Interest in Ghana reflects flight to safety, says VP

According to Ghanaian Vice-President John Dramani Mahama, the increasing exodus of Nigerian businessmen and other foreign investors into the country reflects its safe, secure, politically stable democratic environment.  Speaking this past weekend in Accra at the launch of a Nigerian company, eTransact, which is engaged in electronic payment system, Mahama added that it was reassuring that in this period of global economic meltdown, Ghana continued to see an increase in interest in foreign investors willing to invest.  “All over the world, investors are sensitive to the business and political environment and would only put their capital in environment that they consider safe, secure and conducive.  I believe that the current spate of interest of the investor community is the result of what we have been able to achieve collectively as a nation since the adoption of the 1992 Constitution–a safe, secure, politically stable democratic nation in which the rule of law is faithfully upheld,” he said.

Saudi firms exemplify GCC flight to overseas agriculture

In what is widely viewed as a growing trend of GCC countries investing in agricultural opportunities overseas, two listed Saudi companies plan to invest in either farming or agri-business abroad under a state-sponsored plan to ensure steady food supplies.  Saudi Arabia had previously urged firms to invest in cross-border farm projects after deciding last year to reduce wheat production by 12.5% per year, effectively abandoning a 30-year-old program to grow its own wheat, a plan that helped the kingdom achieve self-sufficiency but concurrently depleted its water supplies.

Hail Agricultural Development Co. (Hadco) announced last month that it would invest roughly $45.3 million in the next two years developing 22,830 acres (9,239 hectares) of farmland in northern Sudan, and will also look at investing in Turkey and Kazakhstan.  However, National Agricultural Development Co. (Nadec), the largest listed agri-business company by turnover, has yet to reveal any future plans to invest abroad.  Nadec produced 150,000 tons of wheat in 2008, but unlike its rivals, the company’s business is more centered on the production of dairy products and juices, which accounted for 70% of its turnover in 2008, against 16.6% for grains.

Kenya on the Brink?

According to the London-based Economist Intelligence Unit (EIU), Kenya is Eastern Africa’s most vulnerable country to political and social upheaval that is expected to arise from a long drawn-out global recession.  The index measures vulnerability on a scale of zero (no vulnerability) to 10 (highest vulnerability). Kenya, with a political instability index of 7.5, is ranked the 19th most vulnerable country, far ahead of neighbouring Uganda and Tanzania, which are ranked 63 and 88 respectively.  South Africa, with an instability index of seven, is the 38th most vulnerable State, while Nigeria is 43rd.  The ranking is based on 15 key indicators based on what the report refers to as “underlying” and “economic distress” indices.  Somalia and Western Sahara, two African countries that have no functional governments are considered failed states and are not rated in the survey.

According to the report, “a stalled constitutional review process, rampant corruption in government and a general breakdown in the rule of law has deepened Kenya’s exposure to social and political tension putting at risk the stability of the coalition government.  The Business Daily further notes that Kenya’s business leaders endorsed the report as a “realistic reflection of the danger that the country faces in wake of incessant political bickering that has dominated the national agenda in the last one year” as economic welfare declined.  “2008’s post poll chaos sent a clear signal that the level of political risk in Kenya is higher than has been indicated. We finally realised that it is possible to descend into the chaos that have over the years dogged neighbouring states with disastrous economic results,” noted Dr. X N Iraki, a strategic management lecturer at the University of Nairobi.

Standard Chartered slashes UAE inflation forecasts

Less than a month after the UAE central bank, based in oil-rich Abu Dhabi, the capital, subscribed up to half of a $20bn five year bond program launched by the Dubai government–news that caused the Dubai Financial Market index to jump 5%–Standard Chartered predicted that inflation levels will fall to 2-3% this year in the UAE as rents and commodity prices ease, and as liquidity dries up.  The new projection is considerably lower than the 20% calculated in 2008.  In fact, inflation accelerated to record highs in all six Gulf Cooperation Council (GCC) states during the past year, fueled by higher government spending and a falling dollar, to which most of the regions currencies are linked.

Yet the bank’s inflation projection is in contrast with that of the government.  UAE Minister of Economy Sultan bin Saeed Al Mansouri, for example, estimates inflation for the year in the range of 5-8%, adding that the government plans to cap prices on 16 basic items and offer discounts at state-owned supermarkets.  However, he lamented, “it is very difficult to have an inflation target when you have a dollar peg.  Policy makers don’t have the tools – the ability to use the currency and the interest rate – to achieve this target because interest rates are set by the U.S. Federal Reserve.”  That said, Mansouri expects inflation to fall because “the supply side will continue but prices will come down especially in the real estate sector due to the drop in demand.”

