Category: Business

Flyafrica – the Bird That Never Flew

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By Timo Shihepo

Windhoek – Low budget airliner Fly Africa has seemingly given up the fight for the SADC market, after a decision to cease operation in some parts of the region, along with very little visibility in markets where the airline still hold operating licenses.

FlyAfrica is a Mauritius-based private equity aviation investment group that tried to offer cheaper services as part of its Pan-Africa low-fare strategy. It made headlines and sends shivers down the spines of state-owned airline companies when it introduced cheap routes across the region at a low ticket prices. The idea was greatly embraced by many people in Namibia who were only to pay as little as U$80 for a return ticket between Windhoek and Cape Town/Johannesburg.

It then had its operating licences withdrawn in Namibia and Zimbabwe in October 2015, which essentially grounded its entire operations and fleet of planes.

In Namibia the company faced a mountains of challenges that led to the local partner company, Nomad Aviation, to throw in the towel in December 2015, and disassociating itself completely from FlyAfrica. Former FlyAfrica Namibia Chief Executive Officer, and Nomad Aviation executive, Clifford Strydom, has confirmed to The Southern Times that Fly Africa has recently stopped all flights in the region and “we as a company [Nomad Aviation] have stopped all our association with the [FlyAfrica] airline.”

FlyAfrica was set to charge $100 for the return ticket for the Victoria Falls routes both in Zimbabwe and Johannesburg in South Africa, which otherwise cost about three times more if using national carriers. The company has had presence in Zambia, Zimbabwe, Namibia, Mozambique and South Africa.

FlyAfrica entered the Namibian market through local company Nomad Aviation, selling air transport tickets worth N$3 million in a span of few days up until its maiden flight was grounded by the Namibian civil aviation authority.

The Namibian directorate of civil aviation successfully prohibited Nomad, which was trading as FlyAfrica Namibia, from flying citing aviation irregularity, absence of relevant licences and aviation validation. This left passenger stranded. The regulators also cited the safety of the airline’s aeroplanes. The DCA said then that had discovered that FlyAfrica uses planes that are not authorised under the civil aviation authority’s approved wet lease, which regulates such passenger services.

FlyAfrica was also dealt a blow by Air Namibia, the national airline, which successfully asked the Namibian High Court to bar FlyAfrica from using the route between Windhoek’s Hosea Kutako International Airport (HKIA) and the OR Tambo airport in Johannesburg, saying FlyAfrica only has licence to fly between Windhoek’s HKIA and Lanseria airport in Johannesburg.

Strydom said the company’s wings in Namibia, were really clipped when Air Namibia took them to court to prevent Fly Africa from transporting passengers from Windhoek to OR Tambo airport in South Africa.Strydom who refrained from uttering harsh words said, at first, in other SADC countries apart from Namibia they were just doing fine.

“In Namibia it’s quite the opposite. Everyone else in SADC was really accommodating but the challenge was only in Namibia. Don’t get me wrong the people in Namibia want us but the national airline doesn’t.

“The problem is that it only has one main shareholder and it is fighting tooth and nail so that it does not lose more customers. But really, if they didn’t want competition they could have just launched services that are affordable to people,” he said.

In January this year however the Civil Aviation Authority of Zimbabwe (CAAZ) cleared FlyAfrica, to resume flying, ending a nearly three months suspension of its flying certificate. Zimbabwe’s regulatory body lifted the suspension placed on the operations of FlyAfrica after it successfully complied with all regulatory requirements.

In Zimbabwe FlyAfrica is operating in partnership between Chakanyuka Karase’s family investment vehicle called Fresh Air and Mike Bond of the now defunct One Time of South Africa.

Namibia and DRC Gets Contrasting Fitch Ratings

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Windhoek – Namibia and the Democratic Republic of Congo (DRC) received contrasting ratings getting a ‘BBB’ Outlook Stable and a ‘B’ Outlook Negative respectively, ratings released by Fitch Ratings this week shows.

Namibia’s rating of BBB – stable is equal to the ratings given to South Africa, while Botswana received the A+ stable from S&P and a A2 stable rating from Moody’s rating agencies. Fitch rating did not rate Botswana, but rated Zambia whom it rated at B negative and Angola at B+ stable.

