian market, there have been a number of duty increases on various products, such as cement, paper, sugar and furniture, which reduces the buying power and ultimately the levels of demand for those products. Part of this is to stimulate local industry, such as sugar production, but there is also a definite drive for increased tax collection in the country.”

He adds that while the export ban of mineral sands out of Tanzania has also had an impact on the mineral industries from DRC, Zambia and Rwanda, the Rwandan market appears to present a positive outlook.

Regarding the rest of the corridor, Felder says that political uncertainty and conflict continue to be a challenge. “In Zambia, although the currency has somewhat improved, it still remains relatively weak in comparison to where it was a couple years ago. The situation in Burundi continues to persist, whereby the country is in the middle of a major conflict with a lot of uncertainty, similar to the political uncertainty being experienced in DRC, with the indefinite postponement of elections that were set to take place in November of last year.”

Vital infrastructure development

Felder concludes by commenting on the progress of key infrastructure development projects that continue to expand in the region, improving trade efficiency and reducing the cost of trade, thus ultimately driving market growth:
With about 18 months having passed since phase 1 of the second container terminal in Mombasa became operational, some much-needed capacity has been added to the port. The Kenyan port authorities are now intending to relocate some mobile harbour cranes to the new terminal in order to increase its capacity and enable it to accommodate two vessels concurrently. As a result of this unlocking of capacity, we’ve seen a period of relatively efficient operations at the port and no congestion, which certainly improves the trade velocity for our customers.
The construction of the Standard Gauge Railway linking Mombasa and Nairobi is close to completion and is expected to be operational by 1 July 2017. This railway will have a direct link to the port of Mombasa and straight into the newly constructed inland container depots in Nairobi. By virtue of this project, a percentage of imports will move from road to rail, which will potentially reduce road congestion and create a more environmentally friendly footprint in the country. This should hopefully also reduce costs for importers and ultimately consumers.
There is also another Standard Gauge Railway in Tanzania, for which construction has just started. The concept of this development is very similar to that in Mombasa, and will ultimately link Tanzania to a number of Hinterland countries.

Outlook

Looking forward, the development along the Northern Corridor will very much depend on the Kenyan elections and the extent to which they are peaceful. A.P. Moller – Maersk expects, nevertheless, a short-term reduction in the import market, followed by a very quick recovery after the August elections. Furthermore, if the interest rate cap decision is reviewed, liquidity could increase, boosting trade and increasing buying power.

For the Central Corridor, the company does not expect to see much fundamental change for the rest of the year. On the long term, “we hope to see developments in mineral exports and we are also excited about the Rwandan market which is a buoyant economy and certainly seems to be taking a strong position in terms of becoming a key trading hub over time,” asserts Felder.

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