Blogs

Morocco Snapshot

Morocco’s new coalition government has focused on pro-poor reforms, job creation and implementing the country’s industrialisation strategy, which aims to increase the industrial sector’s share to 23% of GDP by 2020 from 18.5% in 2016. Evidence of its aspirations and success in this regard can be found in the automotive sector, where, in 2017, it overtook South Africa as the continent’s largest producer of passenger cars. A Who Owns Whom report on the Motor Vehicle Industry indicates that South Africa accounted for 56.4% of Africa’s 2017 total vehicle production, and, with 601,178 units, produced significantly more vehicles than Morocco’s total vehicle production of 376,286. However, in the passenger car production sub-sector, Morocco, with 341,802 units in 2017, surpassed South Africa’s passenger car production of 331,311 units for the first time. Morocco, which is conveniently positioned close to the EU market, is becoming a significant supplier to EU auto factories, including Ford’s plant in Valencia, Spain, which imports car seats, interiors, wiring and other components from Morocco. The country has also attracted investment from major automotive companies, including Renault and Peugeot, to open plants in Morocco by offering significant tax exemptions. It has set an ambitious annual production target of one million vehicles. In the World Bank’s Doing Business 2019 report, Morocco jumped nine places to 60th position worldwide, second in the Middle East and North Africa region behind the United Arab Emirates, and third in Africa after Mauritius and Rwanda. The World Bank said that despite strong investments in infrastructure and manufacturing, “non-agricultural activity has failed to accelerate and job intensity of growth remains low, resulting in only small improvements in employment and social indicators”. Economic growth has been relatively muted in 2018, but Reuters reported that GDP growth has recovered from the drought-induced slowdown in 2016, and Fitch forecasts it will average 3.8% GDP growth over 2017-2019, with economic activity lifted by the rebound in agricultural production and soaring cereal crops. Agriculture remains critical for the economy, accounting for only about 14% of GDP, but employing over 40% of the country’s workers. Morocco’s GDP growth was 3.2% in the first quarter of 2018, lower than the previous year’s 3.5%. Inflation is 1.1% in October and unemployment was 9.1% in the second quarter of 2018. The 2019 draft budget forecasts a deficit of 3.3% of GDP in 2019, down from 3.8% in 2018, with GDP growth of 3.2%, government said. While the country’s automotive and phosphates exports have increased significantly (by 19.2% and 16.7% respectively), higher imports continue to weigh on its trade deficit. Morocco remains a popular tourist destination, with latest World Bank Figures showing a 15% increase in tourism receipts. …

A call for disclosure of beneficial ownership and public access in the Companies Amendment Bill

Public Enterprises minister Pravin Gordhan recently said that a lesson learnt from the OECD’s anti-corruption initiative is that “beneficial ownership of entities is concealed so that it becomes impossible to identify the actual owners of companies”. The 2008 global financial crisis, money laundering, terrorist funding and the Gupta, VBS Bank and Steinhoff delinquencies make a compelling case for maximum corporate transparency. South African company law has historically favoured those wishing to obscure corporate ownership. The clandestine section 15A of the Companies Act of 1973 allowed apartheid ministers of Trade and Industry to disallow the disclosure of certain categories of subsidiaries in the annual reports of companies listed on the Johannesburg Stock Exchange (JSE) where such publication was deemed to be not in the ‘national interest’. It was common knowledge that these undisclosed subsidiaries were engaged in sanctions-busting or supplying goods and services to the state security apparatus. Between the publication of the 1988 edition of Who Owns Whom and the 1992 edition, approximately 900 subsidiaries of JSE-listed companies ‘disappeared’. The lack of corporate transparency is not just a South African problem. Vince Cable, leader of the Liberal Democrats and former UK Secretary of State for Business, Innovation and Skills, stated in 2014: “Transparency and accountability are both essential for trust … We also know a lack of transparency, with respect to those who really own and control companies, can allow tax evasion, money laundering and terrorist financing to flourish.” While JSE regulations require listed companies to disclose beneficial ownership, the Companies Act places no such requirement on private companies. The absence of a law requiring disclosure of beneficial ownership of private companies undermines the intentions of other South African laws such as the Public Finance Management Act, the Financial Intelligence Act, the Preferential Procurement Act and the Amended B-BBEE Codes. Internationally, the subject of corporate beneficial ownership is high on the agenda of the G20 group of countries, and South Africa shares an undertaking by all members to introduce legislation which ensures the disclosure of corporate beneficial ownership. The South African Companies and Intellectual Properties Commission does require private companies to lodge annual returns, but these do not contain beneficial ownership information and are not available to the public. Who Owns Whom has made representation to the Department of Trade and Industry to include in the latest draft Companies Amendment Bill 2018: – The improvement of compliance with section 26 of the Act (public access to company information) – Disclosure of beneficial ownership in annual returns; and – Public access to annual returns. The global fight against corruption, money laundering and terrorist-funding activities have made the issue of increased transparency an inexorable international trend, and the Companies Amendment Bill gives South Africa the opportunity to join the world leaders in this respect. The reasons for corporate secrecy are most likely the same reasons society requires corporate transparency. The benefits of corporate limited liability enjoyed by business owners should be reciprocated by a corporate commitment to transparency. …

