Resurgent South Africa joins Saudi Arabia on road to economic reform

Resurgent South Africa joins Saudi Arabia on road to economic reform
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Updated 16 November 2020

Resurgent South Africa joins Saudi Arabia on road to economic reform

Resurgent South Africa joins Saudi Arabia on road to economic reform
  • Saudi Arabia seen as potential investor in Pretoria’s $100 billion investment recovery plan
  • South Africa is also transitioning from a commodity-based economic foundation to a more sustainable and diversified and modernized model

LONDON: South Africa is embarking on an ambitious economic reform agenda that shares striking similarities with Saudi Arabia’s own efforts to slash red tape and stimulate investment.

South African President Cyril Ramaphosa last month unveiled a plan aimed at helping the country recover from the impact of the coronavirus pandemic by fast-tracking projects and boosting infrastructure spending.

Like Saudi Arabia, South Africa is transitioning from a commodity-based economic foundation to a more sustainable and diversified and modernized model.

Pretoria is targeting an average annual economic growth rate of 3 percent over the next decade and has established a state infrastructure fund that will provide 100 billion rand ($6 billion) in finance, a move that the government expects will unlock a further trillion rand in investment.

The International Monetary Fund (IMF) last month maintained its forecast of an 8 percent contraction in the country’s economy this year but cut its prediction for 2021 because of the impact of the pandemic.

It now expects the economy to expand by 3 percent next year, which is 0.5 percent lower than its previous estimate.

The South African government is spending about 13.8 billion rand ($850 million) on creating 800,000 jobs and economic opportunities by the end of March next year.

An additional 86.2 billion rand will be spent on employment creation over the next two years. Just as Saudi Arabia is increasingly promoting local production and procurement, South Africa is also following a similar path to reduce its reliance on imports. Additionally, the country aims to reduce data costs and extend broadband into poor households, while a 350 rand welfare grant for those who don’t qualify for other government support will be extended by three months.

FASTFACT

$850 million

The South African government is spending about 13.8 billion rand ($850 million) on creating 800,000 jobs and economic opportunities by the end of March next year.

The measures are in a part a response to the specific strains on the South African economy that have resulted from the coronavirus pandemic.

“We expect the economy will remain subdued and for fiscal consolidation to be slow, sustaining the rise in government debt in the next couple of years,” Moody’s said in a recent report.

Trade relations between South Africa and Saudi Arabia received a boost in 2018 with an official visit by Ramaphosa to the Kingdom. The timing was significant for both countries as they stepped up efforts for radical economic transformation with a heavy emphasis on boosting private sector participation.

One area where the pair are likely to see increased cooperation is in power generation and renewables — a sector that has also been prioritized by Riyadh as it aims to reduce its reliance on hydrocarbons and develop alternative energy sources.

About 11,800 megawatts of new power generation capacity is expected to be brought on line in South Africa from 2022, more than half of which will come from renewable sources.

Independent power producers will also supply another 2,000 megawatts of power from current projects by June 2021. One such power producer that has already established a foothold in the country is Saudi Arabia’s ACWA Power, a trailblazer in developing independent power projects across the Middle East, Asia and Africa. It is the lead shareholder in the 50 megawatt Bokpoort concentrated solar power plant commissioned in 2016.

Ramaphosa is seeking to attract as much as $100 billion in investment to boost the country’s ailing economy and Saudi Arabia is seen as a potential partner in a number of planned projects in the country.




South African President Cyril Rmaphosa. (fiile photo)

The South African leader who had a strong previous career in the private sector, has promised to revive the economy and root out corruption since becoming president in February 2018. It coincided with a similar drive to stamp out corruption in Saudi Arabia as a necessary condition of instilling confidence among foreign investors.

Business confidence had been eroded substantially during the presidency of Ramaphosa’s predecessor, Jacob Zuma when South Africa’s credit rating was cut to junk by two of the big three credit ratings agencies which made it more expensive for the country to raise fresh borrowing from international investors.

The election of Ramaphosa helped to reignite international investor interest in what is now Africa’s second-largest economy behind Nigeria, but the arrival of the pandemic has been a major setback for the country where many people live in densely populated urban locations within which the virus thrives.

“The pandemic worsened an already dire situation, severely disrupting economic activity and putting numerous investments on hold,” said Ramaphosa on Tuesday.” Our priority now is driving the implementation of South Africa’s Economic Reconstruction and Recovery Plan.”

