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Fighting Corruption, Money Laundering And Terrorist Funding

Murky ownership details give crooks places to hide Companies profiled by Who Owns Whom researchers are allocated a transparency rating based on their willingness to disclose information about themselves, from 1 (opaque) to 10 (fully transparent). Of the 15,241 active companies on file, 32.76% scored above 6. While this is a material percentage, it indicates that we still have some way to go to convince our business community that transparency is more conducive to a functional society than secrecy. Needless to say, Who Owns Whom scores 10. The most transparent sectors are travel operators, forestry, electrical machinery manufacture, precision instruments manufacture, printing and publishing, education and heavy machinery rental. Our latest report on the banking sector highlights the challenges faced by South African banks with foreign operations or foreign corresponding bank relationships in complying with the laws of foreign jurisdictions which have strict obligations to ‘know your client’ in the international fight against corruption, money laundering and terrorist funding. In 2017, former president Jacob Zuma reluctantly signed the Financial Intelligence Centre Amendment Act (Fica) at the last moment, narrowly avoiding international banks severing their correspondent relationships with South African banks. Fica places international standard know your client obligations on South African banks. A key component is ownership, but while the intention of section 26 of the Companies Act is to give the public access to the share registers of private companies, delinquent companies wishing to hide ownership simply drag the right to access process out in the courts for years. Amabhungane, The Helen Suzman Foundation and Who Owns Whom have made a number of submissions to the Standard Committee on Company Law at the Department of Trade and Industry over the last three years to strengthen this clause in the Companies Amendment Act in order to oblige private companies to lodge ultimate beneficial ownership information with their annual returns at the Companies and Intellectual Property Commission (CIPC) and for the public to have access to ultimate beneficial ownership information, as they currently only have access to a list of directors. This proposal has been included in the latest draft which is currently with Nedlac. As the CIPC makes some annual return financial information publicly available and once the ultimate beneficial ownership disclosure legislation is gazetted, it is going to be considerably more difficult for crooks to get a stranglehold on our country again.

Nigeria Snapshot

Economic growth in Nigeria, the most populous country in Africa, remains slow and way off the overly-optimistic expectations of its 2017 economic recovery and growth plan. The country, which is negotiating World Bank funding in the region of US$2.5bn, the second tranche in as many years, remains highly dependent on agriculture and oil, which played into its languid GDP growth of 1.94% in the quarter to June, from 2.1% and 2.46% in the previous two quarters. The growth plan had projected 4.5% growth in 2019. The oil sector, which accounts for 10% of economic output, grew 5.15% in the quarter to June, while the non-oil sector expanded by just 1.64%. According to the World Bank, Nigerian GDP averaged 5.7% between 2006 and 2016, starting the decade at 8% on the back of high oil prices and ending it at a low of -1.5% in 2016. Nigeria emerged from recession in 2017, with a growth rate of 0.8%, and growth reached 1.9% in 2018. The country remains at the mercy of oil prices, climate and conflict, and investors, including South African companies such as MTN and Shoprite, have found conditions in Nigeria difficult. This is not a new phenomenon. Woolworths announced the closure of its three stores in 2013. Tiger Brands sold its interest in its Nigerian flour division in 2016 after writing down R2.7bn on the investment, although it retains 49% of FMCG company UAC Foods and 100% of biscuit maker Deli Foods. Recently, following xenophobic attacks, Nigeria announced it had recalled its ambassador and pulled out of the World Economic Forum meeting on Africa in Cape Town, while companies such as MTN and Shoprite (which has 25 stores) were forced to close stores in Nigeria after they were attacked in the backlash. Even without these challenges, foreign exchange, regulatory, logistics and supply issues continue to hamper investors’ ability to operate and grow in Nigeria. The World Bank expects economic growth  just above 2% in 2019 and over the medium term, with a stagnant oil sector in the face of regulatory uncertainty. The African Development Bank expects 2.3% growth in 2019 and 2.4% in 2020 as the country’s economic recovery and growth plan gains pace. The United Nations expects Nigeria’s population to double to 410 million by 2050 and president Muhammadu Buhari, who was re-elected in February, has a tough task keeping his promise to lift 100 million people out of poverty over the next 10 years. He has appointed a new  team of economic advisors, including economics professor Doyin Salami, who is on the central bank’s monetary policy team and former central bank governor Charles Soludo, to help him. But the economy remains sluggish, inhospitable to investors and beleaguered by debt.

China’s trade with Africa is escalating, but is the trade fair?

In an article published by The Africa Report, Who Owns Whom’s MD Andrew McGregor and Cathkin Consulting Director Marthinus Havenga discuss the role of Chinese foreign direct investment in the African continent. Read more on The Africa Report

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Mozambique Snapshot

There are causes for optimism about Mozambique’s political and economic future due partly to a recent peace accord with opposition Renamo ahead of the country’s October election and partly to the announcement of several major projects following the discovery of huge deposits of natural gas. African Development Bank figures show Mozambique’s GDP growth was 3.5% in 2018, down sharply from the average of 7% from 2004 to 2015, mainly because of the steep decline in public and foreign investment. Mozambique has a debt crisis and it remains in debt default after the 2016 discovery of US$2bn (13% of GDP) of questionable government-guaranteed debt. The minister of Economy and Finance, Adriano Maleiane said recently that the budget deficit will be 8.9% in 2019. The growth outlook varies widely. Some commentators expect GDP growth of less than 1% in 2019 due to the devastating impact of cyclones Idai and Kenneth and widening fiscal and current account deficits due to reconstruction costs from the storms. The AfDB expects growth of 4.5% in 2019 and 5.0% in 2020 driven by a recovering agriculture sector, extractive industries and coal exports. Mozambique’s economic prospects hinge largely on major projects in the Rovuma Basin, where huge natural gas reserves were discovered. A Whom Owns Whom report on The Mozambican Petroleum Industry indicated that the 35 trillion cubic metres of natural gas deposits in the Rovuma area could put the country among the 10 largest liquefied natural gas producers over the next few years. The report, quoting an International Monetary Fund June 2019 update, said Mozambique’s economic situation had been improving following a drop in inflation (from 26% in November 2016, to 3% in April 2019) and the further development of gas projects, until cyclones Idai and Kenneth hit. The Mozambican economy is characterised by a lack of diversity, with the agriculture sector, which was devastated by the cyclones and their aftermath, accounting for about 30% of GDP and around 80% of the country’s labour force, according to the Who Owns Whom report. Mozambique is also affected by corruption, poor governance, bureaucracy, the weak rule of law and an underdeveloped financial sector that makes it difficult to access finance. Companies contend with a shortage of skilled labour and state-sanctioned monopolies. However, gas investment will bring opportunities. Major investments include Anadarko and partners’ US$25bn in the Rovuma liquefied natural gas project and ExxonMobil, Eni, China National Petroleum and partners’ development of a US$27bn to US$32bn project. Eni and ExxonMobil have a second US19bn project under development, while Eni operates another US$8bn project and Shell has completed a feasibility study for a US$5bn gas to liquids plant. The economy, meanwhile remains susceptible to downside risks. The African Development Bank said these include debt distress, rising prices for key imports such as fuel and food, economic difficulties in South Africa, Mozambique’s second largest export destination, and natural disasters.