Weekly Africa Update: 15-05-2023

Currencies

African currencies have broadly come under pressure this year against the US dollar. In addition to a still unfavorable external environment, idiosyncratic factors have exacerbated currency weakness. The US dollar (USD) against the New Zambian kwacha (ZMW) is, however, flat on a year-to-date basis despite having swung between gains and losses this year on the back of debt restructuring news. For context, the kwacha lost over 18% against the dollar in Q1 2023, largely due to negative sentiment associated with protracted debt restructuring negotiations. Since the beginning of Q2 2023, the kwacha has, however, appreciated by more than 15% and is currently Africa’s best-performing currency quarter-to-date amid expectations that the country’s creditors will soon agree to debt restructuring deals.

The Tanzanian shilling’s (TZS) value has slightly declined against the greenback closing the trading week ended May 12, 2023 at 2363 from the 2361 level recorded a week prior. Foreign currency flows mainly from tourism activities, NGOs and the mining sector supported the demand for US dollars from the energy and manufacturing sectors.

The Kenyan shilling (KES) depreciated against the USD but strengthened against the euro (EUR) and the pound sterling (GBP) the week ended May 12, 2023.  It depreciated 0.6% against the USD but appreciated against the EUR by 0.7% and 1.4% against the GBP.  The shilling is being driven by demand from customers to clear the back log in orders since FX currency scarcity began.

The Sierra Leonean Leone (SLE) continued to weaken over the week ended May 12, 2023 with the USD/SLE parallel market moving from 23.30 to 23.60, an increase of 1.3%.  The decrease in the value of the Leone consequently increases the prices of commodities within the market. With the local currency continuing its depreciating path that started accelerating almost 2 years ago, it is unlikely to stabilize before next month’s general elections slated for June 24.

Côte d’Ivoire

According to the International Monetary Fund (IMF) resident representative in Côte d’Ivoire, Kadima Kalonji, the country which secured an IMF staff-level agreement for the 40-month programme in April will need to end broad-based fuel and food subsidies. Kalonji added that the government has committed to replacing the subsidies with targeted transfers and widening the tax net. Moreover, Kalonji sees Côte d’Ivoire as having room to increase its value added tax (VAT) which stands at 18%.

Cote d’Ivoire’s oil output increased by 6.0% y-o-y to 9.3 million barrels in 2022. The increase can be attributed to the rise in the commissioning of operating wells on block CI-27 and improved facilities on the Espoir field. Similarly, natural gas output rose 7.8% y-o-y to 90.3 million British Thermal Units (BTUs) in the same period.

Ghana

Inflation in Ghana decelerated for the fourth straight month to reach a six-month low of 41.2% y-o-y in April from 45.0% in March. A breakdown of the data showed that food inflation eased to 48.7% in April from 50.8%, while non-food growth decelerated to 35.4% from 40.6% in March. The continued slowdown in Ghana’s headline inflation reading was supported by favorable base effects as well as the effects of the Ghanaian cedi’s rally in March, which saw it record double-digit gains.

Kenya

According to the Kenya National Bureau of Statistics, Kenya’s Gross Domestic Product (GDP) slowed to 4.8% y-o-y in 2022 vs 7.6% y-o-y in 2021. The agricultural sector contracted by 1.9% y-o-y, the manufacturing sector expanded by 2.7% y-o-y, and the construction sector grew by 4.1% y-o-y.

Nigeria

According to the CBN governor, foreign exchange repatriation attributed to the RT 200 FX programme increased to USD 5.6 billion in 2022 from USD 3.0 billion in 2021. He also noted that the year 2023 has started strongly and showing impressive prospects. In the first quarter of 2023, a total of USD 1.7 billion was repatriated to the economy while about USD 970 million was sold at the Importers and Exporters (I&E) window year-to-date.

The Senate approved the Presidency’s request to securitize the NGN 22.7 trillion ways and means advances provided to the federal government (FG) by the CBN.        According to a press release by the Debt Management Office (DMO), the securitization will involve the issuance of debt securities with a 40-year tenor by the FG to the CBN. The securities will have a 3-year moratorium on principal payments and carry an interest rate of 9.0%.

Tanzania

Tanzania’s annual inflation rate edged down to 4.3% in April 2023 from 4.7% in the previous month. It is the lowest reading since May 2022, due to a slowdown in prices of food & non-alcoholic beverages (9.1% vs 9.7% in March), transport (4.3% vs 5.7%) and housing & utilities (0.3% vs 1.1%). Meanwhile, costs increased mainly for clothing & footwear (2.8% vs 2.4%), recreation, sport & culture (1.8% vs 1.5%) and miscellaneous goods & services (1.6% vs 1.3%). On a monthly basis, consumer prices advanced by 0.4%, after rising by 0.8% in March 2023.

The IMF has advised the central bank (The Bank of Tanzania) to be prepared to further tighten monetary policy as needed to curb inflation. The Bretton Woods institution said in a recent report to Tanzania that while inflation remains below the central bank’s target, the recent sharp increases in food and energy prices could lead to second-round effects. The IMF said in the report that inflation was relatively low due to the government’s action with temporary fuel and fertilizer price subsidies while tightening liquidity in the financial system. The IMF also noted that the central bank’s liquidity mop-up operations, helped to reduce excess reserves from about 19.0% of reserve money last August to 10.5% by the end of December last year.

The Zanzibar economy is projected to grow at 7.1% in 2023, thanks to the booming tourism industry and execution of strategic development projects, the House of Representatives was told on Wednesday, May 10. It is largely attributed to the envisaged impressive economic growth to a 30% increase in tourist arrivals from 548,503 last year to 713,053 tourists in 2023 and implementation of development projects, including construction of Pemba airport, Mangapwani integrated port, rural and urban roads as well as the rehabilitation of Malindi port.

The Swiss Embassy in Tanzania has launched a TZS 26.40 billion (roughly USD 11.23 million) fund as part of its Innovation for Social Change project to support the growth of impact-driven micro, small and medium-sized enterprises (MSMEs) in Tanzania over the course of the next five years. The ‘Daraja Impact Fund’ will be implemented and managed by the Small Enterprise Assistance Funds (SEAF), an international investment management group for capital and business assistance to MSMEs.