Despite the devastating impact of the pandemic on business across the entire African continent, positive signs are now starting to emerge from South African industry.

Absa Group’s Purchasing Managers’ Index, compiled by the Bureau for Economic Research, increased to 60.9 from a revised 58.5 in September, the Johannesburg-based bank said this week. It represents the first time the index has topped 60 and is the highest since record-keeping began September 1999.

The country’s employment index also rose for a fifth consecutive month — a positive sign for a country where unemployment is running at 37 percent, according to the latest data from the IMF.

The data has provided some hopes that the stimulus measures already introduced by the government are starting to produce results as the key manufacturing sector starts to recover.

 


Cryptocurrencies make a quick comeback from last week’s turmoil: Market wrap

Cryptocurrencies make a quick comeback from last week’s turmoil: Market wrap
Updated 36 sec ago

Cryptocurrencies make a quick comeback from last week’s turmoil: Market wrap

Cryptocurrencies make a quick comeback from last week’s turmoil: Market wrap
  • The two major cryptocurrencies regained most of their losses on Monday

RIYADH: The two major cryptocurrencies regained most of their losses on Monday, as the market quickly rebounded from last week’s turmoil sparked by the crackdown in China.

Bitcoin, the leading cryptocurrency in trading internationally, traded higher on Monday, rising by 3.5 percent to $44,008.57 at 12:32 p.m. Riyadh time.

Ether, the second most-traded cryptocurrency, traded at $3,130.43, up 8.56 percent, according to data from CoinDesk.

Meanwhile, the second-largest stablecoin by market valuation, USDC, has seen its capital increase significantly, rising by more than $10 billion in 125 days.

As of Sept.25, there are $129.3 billion worth of stablecoin assets in existence which represents 6.54 percent of the cryptocurrency economy.

Many US lawmakers see China’s crackdown on cryptocurrencies as a perfect opportunity for American leadership in the crypto space.

“China’s authoritarian crackdown on crypto, including Bitcoin, is a big opportunity for the US. It’s also a reminder of our huge structural advantage over China,” Sen. Pat Toomey from Pennsylvania said.

In comments to media, Indonesia’s Trade Minister Muhammad Luthfi asserted that the Indonesian government would not follow the lead of China, which has confirmed a ban on all cryptocurrency transactions.

Noting that the state will limit itself to ensuring that it is not used in illegal activities, the statement comes after local cryptocurrency exchanges reported a significant increase in trading volume this year. “We don’t prohibit it, but we will tighten the regulations,” said Luthfi

Cryptocurrency trading on 13 local exchanges licensed by the Indonesian Futures Exchange Supervisory Board also increased by 40 percent in the first five months of 2021. During 2020, the volume of transactions reached 65 trillion rupees ($4.5 billion), according to the reports.

 

Crash ahead

Renowned author and investor Robert Kiyosaki, author of the bestselling book “Rich Dad Poor Dad,” predicts that a giant stock market crash is coming in October, noting that gold, silver and bitcoin may also crash.

"Giant stock market crash coming October. Why? Treasury and Fed short of T-bills. Gold, silver, bitcoin may crash too. Cash best for picking up bargains after crash. Not selling gold, silver, bitcoin, yet have lots of cash for life after stock market crash. Stocks dangerous. Careful,” Kiyosaki tweeted.

 

Tipping point

Twitter users on Apple’s iOS will now be able to link third-party tipping services to their profile on the social networking site. This will include the ability to link both Bitcoin and Lightning Network addresses.

The tipping feature will be entirely dependent on third-party payment services such as the Jack Mallers Strike app. The company said that it “is not in the flow of funds" and will not take a percentage of tipping proceeds.

Company representatives said that the Tips feature will be rolling out to the Twitter app for iOS and will be available on Android soon.

Twitter also announced that it will add non-fungible tokens verification features to the platform. No specific timeline has been set for this, which is still under development.


More than 50 companies plan listing on Saudi stocks market, regulator says

More than 50 companies plan listing on Saudi stocks market, regulator says
Updated 27 September 2021

More than 50 companies plan listing on Saudi stocks market, regulator says

More than 50 companies plan listing on Saudi stocks market, regulator says

More than 50 companies are waiting to be listed on the Tadawul, according to the chairman of the Capital Market Authority.

Speaking at the Financial Sector Conference on Monday, Mohammed Al-Quwaiz said he expected to have over 30 listed by the end of the year.

“If we look at the numbers today we have over 50 files that are either offering or listing either in the primary market or the Tadawul market,” he said.

