Posts tagged as: interest

Namibia:Rural Water Treatment Project Gets Funding

The Adaptation Fund (AF) approved N$60 million for a four year project which will pilot and utilise renewable power and membrane technology at the Grünau settlement and the Bethanie village, located south of the country.

The project aims to assist the treatment of poor quality local groundwater to a level that complies with the national standards for drinking water through the use of reverse osmosis.

This project proposal which was developed by NamWater as the executing entity and was approved during the Adaptation Fund’s 30th board meeting which was held on 12 and 13 Octobe in Germany. The Desert Research Foundation of Namibia (DRFN) will be the implementation entity of the project.

The project is also endorsed by the Environment Commissioner of Namibia, Teofilus Nghitila and aims to see improved resilience of vulnerable communities and groups to climate change impact, specifically to a decrease in water quality of existing groundwater sources.

In addition to providing benefits to vulnerable communities in the target areas, the project also wants to serve to increase the capacity of government agencies to integrate climate change adaptation considerations into water supply planning and policy processes.

It is considered essential to pilot two plants in a rural setting, where the water demand of the communities differs by an order of magnitude. This would allow the opportunity to establish how plant size affected aspects such as operation, management and maintenance requirements, the unit cost of water produced, the involvement of beneficiaries; and the interest of stakeholders.

Furthermore, the execution of the project aims to yield a wide range of information and knowledge on both technical and social aspects of establishing and operating such treatment and power plants.

Caption: Similar machinery will be used for the pilot project which will bank on the reverse osmosis process to purify the water.

Namibia

Art Council Signs Ten New Partners

The National Art Council of Namibia (NACN) has signed an agreement with ten new partners to establish partnerships with… Read more »

Bankers Call for Removal of Interest Rate Caps

By Margaret Njugunah

Nairobi — Kenya Bankers Association is calling for the removal of interest rate capping, a year after it was passed into law.

KBA CEO Habil Olaka says the law has had adverse effects on the economy despite its good intentions.

Olaka said that the law, which was expected to provide low-cost credit and ultimately increase credit uptake has done the opposite as it has instead affected credit growth and discouraged financial inclusion. It was also expected to encourage a savings culture through increased deposits.

It was also expected to encourage a savings culture through increased deposits.

KBA, however, says that deposits – demand and fixed – have shown little evidence of being responsive to the intentions of the law.

At the same time, credit has been skewed towards secure and short-term market end, mainly away from household loans, and has shown a bias towards trade than investment loans.

“It is increasingly becoming evident that the expectations of the law are not being met. For instance, lenders are trading asset quality to portability that is tolerance of lower returns on government papers instead of lending to private sector even at the level of the cap. This is because crowding out is increasingly becoming prevalent,” Olaka said.

In June 2017, for instance, while about 3.2 million loan applications were made, only about 1.1 million of loans were

disbursed, a 34 per cent success rate.

Jared Osoro, Director of Research and Policy at KBA added that the overall economy is hurting as a result of a worsened economic performance due to the undeniable link between credit to the private sector and output growth.

The cap was introduced at a time when credit growth was already declining, further exacerbating the credit squeeze.

Kenya

Ruling Party Sues Opposition Leaders Over Bid to Derail New Poll

President Uhuru Kenyatta’s Jubilee Party has sued opposition leader Raila Odinga and his running mate Kalonzo Musyoka at… Read more »

Uganda:Ugandan Bank Fails to Sell All Shares in Mixed Trade

By Bernard Busuulwa

DFCU Bank Ltd’s rights issue was undersubscribed by 4.79 per cent, raising Ush190.67 billion ($52 million) against a target of Ush200 billion ($54.6 million) in a transaction characterised by strong institutional investor appetite and low uptake from retail investors.

The bank’s share price fell shortly after listing of the new shares.

Latest data compiled by Crested Capital, a Ugandan stock brokerage and investment advisory firm, shows that the DFCU rights issue recorded a subscription rate of 95.21 per cent as 250.88 million shares, priced at Ush760 ($0.21) per share, were absorbed.

Some 263,157,895 new shares were on offer, with an allocation ratio of 0.53 to one rights share issued. Abandoned new shares were 12.63 million, valued at Ush9.6 billion ($2.6 million), the data shows.

The rights issue was concluded on September 25 and the new shares floated on the Uganda Securities Exchange on October 10, 2017. The total number of listed shares on DFCU’s counter rose from 497,201,822 shares to 748,082,989 while its market capitalisation grew to Ush561.06 billion ($153 million).

Whereas most institutional investors took up their rights shares, we could not point out specific reasons for the high uptake within this segment.

