The African Development Bank Group Chief Economist Complex

Market Brief Africa Economic & Financial Brief Volume1, Issue 26 For the period 28 June – 02 July, 2010 9 July, 2010

1. Market Commentary

1.1 Stock Markets 1.2 Commodity Markets

With the exception of a few, African Crude Oil (Brent): The price of crude stock markets were weighed down by oil fell by 8.2% to USD 72.14 per continued European debt worries and barrel over the week, taking the fall in Contents: weak global equity markets. The oil prices to 9.1% in the year-to-date. markets in Côte d'Ivoire, South Africa The sharp decline was driven by 1. Market and Egypt were among the hardest- growing worries over the weakened Commentary hit; registering losses of 3.1%, 3.5% global recovery in consumer demand, 1.1 Stock Markets and 4.4%, respectively. The stock following poor jobs data in the US, as 1.2 Commodity markets in Tunisia, Ghana and well as continued European debt woes. Markets Morocco also posted losses of between 0.1% and 1.9%. However, Copper: The prices of copper declined 2. Regional the Uganda market recorded a gain of by about 6.2%, almost reversing the Development 1.5%, while those of Kenya, Mauritius 7.33% gain in the previous week. The and Nigeria posted marginal gains of copper market was weighed down by 3. Country in Focus between 0.3% and 0.7%. slowing growth prospects of China, the world's largest consumer of the metal. 4. Development Equity Focus Partnership 2. Regional Developments Egypt: The CASE 30 Index fell by

5. Summary 4.4% over the week as investors lost Africa: By the end of June 2010, risk appetite due to uncertainty in Africa had recorded 43 consecutive global financial markets and signals of weeks of net positive capital inflows, a weaker global demand for goods, demonstrating a recovery of investor reflected by a decline in demand for confidence, according to a global crude oil. fund flow tracking firm EPFR Global. Funds investing in emerging and Côte d'Ivoire: The BRVM frontier equity markets in the continent Composite Index dropped by 3.1%, recorded net inflows of USD 484 led by falls in stock prices of the million in the first half of this year, manufacturing company (Nestle) and compared to net outflows of USD 217 car seller (Cfao CFAC.CI). Mthuli Ncube million in the same period a year [email protected] earlier. +216 7110 2062

Charles Leyeka Lufumpa [email protected] Prepared by the following staff: Kang Gil Seong ([email protected], Tel +216 7110 +216 7110 2175 2524), Chaouch Anouar ( [email protected] , Tel +216 7110 3989)

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The continent compares favorably with 3. Countries in Focus other emerging countries, especially India, which only recorded net inflows Zambia: The Copperbelt Energy of USD 246 million, and Brazil, which Corporation (CEC), Zambia's main had outflows of USD 1.37 billion in distributor of power to the mines, the last six months. plans to build a 40 megawatts (MW) power generation plant next year to The Africa Investor and Africa meet growing demand from the metal a consortium of Africa- “The Government of Group, producers. This project is estimated to focused consulting and research firms, cost USD 120 million. Demand for Botswana announced reported through the Africa Wealth electricity by the mines is projected to that the economy grew Cheque Report that the continent has rise to 1,000 MW within five years by 4.1% in the first about USD 1.67 trillion of potential from the current level of about 800 quarter of 2010, driven wealth and additional production in six MW, following a rally in copper by higher output from key sectors (agriculture, water, prices that encouraged mining the mining sector.” fisheries, , and human companies to invest in new projects in capital). This represents a combined the country. current market size of USD 909 billion and USD 762.4 billion of additional Botswana: The Government potential production. The report also announced that the economy grew by estimates current proven stocks of 4.1% in the first quarter of 2010, extractable energy resources in Africa driven by higher output from the (oil, natural gas, coal, and uranium) to mining sector. The growth comes be worth between USD 13 to 14.5 after the contraction of about 6.7% in trillion. 2009.

East Africa: A common market for the The Bank of Botswana (BOB) East African Community (EAC) trade decided to leave its main interest rate bloc was launched on Thursday July 1, unchanged at 10%. The decision was “A common market for opening up the borders of Uganda, taken in spite of a rise in consumer the East African Kenya, Tanzania, Rwanda and Burundi inflation to 7.8% year-on-year in May, Community (EAC) to labour and capital from all member largely due to an average 30% trade bloc was states. However, the financial crisis in increase in power prices from May 1, Greece that threatened the stability of launched on Thursday 2010. The BOB assessed that the the Eurozone has caused a rethink on current interest rate is consistent with July 1, opening up the the timeline of establishing an East achieving its 3% – 6% inflation borders of Uganda, Africa Monetary Union. Mr. David objective in the medium term. The Kenya, Tanzania, Nalo, Kenya’s permanent secretary in BOB reported that low domestic Rwanda and Burundi the Ministry for East Africa demand pressures signaled a positive to labour and capital Cooperation, said the crisis in the inflation outlook in the medium-term. from all member Greece had shown the need to first states.” understand how the financial sectors of Egypt: The Government expected a member states are managed because lower budget deficit than the mistakes in one country may affect the estimated 8.4% for the financial year financial stability of the whole region. ending on June 30, 2010. The Government also reported that it would reduce spending on subsidies,

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export destination, could undermine which initially accounted for more than and the country’s future growth

a quarter of total spending in 2010/11. prospects. These fears, This revision will free funds for notwithstanding, the bank expected

