Em­pha­sis is on stim­u­lat­ing growth for African banks

The Star Early Edition - - NEWS - Vuyani Nd­aba

AFRICA’S ma­jor cen­tral banks are en­ter­ing an eas­ing cy­cle as they try to stim­u­late growth af­ter months of drought, aus­ter­ity drives and con­fi­dence is­sues across the con­ti­nent, a poll found yes­ter­day.

Much of south­ern and eastern Africa is still re­cov­er­ing af­ter an El Niño-re­lated drought that wilted crops last year. Poor busi­ness con­fi­dence in South Africa and for­eign ex­change re­stric­tions in Nige­ria have also ham­pered growth.

“We ex­pect that African mone­tary pol­icy is en­ter­ing a wide­spread and pro­tracted pe­riod of pol­icy eas­ing. This will pro­vide a boost to growth,” said John Ash­bourne, Africa an­a­lyst at Cap­i­tal Eco­nom­ics.

Ghana, which agreed on a three-year fis­cal dis­ci­pline deal with the In­ter­na­tional Mone­tary Fund in ex­change for aid in 2015, cut 100 ba­sis points from its bench­mark in­ter­est rate in May and is ex­pected to do the same on Mon­day, putting it at 21.50 per­cent.

Me­di­ans in the poll pre­dict South Africa will make a first quar­ter trim of 25 ba­sis points to 6.75 per­cent and while Kenya will hold steady on Mon­day it is ex­pected to cut 100 ba­sis points to 9 per­cent in the sec­ond quar­ter of next year.

Nige­ria is ex­pected to hold rates at 14 per­cent on Tues­day, and through this year, but will re­duce bor­row­ing costs by 175 ba­sis points across 2018.

Bat­tered con­fi­dence

Aly-Khan Satchu, chief ex­ec­u­tive of Nairobi-based Rich Man­age­ment, said pol­i­cy­mak­ers in Africa’s big­gest economies have lost cred­i­bil­ity and it would be dif­fi­cult to re­gain that.

To try to re­duce de­mand for dol­lars, Nige­ria banned the im­port­ing of 41 items, but that only fu­elled the gap be­tween the of­fi­cial and black mar­ket rates for its naira cur­rency.

The pol­icy, along­side a com­mod­ity price slump that hurt oil ex­ports, has since 2015 forced its cen­tral bank to hike the bench­mark rate 300 ba­sis points to 14 per­cent as it tried to deal with much faster in­fla­tion and re­store the cur­rency’s strength.

Nige­ria – Africa’s big­gest econ­omy – fell into re­ces­sion for the first time in 25 years in 2016, but is ex­pected to turn in growth of 1 per­cent this year and 2.5 per­cent the fol­low­ing.

South Africa is ex­pected to ex­pand 0.7 per­cent this year af­ter es­cap­ing a six-month re­ces­sion last quar­ter that was partly due to weak con­fi­dence and drought.

Con­fi­dence in South Africa’s econ­omy has been sapped by the chop­ping and chang­ing of fi­nance min­is­ters four time since the end of 2015 by Pres­i­dent Jacob Zuma. The last change in March trig­gered a credit rat­ing down­grade to “junk” sta­tus.

Kenya is ex­pected to grow 5.2 per­cent this year and 5.9 per­cent next. Growth slowed to 4.7 per­cent in the first quar­ter, hit by a credit slow down af­ter author­i­ties late last year capped the in­ter­est banks could charge on loans.

How­ever, Ghana is ex­pected to fare better than most, grow­ing 6.1 and 6.8 per­cent in 2017 and 2018 re­spec­tively. – Reuters

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