Arise B.V., DFCU’s largest shareholder increased its stake from 55.08 per cent to 58.71 per cent while the National Social Security Fund increased their interest from 6.28 per cent to 7.69 per cent.

The Kimberlite Frontier Africa Naster Fund L.P-RCKM increased its stake from 5.93 per cent to 6.15 per cent while SSB-Conrad N Hilton Foundation-00FG raised its stake from 0.97 per cent to 0.98 per cent.

Vanderbilt University increased its stake from 0.8 per cent to 0.87 per cent while the Bank of Uganda Staff Retirement Benefits Scheme managed by Stanlib Uganda slightly expanded its stake from 0.58 per cent to 0.59 per cent.

In contrast, SCB Mauritius a/c CDC Group saw its shareholding drop from 15 per cent to 9.97 per cent, a change partly attributed to the company’s desire to exit the business after a 50-year relationship with DFCU while Banque Pictet and Cie sa a/c Blankeney L.P saw its shareholding fall from 0.95 per cent to 0.63 per cent, the data revealed.

DFCU Bank Ltd boasts of 10 institutional investors on its shareholder list that currently hold 88.81 per cent shares, a factor that leaves its fate in the hands of large, deep-pocketed investors.

However, the overall shareholding pegged to retail investors dropped from 12.96 per cent to 11.19 per cent, suggesting low appetite towards the transaction among individual investors.

While some institutional investors were apparently motivated by hopes of a smooth integration of DFCU Bank’s operations with those of the former Crane Bank that it acquired in January, stronger demand for credit, backed by steady declines in the benchmark policy rate and projected economic recovery, retail investors appeared discouraged by insufficient information on the acquisition, The EastAfrican has learnt.

A higher rights issue offer price of Ush760($0.21) compared to a previous trading price of Ush758 ($0.207) also put off many retail investors, with most of them preferring to buy new shares at the USE instead of taking up allocated rights shares.

The Bank of Uganda cut its Central Bank Rate by 0.5 per cent to a record low of 9.5 per cent this month, signalling a further decline in interest rates that’s badly needed to accelerate credit demand and economic growth that grossed just 3.9 per cent at the end of 2016/17.

Banks to Declare Lower Dividends

By James Anyanzwa

Kenyan banks are expected to declare reduced dividends to shareholders this year due to an increasing number of bad loans as borrowers struggle with repayment in an underperforming economy.

The situation is likely to worsen next year when banks start allocating more resources to cushion themselves from bad debts under a new set of global accounting rules.

The rules require banks to make higher provisions for bad loans by roping in even the risk-free lending to the government through Treasury bills and bonds.

Analysts at Renaissance Capital said high non-performing loans (NPLs) remain a big threat to Kenya’s banking sector, besides the interest rate law that has fixed lending rates at four percentage points above the Central Bank Rate (CBR), wiping out interest income for the lenders.

Analysts at AIB Capital said the prevailing political environment is an impediment to economic productivity since most investors have suspended their plans while some have chosen to trim their workforce to cut costs.

Political environment

“On the back of this we expect loan book quality to deteriorate further,” AIB Capital said in its banking sector report for October.

“With low economic activities, aggregate consumption reduces, corporates scale down on operations and consequently private sector and public sector incomes reduce. This will have the effect of deteriorating the quality of the existing debt stock.”

According to Renaissance Capital, Kenya’s big banks are likely to weather the political and economic storms and provide some fairly good returns to the shareholders compared with the smaller and mid-sized banks that have lost huge deposits to big banks through flight to safety.

These big banks include KCB, Equity, Co-operative Bank, Barclays Bank, Standard Chartered Bank, Diamond Trust Bank and Commercial Bank of Africa, according central bank’s latest ranking in terms of market share.

Equity Bank has suffered the highest deterioration in its NPL book since the rate cap law was implemented in September last year.

This is due to the bank’s unsecured portion of its Small and Medium-sized Enterprises lending, exposure to trade customers and delayed payments for suppliers by the government.

Its loan book has contracted with most of the funds being channelled to government securities.

“What concerns us most about Equity is the trend in NPLs. While the deterioration in the NPL ratio to 7.3 per cent in the first half of this year from 6.8 per cent in 2016 and 4.6 per cent in the first half of 2016 can partly be explained by the lack of loan growth; NPLs in absolute terms were up by 1.6 per cent in the 12 months to the first half of 2017,” Renaissance Capital Market report dated September 28 notes.

KCB’s NPL stands at nine per cent though the lender continues to struggle with stock of bad loans, compared to its tier 1 peers.

