Michael Nderitu
Head of Trading, AZA
Redouble effort for post-Covid recovery in Africa 

Africa needs around $12bn to procure and distribute sufficient numbers of Covid-19 vaccines to achieve adequate protection against the virus, the World Bank and IMF said in a report at their virtual Spring meetings this week. The sum is about the same as the total official debt service payments deferred by 45 of the world's poorest countries participating in the G20’s Debt Service Suspension Initiative (DSSI). The World Bank’s latest biannual economic analysis, called the Pulse, reports that economic growth in Sub-Saharan Africa contracted by an estimated 2% last year, closer to the lower end of its forecast a year ago. One reason for relative resilience is rapid adoption of digital technologies to boost productivity in existing jobs and improve employment opportunities, particularly for women and youth. To unlock the full benefits of a digital economy, the report recommends government policies to accompany growing investments in digital infrastructure, such as a regulatory framework that fosters competition and innovation in telecommunications, provision of reliable and affordable electricity, investment in education and upgrading the skills of informal workers. While the World Bank also sees the Covid-19 induced recession as less severe than earlier anticipated, economic recovery will vary significantly across countries and sub-regions. 
 
 
Murega Mungai
Trading Desk Manager, AZA      
Rand gains on positive economic data 

The Rand strengthened from 14.62 against the dollar to 14.52 this week, supported by an array of positive economic data. South Africa’s trade surplus more than doubled to R28.96bn in February from R12.42bn in January, according to the South African Revenue Service. Exports surged by 16.5% in February on a month-on-month basis, mainly due to a 73% rise in sales of vehicles and transport equipment. Meanwhile, imports only rose by 1.6%, leading to the widening surplus. In further positive data, the ABSA Manufacturing Purchasing Managers' Index (PMI) jumped to 57.4 in March from 53 the previous month, exceeding the rise to 55 expected by most analysts, as new sales and exports rose with the easing of coronavirus lockdown restrictions. Naamsa and the Automotive Business Council’s figures for March 2021 recorded 44,217 new vehicle sales, a 31.8% surge in sales from the same month last year (sales jumped by 18.4% between February and March this year). The improving economic data has spurred increased appetite for the Rand, and we project these gains will be maintained in the coming days.

Egyptian Pound climbs as debt and deficits fall

The Pound appreciated slightly from 15.72 at last Friday's close to trade at 15.699 this week. Finance Minister Mohamed Maait said this week that public debt fell to 88%, as of June 2020, from 108% three years earlier. He expects the total budget deficit to decline to 3.6% during the first half of FY 2020/21, compared to 4.1% during H1 of FY 2019/20. The data will help steady trading of the Pound in coming days.

 
Oghenefejiro Eduviere
FX Trading Associate, AZA

Naira rates diverge amid 'N5 for $1' 

The Naira strengthened on the parallel market, trading in the 478/485 to the dollar range vs. 482/486 at the end of last week, while depreciating on the official NAFEX window, from N408.67 to 411 amid accumulated demand for dollars carried over from the long Easter break. We expect the Naira to remain stable on the parallel market, hovering around the 480 to 490 level, as the Central Bank of Nigeria's 'N5 for $1' incentive scheme encourages FX flows to go through banks. We see trading on the NAFEX window extending depreciation towards 435 in the short term.

BOG injections insufficient to balance Cedi

The Cedi weakened to 5.7827 this week from 5.7600. The currency continues its downward momentum, even as the Bank of Ghana continues injecting $50m into the market through its fortnightly FX forward auction programme. We expect the Cedi to weaken towards 5.7800 levels as the BOG’s injections prove insufficient to balance demand for dollars.

 
Terry Karanja 
Treasury Associate, AZA

IMF's big loan to Kenya creates a political storm

The Shilling strengthened slightly to 108.15 this week from 108.93 amid reduced importer demand for dollars on the back of fresh lockdown restrictions to curb a new wave of Covid-19 infections. The IMF announced April 2 that Kenya would receive a KSh255bn loan to support its Covid-19 response but said the country must address urgently its debt vulnerabilities. Nearly 200,000 Kenyans have signed a petition pushing for the suspension of the IMF credit facility amid concerns over rising public debt. The IMF said its focus on raising tax revenue, controlling spending, protecting vulnerable groups, addressing weaknesses in state-owned enterprises and strengthening the anti-corruption framework will “support the next phase of the authorities’ Covid-19 response and their plan to reduce debt vulnerabilities.” Usable foreign exchange reserves remained adequate at $7.343bn (4.51 months of import cover) on April 1. The Shilling is likely to benefit from reduced dollar demand from importers and increased inflows from offshore investors in the near term.

Uganda's Covid-19 vaccination rollout gathers pace

The Shilling appreciated to 3,652/3,662 this week from 3,660/3,670 levels amid subdued dollar demand over the long Easter weekend period and FX inflows from commodity exports. Meanwhile, the country's fight against the Covid pandemic is ramping up. A senior official with the Ministry of Health said Uganda is scheduled to receive 2 million more doses of the AstraZeneca vaccine next month, enabling people who received the first dose to get a second one. The country's Covid-19 infection rate is falling and this should help the economic recovery. We expect the Shilling to remain within range with only slight movements for the immediate term.

All change in Tanzania as Hassan begins Covid response

The Shilling remained at the same level as last week's close, at 2310/2324, as dollar inflows matched the demand from importers. In an about-turn from her late predecessor, President Samia Suluhu Hassan announced plans to form a technical committee to advise on the scope of Covid-19 infections and how to respond to the pandemic. In further signs of change, Hassan ordered media houses that had been shut down during the Magufuli era to be reopened, and urged regional officials to encourage members of the public to express grievances without being intimidated. The new President said there is a need to regain investor trust in the country and bring back those who have shifted businesses to other countries due to the non-conducive business environment. Hassan directed the ministries and institutions responsible for investment and trade to remove all kinds of bureaucracy and desist from corrupt acts. We expect a stable Shilling in the coming week amid supportive foreign investment and FX inflows from mineral exports, including gold and agricultural products.