Brexit storm hits markets and trade everywhere
http://www.africa-confidential.com/blog-entry/Brexit+storm+hits+markets+and+trade+everywhere
30th June 2016
Brexit storm hits markets and trade everywhere
Patrick Smith
A Brexit-dominated blog this week as Africa's economies count the cost of the turmoil in Europe. In Zambia, President Edgar Lungu's government cracks down on the independent media and Mozambique's finance troubles escalate after the secret loan scandal. Finally, Algeria's reforming bureaucrats make optimistic noises about oil and gas production.
AFRICA/EUROPE: Brexit storm hits markets and trade everywhere
African finance officials are preparing for more shockwaves after the United Kingdom's vote last week to leave the European Union upset the markets, wiping some two trillion dollars off the capital markets and pushing sterling to its lowest level for 30 years. Analysts expect Africa's biggest economies – Nigeria, South Africa, Egypt and Kenya – to be the worst hit, as they were following the global credit crunch in 2008. This time, the effects could be harsher.
On the first day after the Brexit vote, South Africa's rand fell by 7% and Finance Minister Pravin Gordhan warned that inward investment could slow this year. For Nigeria, whose trade with the UK is worth some US$8.5 billion and was due to double in the next five years, the uncertainty around Brexit complicates an already poor outlook with low oil prices and falling capital inflows.
Egypt's economy, already rocked by regional instability and falling tourism revenues, will take another hit from Brexit. Kenyan officials worry that the already difficult trade negotiations between the East African Community and the EU could be held up further by the decision to leave the union.
Treasuries in Africa already have much lower reserves because of lower state revenues in the wake of China's slowdown and the commodity price slump. Optimistic forecasts on the Brexit effect for Africa are thin on the ground.
One, not entirely dispassionate voice, that of James Duddridge, Britain's pro-Brexit Minister for Africa, has pledged that the UK's relations with Africa would expand after it left the EU. Others, including Duddridge's colleagues in government, don't share his optimism, at least in the short term. They predict at least two years of uncertainty as the UK tries to disentangle itself from Europe and re-negotiate new trade deals in its own right.
For decades, the UK's trade relations with Africa have been governed by rules negotiated by the EU under a succession of treaties such as the Lomé Treaty or the Cotonou Agreement. It's unclear whether Britain would offer tougher or better terms, once it leaves the EU. In the meantime, much of London's diplomatic and negotiating skills will be consumed by the tortuous process of extricating itself from Europe. Consequently, London's already over-stretched expertise on Africa will come under further strain.
As Europe dives into a period of infighting, according to a veteran diplomat in London, African governments may see their best course of action would be to reinforce relations with Asia's big economies, China, India and Japan.
ZAMBIA: Editor arrested in pre-election crackdown on the media
A week after tax collection officials closed down Zambia's leading independent daily newspaper, The Post, police arrested the paper's publisher and veteran editor-in-chief, Fred M'membe, his wife Mutinta and deputy managing editor Joseph Mwenda on 28 June. Although President Edgar Lungu defended the actions of the Zambia Revenue Authority against the newspaper, a court ruled it should be allowed to resume full operations while it negotiates the size of its tax bill with the government.
Under fire from journalists' unions in the region as well the Committee to Protect Journalists, the government's actions are widely seen as a bid to silence critics ahead of the general election on 4 August. The Post had started to run a series of stories about how the electoral commission was registering foreigners to vote.
MOZAMBIQUE: Growth slowing as IMF talks tough to Maputo
There was tough talking between President Filipe Nyusi's government in Maputo and a visiting delegation from the International Monetary Fund as the row over the government's secret security loans of over $1.4 billion rumbles on.
There have been calls from the United States and United Kingdom for an international audit of the loan deals set up by Credit Suisse and Russia's VTB Bank.
The Fund has warned that Mozambique's growth this year may fall to 4.5%, compared with 6.6% last year. Michel Lazare, who led the IMF delegation, welcomed the decision by state prosecutors to investigate the state firms linked to the secret loans but announced the country's total debt stock was now 86% of GDP.
ALGERIA: Energy production to rise after reshuffle
Oil and gas production are due to soar over the next five years, according to Amine Mazouzi, the new chief executive of state oil company Sonatrach. Mazouzi is one of a group of technocrats promoted by President Abdelaziz Bouteflika's government in what some optimistic commentators see as a wave of economic reform.
Mazouzi forecast that oil and gas production would rise by over 5% this year and by as much as a third by 2020 as new fields come on stream. It was demand-driven, he argued: Sonatrach reported that Italy's ENI doubled its gas imports from Algeria last year, compared with its purchases in 2014.
On Wednesday, 29 June 2016 06:15:41 UTC+2, chidi opara reports wrote:
(EXX Africa analyses the impact of an eventual 'Brexit' on three of the UK's most important African markets: South Africa, Nigeria, and Kenya)...............From chidi opara reportschidi opara reports is published as a social service by PublicInformationProjects
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