“The Government of increased spending on education, health economic growth of about 4.2% in and other social services without 2010 from an estimated contraction of Morocco announced a increasing the deficit. 0.8% in 2009. wind energy project

worth 31.5 billion Morocco: The Government announced The Government was also reported to dirhams (about USD a wind energy project worth 31.5 billion be planning to take measures that 3.5 billion) that will dirhams (about USD 3.5 billion) that would ensure foreign mining firms help the country will help the country increase its share start adding value to minerals increase its share of of electricity generated from renewable produced and foster greater participation of the local people in the electricity generated sources to 42% by 2020. The project will involve building five wind farms, sector. from renewable sources to 42% by raising the country’s wind generation capacity to 2,000 megawatts (MW) by 2020.” Côte d'Ivoire: A bond issued by the the year 2020 from the current 280 MW. country’s main port of has been oversubscribed by over 30%, The Government expects economic raising 30 billion CFA francs (USD 55 growth of 4% this year on the strength in million) to finance port developments. the mining, manufacturing and construction sectors. The estimated South Africa: The recovery in growth is lower than last year's Standard Bank’s median house price expansion of 4.9% but faster than a gained traction in June, rising to R588 “Zambia revised its 3.5% official forecast made at the start 500 from R579 000 in May. In of the year. 2009 GDP growth absolute terms, this level corresponds

slightly upwards to to the median house price at the start 6.4% compared to a Nigeria: The Central Bank plans to of the business cycle downswing in clear about USD10 billion of toxic debts previous estimate of December 2007. In real terms, from the banking system by the end of however, the property cycle is around 6.3% following the year. The debt clearance will cost 2% below last year’s levels. increased output in the Central Bank about USD 5 billion, as metal mining, the banks do not have collateral to cover Zambia: The Government revised its construction, the bad loans. 2009 GDP growth slightly upwards to agriculture and 6.4% compared to a previous estimate communications..” Kenya: The country will wait at least of 6.3% following increased output in

another year before selling bonds abroad metal mining, construction, agriculture as it can raise the money more cheaply and communications. The metal and on the local bond market. The quarrying industry grew by 20.3% in government is yet to decide on the exact 2009, up from only 2.5% in 2008. timing and it will aim to raise about Particularly, copper production rose by

USD500 million through the 21.1% to 696,400 tonnes in 2009 international sale. Kenya’s unfavorable compared to 575,000 tonnes the exchange rate is one of the factors previous year.

behind the government’s decision to delay the international bond sale.

Namibia: The Central Bank of Namibia reported that the impact of the debt crisis in Europe, the country’s main

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4. Development Partnerships 5. Summary

There is a renewed interest by foreign U.S.A - Egypt: Procter & Gamble (P&G) reported that it is building a USD investors in African financial markets, “Procter & Gamble and this has seen the continent (P&G) reported that it 176 million diaper factory in Egypt, doubling its investments in the country recording net global funds inflows of is building a USD 176 in the next few years. P&G will about USD 500 million in the first half million diaper factory complete the construction of the factory, of this year. The resources sector , with in Egypt, doubling its its estimated potential value of about its second one in Egypt, in 2020. Forty investments in the USD 14 trillion continues to attract percent of its production will be sold country in the next few locally and the rest exported to Africa, foreign investments. Furthermore, foreign-owned manufacturing firms are years.” Asia and Europe. also looking into expanding their operations on the continent, taking Switzerland - Africa: Nestle SA, the advantage of the growing local markets multinational manufacturer of food and export potential. products headquartered in Switzerland,

will invest 1 billion Swiss francs in Africa in the next three years to raise revenues from emerging markets. Nestle

expects emerging markets to make up 45% of sales in 10 years, up from about a third now.

“ The resources sector Appendix Table: Stock markets movements – Week ending on 2 July, 2010 in Africa, with its estimated potential value of about USD 14 trillion continues to attract foreign investments.”

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Stock Markets

Weekly % change Year-to-date % ( 02-07-2010) Change

Region/Country Index Name Index Code Week under Previous week Dec 31 - Jul 02 review

Côte d'Ivoire BRVM Composite Index BRVM CI ▼ -3.08 ▼ -1.49 ▲ 12.2 Egypt* CASE 30 Index CASE30 ▼ -4.35 ▼ -1.73 ▼ -2.8 Ghana Ghana All Share GSE ▼ -0.86 ▼ -0.24 ▲ 17.4 Kenya Nairobi SE Index- NSE 20 NSE 20 ▲ 0.65 ▼ -0.37 ▲ 33.2 Mauritius Mauritius AllShares SEMDEX ▲ 0.47 ▲ 0.49 ▼ -0.4 Morocco Casa All Share Index MASI ▼ -1.91 ▼ -0.35 ▲ 12.9 Nigeria NSE All Share Index NSE ▲ 0.28 ▼ -2.74 ▲ 21.1 South Africa All Share Index JALSH ▼ -3.46 ▼ -1.81 ▼ -4.9 Tunisia Tunis se Tnse Index STK TUNINDEX ▼ -0.05 ▼ -0.85 ▲ 14.8 Uganda* Uganda SE All Share index USE ▲ 1.49 ▼ -2.71 ▲ 40.9 Others USA Dow Jones Industrial DJ Index ▼ -4.51 ▼ -2.94 ▼ -7.1 France CAC 40 Index CAC40 ▼ -4.87 ▼ -4.54 ▼ -14.9 ▼ -5.48 ▼ -2.58 ▼ Japan Nikkei 225 Index N225 -12.7

* Value at end of 1st July, 2010