The lender announced a Ksh900 million ($9 million) cost restructuring this year and with only 14 per cent of transactions currently taking place in branches.

Analyst at Renaissance Capital expect the bank to further cut its workforce.

Co-operative Bank which has the lowest NPL among listed banks recorded the highest loan growth of seven per cent in the first half of this year as a result of existing customers taking on additional credit lines, and growth in the personal loan segment of the loan book.

Kenya

Opposition Nasa Suspends Demos

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Kenya:Banks to Declare Lower Dividends

By James Anyanzwa

Kenyan banks are expected to declare reduced dividends to shareholders this year due to an increasing number of bad loans as borrowers struggle with repayment in an underperforming economy.

The situation is likely to worsen next year when banks start allocating more resources to cushion themselves from bad debts under a new set of global accounting rules.

The rules require banks to make higher provisions for bad loans by roping in even the risk-free lending to the government through Treasury bills and bonds.

Analysts at Renaissance Capital said high non-performing loans (NPLs) remain a big threat to Kenya’s banking sector, besides the interest rate law that has fixed lending rates at four percentage points above the Central Bank Rate (CBR), wiping out interest income for the lenders.

Analysts at AIB Capital said the prevailing political environment is an impediment to economic productivity since most investors have suspended their plans while some have chosen to trim their workforce to cut costs.

Political environment

“On the back of this we expect loan book quality to deteriorate further,” AIB Capital said in its banking sector report for October.

“With low economic activities, aggregate consumption reduces, corporates scale down on operations and consequently private sector and public sector incomes reduce. This will have the effect of deteriorating the quality of the existing debt stock.”

According to Renaissance Capital, Kenya’s big banks are likely to weather the political and economic storms and provide some fairly good returns to the shareholders compared with the smaller and mid-sized banks that have lost huge deposits to big banks through flight to safety.

These big banks include KCB, Equity, Co-operative Bank, Barclays Bank, Standard Chartered Bank, Diamond Trust Bank and Commercial Bank of Africa, according central bank’s latest ranking in terms of market share.

Equity Bank has suffered the highest deterioration in its NPL book since the rate cap law was implemented in September last year.

This is due to the bank’s unsecured portion of its Small and Medium-sized Enterprises lending, exposure to trade customers and delayed payments for suppliers by the government.

Its loan book has contracted with most of the funds being channelled to government securities.

“What concerns us most about Equity is the trend in NPLs. While the deterioration in the NPL ratio to 7.3 per cent in the first half of this year from 6.8 per cent in 2016 and 4.6 per cent in the first half of 2016 can partly be explained by the lack of loan growth; NPLs in absolute terms were up by 1.6 per cent in the 12 months to the first half of 2017,” Renaissance Capital Market report dated September 28 notes.

KCB’s NPL stands at nine per cent though the lender continues to struggle with stock of bad loans, compared to its tier 1 peers.

The lender announced a Ksh900 million ($9 million) cost restructuring this year and with only 14 per cent of transactions currently taking place in branches.

Analyst at Renaissance Capital expect the bank to further cut its workforce.

Co-operative Bank which has the lowest NPL among listed banks recorded the highest loan growth of seven per cent in the first half of this year as a result of existing customers taking on additional credit lines, and growth in the personal loan segment of the loan book.

Kenya

Opposition Nasa Suspends Demos

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Chinese Firm Returns for Uganda Oil Refinery Talks

By Halima Abdallah

Chinese consortium Guangzhou DongSong Energy Group Company has returned to negotiations with Uganda for the planned 60,000 barrels-per-day refinery.

Their return comes just weeks after the unceremonious sacking of Energy Permanent Secretary Dr Stephen Isabalija about whom the company had expressed displeasure.

Sources say that the government is also considering exiting all financial investment in the refinery as it seeks an investor ready to cover the entire project cost.

The new development also comes as parliament pushes government to share more information on progress on the refinery side of its oil production plans in the Albertine Graben.

While briefing MPs on the status of developments in the oil and gas sector in preparation for first oil in 2020, Energy minister, Irene Muloni said the government is still in the process of identifying the lead investor who will design, finance, build and operate the refinery at 100 per cent.

DongSong and Albertine Graben Refinery Consortium were the final two pre-qualified bidders, but a disagreement emerged and DongSong was dropped off along the way when, according to correspondence we have seen, it failed to attend meetings, signing non-disclosure agreement and payment of bid bond fee with the government of Uganda.

The Energy ministry has indicated that the consortia presented an acceptable proposal on financing and technical aspects of the project.