The key drivers for Namibia’s ratings are that the country balances strong and sustained levels of economic growth, a relatively low public debt load and a high level of political stability, against large fiscal and external deficits.

Fitch Ratings also noted that Namibia has a sizeable general government deficit, which Fitch estimates at 6 percent of GDP in fiscal year 2015/16, similar to the 6.1 percent shortfall in 2014.

The favourable ratings for Namibia were also helped by the fact that in February 2016, the government announced plans to tighten fiscal policy to reduce the budget deficit to 3 percent of GDP over the medium term, in line with the International Monetary Fund recommendations.

The consolidation will involve a reduction in expenditure by around 8 percentage points of GDP by 2018, focussed on reducing expenditure on materials and supplies, subsidised travel, overtime, equipment and some capital spending.

Fitch Ratings however states that the fiscal consolidation will be challenging in the context of an expected fall in revenues from the Southern African Customs Union (SACU), which is expected to fall from around 10 percent GDP in 2015 to under 7 percent by in 2018.

The international rating agency also expects the deficit to narrow to 4.9 percent of GDP in 2016 and 4.0 percent in 2017, somewhat higher than the government’s targets.

The Institute for Public Policy Research (IPPR) associate researcher, Klaus Schade said all is not well expressing his concerns that currently the country’s foreign reserves are not doing that well.

The international benchmark for foreign exchange reserves is three-month import cover; the Southern Africa Development Community (SADC) benchmark is six-month import cover. This means a country should be in a position to pay the import bill for at least three months even if there is no inflow of foreign exchange.

“Namibia’s foreign exchange reserves are below these benchmarks, which could result in a downgrading in the rating of agencies such as Moody’s and Fitch. A lower rating could result in increasing borrowing costs on international markets,” said Schade.

For now Namibia is still able to honour her foreign loan obligations and to pay the import bill.

But Schade noted that low commodity prices combined with low commodity demand and lower than expected transfers from SACU Common Revenue Pool imply that foreign exchange reserves are not likely to recover soon.

“We therefore need to find effective ways to reduce unproductive imports and prioritise the importation of goods that can stimulate exports.

“Furthermore, the involvement of more Namibian companies, which have a proven track record and the capacity to deliver, in infrastructure projects will contribute to keeping more financial resources in the country instead of profits being repatriated by foreign companies,” he said.

BoN’s Director of Strategic Communications and Financial Sector Development, Ndangi Katoma said the country’s economy is doing well as highlighted by the Fitch ratings of BBB. He said this shows that Namibia has maintained its international ratings and remains amongst the top three countries in Africa in terms of investment climate and other factors.

“This also implies that the economy is generally doing well in comparison to its peers and therefore has access to international financial markets for funds should that be required.

“This means that, for as long as Namibia has access to both domestic and international capital markets, it would not be accurate to state that Namibia is facing financial distress. In addition, Namibia’s foreign reserve levels are still sufficient to enable her to fulfil her foreign payment obligations,” he said.

DRC ‘B’ Outlook Negative

Fitch Ratings has downgraded the Democratic Republic of Congo’s long-term foreign and local currency Issuer Default Ratings (IDR) to ‘B’ from ‘B+’. The Outlooks are Negative.

The issue ratings on the country’ senior unsecured foreign currency bonds have also been downgraded to ‘B’ from ‘B+’. The Country Ceiling has been affirmed at ‘BBB-’ and the Short-term foreign currency IDR at ‘B’.

The downgrade of the Republic of Congo’s IDRs reflects the depleting sovereign and external assets due to a rapid deterioration in fiscal accounts resulting from the sharp fall in oil prices since 2014 and the lack of a policy response.

The Negative Outlook reflects uncertainties around the financing options for the budget deficit in the context of a high-spending 2016 budget.

Bleak Future for Mining Sector SADC

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Windhoek – Fifty thousand employees in the SADC Region face the risk of losing their jobs in the mining sector if something is not done urgently to avert the situation, according to the Mining Industry Association of Southern Africa (MIASA).