“Our expectation is obviously this is subject to market norms and the readiness of these businesses but we imagine that we will end the year with over 30 listed,” he added.


Switching to renewables will save Kingdom's businesses $13bn, Saudi debt office chief claims

Switching to renewables will save Kingdom's businesses $13bn, Saudi debt office chief claims
Updated 27 September 2021

Switching to renewables will save Kingdom's businesses $13bn, Saudi debt office chief claims

Switching to renewables will save Kingdom's businesses $13bn, Saudi debt office chief claims

The transition to renewable energy will save companies $13billion, the CEO of the National Centre for Debt Management said on Monday.

Speaking at the Financial Sector Conference in Riyadh, Hani Al-Madini said many local entities are already transforming towards sustainable energy, which can decrease expenses by SR50 billion.

His comments were echoed by Mohammed Al Kuwais, chairman of the capital market authority, who said: “Companies are doing this because they recognize their responsibility, and to relate to investors’ demands.” 


Consortium signs financing deals for world’s largest IGCC complex in Jazan

Consortium signs financing deals for world’s largest IGCC complex in Jazan
Updated 27 September 2021

Consortium signs financing deals for world’s largest IGCC complex in Jazan

Consortium signs financing deals for world’s largest IGCC complex in Jazan
  • The JV is purchasing the ASUs, gasification, syngas cleanup, utilities and power assets from Aramco

RIYADH: A consortium of Saudi Aramco, Air Products, ACWA Power and Air Products Qudra on Monday signed asset acquisition and project financing agreements for a $12 billion air separation unit, gasification and power joint venture in Jazan Economic City, said a press release.

“This JV is meant to be central to the self-sufficiency of our megaprojects at Jazan,” said Mohammed Al-Qahtani, senior vice president of downstream, Saudi Aramco.

It serves Aramco’s Jazan Refinery, a megaproject to process 400,000 barrels per day of the crude oil to produce the main products such as ultra-light sulfur diesel, gasoline, and other products.

All parties under the joint venture expect asset transfer and funding to occur during October 2021. Air Products intends to conduct a public investor call at that time.

Seifi Ghasemi, Air Products chairman, president and CEO, said the project is a “perfect fit with our growth strategy.”

The JV is purchasing the ASUs, gasification, syngas cleanup, utilities and power assets from Aramco. The JV owns and operates the facility under a 25-year contract for a fixed monthly fee. Aramco will supply feedstock to the JV, and the JV will produce power, steam, hydrogen and other utilities for Aramco.

Mohammad Abunayyan, chairman of ACWA Power, said:  “Jazan IGCC is set to be the largest integrated project for gasification and combined cycle energy production in the world.”

Aramco via its subsidiary Saudi Aramco Power Co. has a 20 percent share in the JV; Air Products 46 percent; ACWA Power 25 percent; and Air Products Qudra 9 percent. Air Products’ total ownership position is 50.6 percent by owning an additional 4.6 percent through Air Products Qudra.


Dubai's Amanat eying up $272m of investments in Middle East, says CEO

Dubai's Amanat eying up $272m of investments in Middle East, says CEO
Updated 27 September 2021

Dubai's Amanat eying up $272m of investments in Middle East, says CEO

Dubai's Amanat eying up $272m of investments in Middle East, says CEO

RIYADH: Dubai-based Investment firm Amanat Holdings can call on a billion dirhams warchest to fund new acquisitions across the Middle East, its chief executive has revealed.

Speaking on CNBC Arabia, Mohamad Hamade said his firm will target investments in Saudi Arabia, the UAE and Egypt as he claimed Amanat’s investment portfolio delivered achieved returns of 235 million dirhams in the first half of the year, representing about 10 percent of the value of the portfolio.

"Currently, the liquidity has reached more than 700 million dirhams as cash for investment, but we can increase this amount to one billion or more if we borrow from the banks," Hamade said.

On Sunday, Amanat completed the sale of its minority 13.13 percent share in Jeddah Hospital International Medical Center for SR443 million ($118 million).

The divestment resulted in a cash return of 100 million dirhams, and is expected to report a gain of 40 million dirhams, Amanat said in a statement.

Amanat Holdings acquired Cambridge Medical and Rehabilitation Center — a local rehabilitation firm for an enterprise value of $232 million, Bloomberg reported last February.

The Cambridge acquisition deal amounted to 850 million dirhams and was half financed by banks, Hamade said.