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South Africa records marginal Q1 growth on back of power crisis

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Despite a steep power crisis, South Africa recorded marginal economic growth in 2023 which helped it escape recession in the period.

According to the official state data source, eight of the ten industries experienced growth between January and March, with manufacturing and finance, real estate, and business services contributing the most. Manufacturing output increased by 1,5%, adding 0,2 of a percentage point to GDP growth. The production of food and beverages was the main catalyst behind the industry’s positive showing.

The transport sector was inspired by the rise in rail freight and rail passenger transport while the storage & communication industry expanded by 1,1%.

Finance, real estate & business services grew by 0,6%, mainly driven by financial intermediation, insurance & pension funding, real estate and business services. Personal services also increased by 0.8%, owing to increased community service activity.

South Africa’s Statistician-General, Risenga Maluleke said food and drinks manufacturing had performed particularly well, partly because the sector was not as electricity-intensive as other types of manufacturing.

“Household consumption was driven largely by restaurants and hotels, and when you look at that, with load-shedding (power cuts), where do people get their food? They have to call on Uber Eats or order from restaurants,” Maluleke said.

Meanwhile, experts have argued that the economic situation remains dire despite the marginal growth.

An economist, Jason Tuvey quoted by Reuters, said “The outlook remains bleak. Severe power cuts, tight fiscal and monetary policy and a worsening external backdrop mean that the economy is likely to merely stagnate this year.”

As one of Africa’s most industrialized economies, power outages have posed a threat to businesses and the country’s overall economy. South Africa’s state utility firm, Eskom recently announced that its power rotation had been suspended “until further notice”.

 

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Private sector concerned as Nigeria’s central bank raises interest rate to 26.25% 

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The decision of Nigeria’s central bank’s Monetary Policy Committee to raise the country’s benchmark interest rate has alarmed members of the organized private sector and economists alike, some of whom believe it will severely impair the ability of business operators to repay their debts.

The decision of the committee was declared by Olayemi Cardoso, the governor of the Central Bank of Nigeria and chairman of the MPC, after the latter’s 295th meeting on Tuesday.

The interest rate was increased by 150 basis points by the MPC, from 24.74% to 26.25%. The benchmark interest rate increased for the third time this year on Tuesday with the MPR boost.

The policymakers raised the MPR by 750 basis points since the MPC reconvened in February. In February, the MPR jumped from 18.55% to 22.75%, a 400 basis point rise. In March, it was raised by 200 basis points to 24.75%.

Cardoso said, “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation. Members observed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month measures of headline, food and core all declined significantly. This follows a decline (month-on-month) of headline and food measures in March 2024, suggesting that the recent tight monetary policy stance of the Bank is beginning to yield the desired outcomes.”

Cardoso added, “For the first time since October, we have seen a relatively significant moderation in the rate of increase and that is working. I believe very strongly that the tool that the central bank is using is working. I have said it before, there is no magic wand, these are things that need to take their own time. I’m confident and the figures show that we are beginning to get some relief and I believe in a couple of more months, we will see some positive reports on the effects of what the CBN is doing.”

Cardoso defended the decision to raise the MPR once more during a press conference on Tuesday following the MPC meeting. In the face of an uncertain economic environment, the MPC has remained hawkish in its approach to combating inflation.

Nigeria’s inflation rate increased to 33.69% in April. As compared to the headline inflation rate for March 2024, the National Bureau of Statistics reports that the headline inflation rate for April 2024 increased by 0.49 percentage points.

According to the NBS, the headline inflation rate increased by 11.47 percentage points year over year from the 22.22% rate reported in April 2023. In April 2024, food inflation was 40.53%. Cardoso stated that the MPC has connected the ongoing naira volatility to the principles of the free market.

“Members further observed the recent volatility in the foreign exchange market attributing this to seasonal demand, a reflection of the interplay between demand and supply of a freely functioning market system. The committee also noticed the marginal increase in the foreign reserve between March and April 2024,” he said.

Segun Kuti-George, National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, denounced the Interest Rate Increase by MPC. At a time when many firms were depending on loans to operate, Kuti-George argued it was callous to keep rising interest rates.

He said, “That is the only thing they know. The only thing they know is to increase the interest rate. As long as the industrial sector cannot access cheap funds, we are joking. We cannot be talking about economic development.”

In addition, Gabriel Idahosa, the president of the Lagos Chamber of Commerce and Industry, who disagreed with the rate hike, charged that the CBN was employing the incorrect measure to combat inflation.

Idahosa said, “The CBN is like a farmer that does not have any other tool. So, they are stuck with one tool. We just came out of a consultation session and this was the issue. The CBN is driving a metric that is not related to the problem.

“The problem is the cost of production. It has nothing to do with interest rates. It is not advisable to keep raising the interest rates, but they have run out of ideas and they don’t want to be seen to do nothing.”

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Under govt pressure, Zimbabwean lithium miners present their refinery plans

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A Zimbabwean government official announced on Monday that four lithium mining businesses had submitted plans to produce battery-grade lithium in the country to strengthen its economy.

Zimbabwe, the continent’s leading supplier of lithium, which is used in batteries for electric cars and to store renewable energy, is encouraging miners to refine the mineral domestically. At the moment, Chinese lithium miners, who control the majority of the industry in Zimbabwe, only generate concentrates, which they export to China for additional processing.

Zimbabwe’s finance minister, Mthuli Ncube, stated in November of last year that miners had until March 2024 to submit their proposals for domestic refining.

Deputy Minister of Mines Polite Kambamura told Reuters that the government has decided to extend the deadline by two months at the request of certain miners.

“They are coming forward with plans but these are long-term plans which we are receiving. We have four large-scale producers who have come forward,” Kambamura said.

He noted that the government has not yet given the plans any thought, but he declined to identify the companies that had submitted blueprints.

Over $1 billion in investments have been made by Chinese miners, such as Zhejiang Huayou Cobalt, Sinomine Resource Group, Chengxin Lithium Group, Yahua Group, Canmax Technologies, and the Tsingshan Group, in response to Zimbabwe’s some of the largest hard-rock lithium reserves in the world.

According to Huayou, it will investigate producing battery-grade lithium in Zimbabwe “only when the economic and construction conditions are right”.

According to the business, Zimbabwe lacks the natural gas, sulfuric acid, and dependable renewable energy sources required to generate lithium suitable for batteries. Nonetheless, Zimbabwe has pushed for domestic refining to profit from the anticipated rise in lithium demand as the globe moves toward greener energy sources.

“We are not going to end on concentrates, we want batteries to be manufactured here,” Kambamura said.

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