Finally, Standard Chartered also warned that the country needs a significant increase in liquidity.  The bank believes there is a Dhs110bn liquidity shortfall, despite the recent measures to inject money into the system.  Measures like an additional liquidity injection and a permanent repo window would help plug it, according to Shayne Nelson, the bank’s Regional CEO of the Middle East and North Africa.

PalTel continues to rise on Zain merger talk

Palestinian Prime Minister Salam Fayyad noted this past weekend that a deal for Kuwait’s Mobile Telecommunications Co. (Zain) to take a major stake in  Palestinian operator Palestine Telecommunication Company (PalTel)–which operates in the occupied West Bank and Gaza Strip–could be signed sometime this week.  Zain, which is Kuwait’s biggest mobile operator, is spending billions to expand and provides services in 22 countries in the Middle East and Africa.  Shares of PalTel, meanwhile, rose 4.9% on Monday on heavy volume and are up 26.3% YTD.  Palestine’s  Al-Quds Index, meanwhile, is up 23% in 2009, one of only two Middle East and North African exchanges up for the year.

A Paltel acquisition would become Zain’s 23rd country, following a three-year campaign costing around $5 billion. Zain plans to spend another $5 billion on acquisitions in the next few years, said its CEO, Dr. Saad Al-Barrak, who also mentioned that the company is interested in operations in Mali, Rwanda, Burundi, Angola and Liberia.

Merger to help Cairo Pharmaceuticals meet high European demand

Cairo Pharmaceuticals and Arab Drug Company will merge to become the second largest pharmaceutical company in the local market, chairman of the Holding Company for Pharmaceuticals, Magdy Hassan, said.  This is to improve the companies’ position in light of growing competition.  Hassan added that the merger will cost around EGP 350 million and will be financed from holding company’s surplus cash and direct investments.  Moreover, the deal will alleviate the burdens of private investments and diversified developments which the firms need, Hassan explained.  Finally, a new state of the art factory will be set up on Arab Pharma-owned land plot, to manufacture tablets, inhalation products, syrup and salves, and be the first outlet for export to Europe.  The new plant will be the first of its kind in Egypt.

Convergence in Argentine CDS swap market?

According to the Financial Times, pressure is intensifying on Argentina to settle with holders of defaulted debt, who are now owed $29bn including interest.  In 2001 the country defaulted on $95bn worth of debt.  Ever since, the country has been effectively barred from capital markets, despite a 2005 debt swap accepted by the majority of bondholders, since those holding out would be able to seize any funds raised.  A plan to settle with the hold-outs fell through last September after the Lehman collapse, and consequently Argentina’s continuing financial isolation is making it hard for it to meet its debt obligations.  Some economists fear it could be heading for a new default next year.

 

That said, some kind of settlement could be drawing near.  Five-year credit-default swaps based on Argentina’s bonds have taken a beating of late, and have soared nearly 10 percentage points in the past month, the worst performer among credit-default swaps tied to government debt.  Traders eyeing a convergence could be rewarded.

Chilean Peso looks attractive in the short term

The Chilean peso has gained 8.6% this year, the biggest increase among the six most-traded currencies in Latin America.  During Wednesday trading, however, that number fell, with the peso reaching 595.80 per dollar from 587.85 a day earlier.

That said, pending dollar sales by the Finance Ministry, announced on Feb. 23 as part of an economic stimulus plan, will extend the dollar’s slide during the coming weeks, according to Celfin Capital in Santiago.  “We could reach 550-570 [per dollar],” noted the firm’s head economist, Cristian Gardeweg.

Orascom falters, but blames Pakistan for poor showing

Orascom Telecom, which operates in Algeria, Pakistan, Tunisia, Bangladesh, Zimbabwe, North Korea as well as Egypt, represents 15% of the weighting of the benchmark Egyptian index EGX 30, and is the largest Arab mobile operator by subscribers, has declined 77% from its peak in January 2008, and on Monday the firm announced a 76% decline in full year net profit.  That said, Chairman Naguib Sawiris argued that most of the firm’s businesses, excluding Pakistan, achieved growth and profit targets.  In Pakistan, however, the volatile political, economical and financial conditions, coupled with the devaluation of the Pakistani rupee, have “negatively impacted the strong performance of the rest of the group.”  Orascom’s Pakistani operation, Mobilink, lost ground in key areas such as revenue, earnings, ARPU and number of subscribers.

East African Breweries Limited looking to cut costs

With cereal prices expected to remain high on the international market, East African Breweries Limited is now diversifying its cereals raw materials to include sorghum. Hitherto the brewer saw the cost of barley and malt rise by about 60% which lead to sluggish earnings.