MARCH UPDATES FINANCE

Monthly Finance & Infrastructure Update: March 2018 Finance| Focus Even though the global economy is looking bright, March showed signs of strain where risks such as protectionist measures reared its head, curbing the momentum in the economy’s upswing. The U.S Federal Reserve raised interest rates resulting in boosting growth forecasts for the next two years. The European private sector saw a slowing of growth, the least in the last 14 months and German business confidence fell to its weakest in the last 12 months. According to the “World Forecast Flash”, even though the economic outlook is brighter than previous years, the risks are also greater. The forecast said that global GDP is forecast to rise 3.4 percent in 2018 and 2019, with a lower 3.2 percent for 2020, the strongest predicted growth since the turn of the century. The risks mentioned include the concern of steel and aluminium tariffs imposed by the United States, which could lead to a trade war, derailing any recent global recovery. The Organization for Economic Cooperation and Development (OECD) has seen global economic expansion, with robust investment growth driving higher employment and better trade, with a definite short term boost on the horizon. However, they said that “…tensions are appearing that could threaten strong and sustainable medium-term growth.”   A favourite cryptocurrency, Bitcoin, fell below $8,000 USD this month when social media companies went against placing adverts related to these currencies on their platforms. Twitter confirmed that it has banned ads for initial coin offerings and token sales.   Alternative Investments Focus The Nigerian Minister of Science and Technology, Dr Ogbonnya Onu has recently commented on the Government searching for alternative sources of energy for the country to invest in.  They look to create an environment for the private sector to easily access and invest in the area, providing legislative and regulatory frameworks to interested parties. Investment in renewable energy could create jobs and create more wealth for the community as a whole Private Equity| South Africa Despite economic and political uncertainty across Southern Africa, private equity plays itself as a solid and stable avenue, being able to provide attractive returns for investors. The asset class can give feasible alternative investment strategies even in markets that are prone to volatility. External factors such as Brexit and the possibility of less foreign aid could be some of the challenges facing the private equity sector. Even though this might be the case, according to the 2017 Deloitte Africa Private Equity Confidence Survey, projections for growth in specific markets look good.  Mozambique expects a 5.3 percent growth per year while Mauritius looks at a 4 percent increase.  The average real GDP growth in Malawi in expecting 5 percent, while Botswana shares the positive outlook at 4.6 percent. Pensions Focus | South Africa With a focus of stopping corruption within the industry, the Financial Services Board has forbidden the giving or receiving of any gifts. This is intended to prevent asset managers from using gifts as a means of winning business. The directive (No. 8: Prohibition on the Acceptance of Gratification, March 08, 2018) appears to limit any gift or gratuity to no more than a token amount of R500 per year from any party, and falls under the Financial Advisory and Intermediary Service Act. Infrastructure Focus| Africa Recently, African leaders signed the African Continental Free Trade Area, which is the biggest free trade agreement that has been put in place since the start of the World Trade Organisation. The aim of this agreement is to create a free trade area for a single market for goods, services and investments on the continent, enabling intra-African trade. Infrastructure remains a challenge and transport infrastructure is needed to help this level of trade. Transport is one of the three main focuses of this years, Africa Public Private Partnership Conference, taking place in Cape Town, from 24 – 25 October 2018. The Capital Economics Report, which compares China and Africa shows the high cost of production in Africa which is contributing to the decline of  labour intensive manufacturing. Even though labour costs are similar, electricity, transportation and skilled labour are more expensive and need the support of these infrastructure elements to unlock sustainable growth. Public Private Partnership Focus | Angola The Angolan government plans to create more public private partnerships in the maritime, port and rail sector. The minister, Augustro da Silva Tomas found it important to utilise these avenues in designing a strategy for coastal shipping and the transporting of passengers and cargo over rivers, which would hopefully increase mobility and the ability for the rural population to access the more inhabited areas. Private entities with enough technology, resources and capcity for this type of execution could mobilise Angola.  Current projects mentioned were:  the construction of the new Luanda International Airport (NAIL) and Cuito-Bié (Joaquim Kapanga) and Cabinda (Maria Mambo Café) airports, the launch of the public tender for construction of the M’banza Congo airport, restoration and modernisation of the Benguela railway and the implementation of a project to link this railway line with Zambia from Moxico province.   Upcoming events: