confidentially speaking
The Africa Confidential Blog
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.