MIASA, an association of chambers of mines in the SADC region, representing Botswana, the Democratic Republic of Congo (DRC), Madagascar, Namibia, South Africa, Tanzania, Zambia and Zimbabwe, warns that if there is no cooperation between governments and the private sector, the industry will slide further into decline to the detriment of socio-economic growth in the region with massive job losses, which are a threat to social stability.

So far, the mining industry has lost approximately 70,000 jobs across all commodities and considering a multiplier effect of seven, this translates to total jobs losses amounting to 490 000, according to the association.

“This means up to five million people have been deprived of their daily subsistence considering that each employee supports between seven to ten dependants,” said MIASA in a statement.

The association calls on SADC governments to uphold policy consistency in order to help the mining industry at a time when the whole of the SADC region and Africa at large is experiencing “headwinds of significant proportions that require governments and the private sector to be pulling in the same direction to weather the storm and mitigate the negative impacts of the current downturn.”

“With a large scale retrenchments in the Southern Africa region as a result of depressed commodity prices on international markets, it is imperative that governments introduce policies that are well researched and in consultations with the private sector. MIASA calls for governments to cooperate and share experiences of what works and what doesn’t.

“There is no need to re-invent the wheel. Four jurisdictions in the SADC region are currently reviewing mining legislation. Any legislation change makes investors nervous for as long as there is no finality and consultation on that legislation,” reckons MIASA.

The association further noted that since the mining industry has had no significant investment in recent years without major exploration projects for mining, government ministers in the mining sector need to assist the industry by reducing the level of bureaucracy and creating an environment that will make it easy for new and emerging miners to enter the industry.

Governments are advised to reduce uncertainty by not changing policy at short intervals, while external investors also need certainty on security of tenure to ensure long term investment in mining industry.

The industry is always ready to engage with governments in the SADC region to come with solutions that will help the industry to survive the downturn and position itself to reap mutual benefits in the next super-cycle.

MIASA recently took part in the Ministerial Symposium held on February 7, 2016 ahead of the official opening of this year’s 20th Mining indaba in Cape Town, which is aimed at promoting Africa as a preferred investment destination for mining.

While the current slump in commodity prices spells a sombre outlook for the global mining industry in the region, Namibia’s Chamber of Mines Chief Executive Officer Veston Malango Malango is positive about the Namibian mining sector.

He said this during the launch of the 2016 Mining Expo & Conference on February 24 that Namibia is well-placed to weather the storm as the mining sector finds itself in a fortunate position with recent investments that are culminating in increased production and are expected to offset any negative impacts on the industry.

Some of the major investments in mining are the B2Gold’s Otjikoto Gold Mine, situated between Otavi and Otjiwarongo in the Otjozondjupa Region in the north, which opened its doors in June 2015, employing over 1000 people including local contractors.

The Swakop Uranium under construction invested N$11 billion, followed by Dundee Precious Metals with had a fixed investment of N$1.35 billion for 2014.

The other big mining investors during 2014 included Weatherly Mining, Skorpion Zinc and Sakawe Mining that invested N$474 million, N$287 million and N$113 million, respectively.

This was revealed in the Chamber of Mines of Namibia’s Annual Review 2014 report, which highlighted 17 mining companies.

Malango praised Namibia’s sound regulatory regime, the stable political climate and the clear framework set out by the government, which he said has made Namibia the number one mining investment destination on the African continent for two years running as evidenced by the Fraser Institute Survey of Mining Companies.

The mining sector remains the largest primary contributor to Namibian GDP and the biggest export earner.

Huge Trade Finance Opportunities in Africa

Timo Shihepo

Windhoek — There is a big drive on the African continent to increase manufacturing and industrial base and shift away from an economy that is commodity driven, says Standard Bank’s Head of Corporate and Investment Banking (CIB) in Namibia, Amit Mohan.

Mohan maintains that Africa has over a billion people and a large percentage of young people who are familiar with what is happening in technology, which provides a big opportunity from a manufacturing and industrialisation base.