Electricity Generation in Africa

African Gross Domestic Product Comparisons Nigerian GDP recently overtook South Africa’s largely due to the contribution from its booming information and communication sector, which contributes more to the Nigerian economy than the manufacturing sector. Ethiopia has doubled its GDP over the last five years and has announced a US$7bn investment in new power generation infrastructure projects. If you look at the comparison of installed generation capacity, a different picture emerges. The Energy Mix South Africa produces more electricity than all sub-Saharan African countries combined due to its industrialised economy, where manufacturing contributes one third of GDP. More than 85% of South Africans have access to electricity compared with less than half in Nigeria. Eskom, the state-owned power utility, generates approximately two-thirds of the electricity produced in Africa and about 90% of South Africa’s current requirements. Generation has been primarily coal-fired, due to abundant supplies of low-quality coal in Mpumalanga and Limpopo, but Independent Power Producers now supply for just over 10% of South Africa’s consumption. According to the Who Owns Whom report on the Generation of Electricity in South Africa, the Department of Energy’s Integrated Resource Plan expects an additional 13,700 MW from wind and solar, 8,100 MW from gas and 2,500 MW from hydro (imported from the DRC) by 2030. South Africa has one of the highest levels of solar radiation in the world and has been ranked one of the best locations for solar production with an annual 24-hour global solar radiation average of 220 watts per square meter (W/m²) compared with about 150 W/m² for parts of the United States and about 100 W/m² for Europe and the United Kingdom. Government also intends to fast-track the exploration and exploitation of shale gas in the Karoo Basin and Mineral Resources minister Gwede Mantashe told parliament that the development of shale gas as a resource was necessary to transform South Africa’s energy economy. According to the Who Owns Whom report on Coal Mining in South Africa, reserves should last another 120 years at current production, which was 251Mt in 2016. Botswana also has substantial coal reserves while Mozambique, Nigeria and Tanzania are rich in natural gas, and the existence of these reserves will influence the energy mix into the future. …

Ethiopia Snapshot

The winds of change are sweeping through Ethiopia since Abiy Ahmed became prime minister in April. Ethiopia is sub-Saharan Africa’s fastest growing economy, with average growth of around 10% a year for over a decade. GDP was US$8.2bn in 2000, $80bn by 2017, and will reach US$129bn by 2023, according to the IMF. The IMF’s World Economic Outlook expects 8.5% GDP growth in 2019 – while the World Bank expects 8% – outstripping advanced economies and global growth, which is expected at 3.9%. Since April, Ahmed has signed a critical peace agreement with Eritrea, giving his country access to ports, trade and telecommunication services. He has lifted the state of emergency which was imposed to quell anti-government protests and has achieved gender parity in government, which now has its first female president, Sahle-Work Zewde. He is curbing corruption and has cancelled contracts with the military-run METEC (Metals and Engineering Corporation), the country’s largest industrial group, and arrested dozens of its current and former employees for corruption. Ahmed wants to liberalise the economy and increase private and foreign investment. The World Bank granted Ethiopia US$600m in loans and US$600m in grants to reform its financial sector and grow exports and there has been interest expressed by private investors. However, Ethiopia remains one of the world’s poorest countries and despite the advances in GDP growth, economic development remains hampered by its infrastructure deficit and government’s stranglehold on the economy. The World Bank estimates that it will need to invest US$5.1bn a year in infrastructure over the next decade to overcome its development constraints. Its more than 100 million population remains largely agrarian with estimates that only 20% of the population is urbanised while 70% of the working population farms. Who Owns Whom’s report on ICT in Ethiopia says that the country wants to grow its industrial and manufacturing sector in order for the economy to become less dependent on agriculture. The Who Owns Whom report indicates that most telecommunication services are owned or operated by state-owned Ethio Telecom. The only two sectors open for competition are equipment provision and downstream services such as call and data centres, messaging and applications. Ethio’s monopolistic control has stifled innovation, restricted network expansion and limited the scope of services. Government announced recently that while majority stakes will be held by the state, shares in Ethio Telecom, Ethiopian Airlines, Ethiopian Power, and the Maritime Transport and Logistics Corporation will be sold to both domestic and foreign investors. …