Initially it was proposed that government would raise finance through equity, but the Permanent Secretary Robert Kasande explained that the latest position, which has been already agreed upon, is that the investor bears all the project cost. A tentative estimate puts the refinery cost at $4.27 billion.

“We are discussing with the two companies and we expect to conclude discussions by the end of the year,” Mr Kasande said, without giving details of how DongSong was drawn back into the negotiations.

Unlike in the past, where government has had a preferred and alternate bidder, that procedure was abandoned as the government opted to rely on unsolicited expressions of interest.

Some 40 entities applied, out of whom four were prequalified and subjected to due diligence before the final two were selected.

The lead investor will be selected based on a model Project Framework Agreement (PFA) that will be signed with a consortium that offers best terms.

The PFA will detail the proposed solutions, validation of the solutions, risk mitigation measures, and additional due diligence necessary for accelerating investment and financing for the project.

The signing of the Project Framework Agreement will in turn pave the way for commencement of pre-final investment decision activities such as front-end engineering and design, project capital and investment costs estimations, Environmental and social impact assessments, among other things.

It was expected that the lead investor would be announced last month, but the delay is likely to have knock-on effect on the refinery construction timelines. Initially, it was projected for completion in 2018, but has now been revised to 2020 to coincide with first oil.

South Africa:Operations Partially Resume At Port of Durban

Photo: Road Traffic Management Corporation

The collapsed roof of King Edward Hospital in Durban.

Marine operations at the Port of Durban have partially resumed following disruptions caused by inclement weather experienced this week.

On Wednesday at 6:30pm, the Transnet National Ports Authority (TNPA) declared 80% of the navigable area of the port safe for marine operations.

“We are extremely appreciative of the excellent collaboration between TNPA and various stakeholders who acted quickly and efficiently to partially restore normality at the port. Our immediate focus is to continue with the implementation of the recovery operations,” said TNPA Chief Executive Shulami Qalinge.

TNPA said the results of the sounding surveys that were conducted indicate that there is some obstruction on the seabed that could pose a risk to navigation.

“In the interest of ensuring safe navigation of vessels, operations have commenced in channels that are clear from obstruction. Port teams remain on scene,” TNPA said.

The Business Continuity Plan (BCP) will remain in place until TNPA has restored normality at the Port of Durban. At this stage, Durban marine operations are anticipated to resume by midday on Thursday, pending the outcome of the sounding surveys.

South Africa

Tsvangirai Returns From South African Hospital

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High Interest Rates – President Museveni Turns Up Heat On Banks

Photo: The Daily Observer

Yoweri Museveni

By Ismail Musa Ladu

Kampala — The cost at which the country’s private sector borrows is not only prohibitively high but it also doesn’t make sense, according to President Yoweri Museveni.

Lashing out at commercial banks last week while officially opening the 25th Uganda International Trade Fair, President Museveni said interest charged on loans is unreasonably high, describing it as idiotic.

Just recently, Bank of Uganda (BoU) reduced the Central Bank Rate (CBR) from 10 to 9.5 per cent hoping that the move will persuade commercial banks into relaxing interest rates to allow private sector access affordable credit.

However, commercial banks have since then not responded in the way the Central Bank anticipated.

Most financial institutions continue to impose interest rates at an average of 24 per cent, leaving the private sector with no option but to shun borrowing.

This, according to Private Sector Foundation Uganda executive director Gideon Badagawa, is bad for the economy because it constrains the private sector ability to generate economic activities.

Speaking at the event organised by Uganda Manufacturers Association (UMA), Mr Museveni said with such high cost of credit, it is unlikely that the country’s private sector will break-even.

He said: “Borrowing at the interest of 24 per cent is idiotic.”

He added: “You cannot have high cost of interest rate, then high cost of power and then say you have minister of planning. What are they planning? These ministers should come here and explain themselves to you.”

Before the President took a swipe at the commercial banks and his ministers of Finance, Planning and Economic development, the chairperson of the UMA board of directors, Ms Barbara Mulwana, pointed out several challenges manufacturers face, including the cost of borrowing.

She said: “The high cost of capital in Uganda which is about 24 per cent per annum on average compared to less than eight per cent in major competing countries continues to render Uganda’s manufacturers uncompetitive.”

She added: “The high interest rate persists in spite of the fact that the manufacturing sector having the least default rate–non performing loans within the banking sector.”

As a result of high interest rate on loan, domestic borrowing is at an all-time low of eight per cent today.

Mr Museveni pleaded with the manufacturers to bear with him on the issue of high cost of power, saying this is a matter that will be history in a short while.

The President also blamed his predecessors, particular the late Milton Obote and Idi Amin Dada for committing policy mistakes.