“We really believe that the labour force from a cost perspective is becoming increasingly competitive globally. We see that with multi-nationals opening up shop on the Continent and also big Chinese conglomerates opening textile and clothing factories in Africa,” he points out, adding that with that will come investment into power, telecommunication, water, primary infrastructure and more that is needed for conducive economic growth.

He is convinced that all these big infrastructure investments will lead to big financing opportunities in Africa. The Standard Bank’s CIB Head welcomes partnerships with various banks including development banks in the SADC region and beyond, “because we see these partnership indications and joint agreements and incorporations that will eventually lead to the success of key infrastructural development on the Continent, in SADC, in the (African) region as well as in Namibia.”

Mohan says that Standard Bank facilitates straightforward transactions and have a ray of trade finance instruments to offer to customers; they can provide trade solutions to customers because of their presence, expertise in the sector and can also arrange working capital facility with their sisterly banks in the region that could assist their clients.

He further states that Standard Bank has one of the biggest trade finance book in Namibia, where they facilitate infrastructure investment from contractors to the actual client, which could be terminal expansion, construction, oil storage facility and more.

Across Africa, Standard Bank has associations with many banks and are the largest bank on the continent in terms of assets; they are widespread in regional presence and it is second nature to them to finance trade transactions.

In the SADC region, Mohan says that Standard Bank has a strong footprint in every country and recently the bank provided a loan facility of N$500 million to the Zimbabwe Power Corporation for the 300 MW extension of the Kariba South Hydro Power.

“The Zimbabwean power transaction speaks to our strength from a sector and regional perspective how we are able to facilitate and also conclude what is a regional milestone transaction in that sector,” he points out.

Mohan adds that power is quite a contemporary topic in the region and because the region is facing a shortfall, Standard Bank’s strength and expertise in the sector cannot be over-emphasised.

In Namibia, Standard Bank also landed a landmark transaction in 2013 to be the lead arranger and lender of a US$60 million facility for Debmarine Namibia for the acquisition of the largest marine diamond production vessel of its kind in the world.

Standard Bank further partnered with the Namibian government as the appointed joint lead manager and book runner in the issuance of Namibia’s second Eurobond in October 2015 worth US$750 million.

The bank was also the arranger and book runner for Nambia’s first successful Eurobond in 2011.

“It (Africa) is a big and very relevant region. This gives an indication of how Standard Bank facilitates development and growth,” he adds.

Mohan says that the economic slowdown and depreciation of the (South African) Rand brings in a lot of volatility, but Standard Bank’s size and expertise in the global market, allows them to manage volatilities and provide clients with appropriate solutions.

“Namibia is still seen as a key investment hub from global investors. Namibia is in a very fortunate position. We continue to maintain our investment growth grading,” he adds, saying that while there is a lot of volatility and shortfalls in various other economies, the Namibian economy has the strong possibility to flourish.

Furthermore, the CIB Head says that Namibia has one of the best infrastructure in Africa and is an investment rated country which is economically and politically stable.

“It (Namibia) has come out of 2008 in the midst of global economic crisis pretty much unscathed. We have shown that we can wither certain storms for a number of reasons,” he says.

When it comes to trade with China, Mohan is adamant that China is a dominant force in global market, also synonymous trading partner with Africa in terms of understanding.

He discloses that the Industrial Bank of China is Standard Bank’s largest single shareholder owning 21 percent shares.

“We understand China, because we have a huge presence in Beijing. There’s huge synergy of Chinese clients coming to do business in Africa and vice versa. Without doubt, in Namibia we have the most significant portfolio with the Chinese,” says Mohan, adding that Standard Bank can offer Chinese banking solutions, where just in January this year, they launched their Chinese Yuan Renminbi (RMB) platform, where RMBs can be exchanged for Namibian dollars without having to first change into US dollars.

Mohan says that there are institutions and people within and outside Africa who make the mistake of assuming that in Africa, “one shoe fits all”, while the Continent has 54 different jurisdictions, different cultures, different political and economic systems, different regulations and every country has a different identification and blue print.

This, he says, makes cross-border trade quite challenging from a financial perspective. (Reported by Magreth Nunuhe)