He said Obote’s 1970 Nakivubo pronouncement which saw government take control of 60 per cent (up from at most 51 per cent) of more than 80 corporations in Uganda was a policy mistakes that should not have happened.

He also blamed former President Idi Amin Dada for expelling the entrepreneurial class (mainly the Indians) in 1972, saying the decisions by the two former leaders explain why Uganda which was at the same level of development with South Korea is still lagging behind.

Way forward

According to President Museveni, Islamic Banking will go a long way in solving the interest rate challenge.

He said the principle of Islamic Banking which is rooted in sharing profit and losses incurred is a good idea, describing it as a more friendly finance packaging.

As for Ms Mulwana, fast tracking roll-out of Islamic Banking here will enable the diversification of the credit market as well as provide an alternative to the expensive credit her members are grappling with and also break the monopoly the local commercial banks are enjoying.

In her remarks, Trade minister Amelia Kyambadde noted that security restored by the current government explains all the progress registered in the economy thus far.

“We are seeing key sector of the economy showing good growth. BUBU policy has been successful so far. We have put in place national development strategy and although we are still struggling with Economic Partnership Agreement (EPA) we believe we will get there,” she said.

Red Cross to Hire Temporary Nurses in Malaria-Hit Areas

By Angela Oketch

The Kenya Red Cross Society is hiring nurses on a temporary basis to help deal with medical emergencies in 11 counties hit by the malaria outbreak.

This comes at a time nurses have vowed not to resume duty until their Collective Bargaining Agreement is signed.

The temporary nurses will be posted to Marsabit, Mandera, Baringo, Isiolo, Samburu, Wajir, Garissa, Tana River, Turkana, Lamu and West Pokot counties, where more than 50 people have died of malaria over the last two weeks.

DEATHS

More than 2,000 others have been diagnosed with the disease.

Marsabit County is the worst hit, having recorded at least 26 deaths while about 1,300 people have been diagnosed with the disease.

The disease has also claimed nine lives in Baringo County.

Kapau, Chesawach, Tayier, Gulel, Akoret and Kongor villages are the hardest hit.

LICENCE

Other affected areas include Kakuma refugee camp in Turkana County, where 438 people tested positive.

According to an advert by Red Cross, the nurses should be available for deployment and must be registered with the nursing Council of Kenya, and possess a valid practising licence.

“Interested candidates should send their applications quoting the county of interest on the subject line,” the advert states.

STRIKE

This comes even as county governments have begun advertising the position of the striking nurses, the latest being Kisumu, which is set to hire 210 nurses on a three-months contract.

Other counties that have also advertised for the positions to replace the striking nurses include Lamu, Kirinyaga, Muranga and Lamu.

Kenya

Duale to Seek MPs Approval of Sh11.5 Billion for Poll

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Ethiopia: Corp’s Attempts to Export Sugar Ends in Turmoil

A deal entered between the Ethiopian Sugar Corporation and a Dubai based buyer came to an abrupt end last week, after the latter pulled out of a contract signed to buy 44,000tns of sugar.

Agri Commodities wrote a letter of termination on October 3, 2017, informing the Corporation on the cessation of contract, valued at 2.2 million dollars. Controversy over the weight and quality of the merchandise led to the falling apart of the deal, accoridng to people close to the issue.

Following the termination, Bright Border Crossing Transport Association, the contracted company for the transportation of the item to Kenya, has begun returning the sugar from Moyale, a border town 794.7Km south of Addis Abeba, to Wonji. The trucking company has deployed 110 trucks to return the merchandise to the factory, beginning yesterday.

Agri had not made any payment to the Corporation claiming failure to confirm the shipping document, although it was supposed to settle the invoice before the merchandise exited the factory.

“If you had presented all the documents in time, you would have been paid under the letter of credit,” reads the letter Agri wrote to the Corporation.

Signed by Krishnakant Mishra, representative of the company, the letter attributed the termination to the inability of the Corporation to present a certificate of weight and quality issued by an independent body.

“This is a minor discrepancy not to pay us for the sugar,” Gashaw Aychiluhim, corporate communications director of the Corporation, told Fortune. “They will be accountable for the loss we incurred.”

Agri demanded that the Corporation covers the 242,000 dollars it paid to transport the sugar and claimed compensation for the failure of the contract. The merchandise has been exposed to temperature and spoilage during the two-month trucks were stranded in Moyale.

Ethiopia

Govt Devalues Currency, Raises Interest Rates

In the midst of a Forex currency crisis, the National Bank of Ethiopia (NBE) has devalued Birr by 15pc and raised the… Read more »

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