Major International Business Headlines Brief::: 18 February 2020

Tue Feb 18 03:21:07 CAT 2020

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Major International Business Headlines Brief::: 18 February 2020

 <http://www.nedbank.co.zw/> 

ü  Apple warns coronavirus will hurt iPhones supplies

ü  Jeff Bezos: World's richest man pledges $10bn to fight climate change

ü  GM scraps historic Holden car brand in Australia

ü  Brexit: France warns UK of bitter trade negotiations

ü  Japan's economy shrinks at fastest rate since 2014

ü  German firms Bayer and BASF fight $265m US fine over weedkiller

ü  Thomas Piketty says don't blame foreign workers

ü  Shoe Zone: Retailer warns 100 shops could close

ü  Laura Ashley appeals for funding as sales fall 10%

ü  Moody's cuts South Africa's 2020 GDP growth forecast to 0.7%

ü  Ethiopia approves supplementary budget of 27.89 billion birr

ü  Anglo American Platinum CEO Griffith to step down, earnings soar

ü  Maroc Telecom reports $620 mln profit in 2019

ü  Ivory Coast to issue domestic bonds worth $184 million

ü  Kenya's KCB sees loan growth tripling to 15% after rate cap repeal

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Apple warns coronavirus will hurt iPhones supplies

Apple has warned that disruption in China from the coronavirus will mean revenues falling short of forecasts.

The tech giant said production and sales were affected, and that "worldwide iPhone supply will be temporarily constrained".

The iPhone maker is the first major US company to say that the epidemic will hit its finances.

Apple, which had forecast record revenues of up to $67bn in the current quarter, did not reveal the likely hit.

"We do not expect to meet the revenue guidance we provided for the March quarter," the company said in a statement, adding that it was "experiencing a slower return to normal conditions" than expected.

With most stores in China either closed or operating at reduced hours, sales of Apple products would be lower, the company said.

Apple said that "while our iPhone manufacturing partner sites are located outside the Hubei province - and while all of these facilities have reopened - they are ramping up more slowly than we had anticipated.

"All of our stores in China and many of our partner stores have been closed," it added. "Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can."

JCB cuts production because of coronavirus

Why much of 'the world's factory' remains closed

Analysts have estimated that the virus may slash demand for smartphones by half in the first quarter in China, which is the world's biggest market for the devices. The car industry is another sector that has been affected by disruption to its supply chain. Last week, the heavy equipment manufacturer JCB said it was cutting production in the UK because of a shortage of components from China.

New virus cases outside the epicenter area have been declining for the last 13 days. There were 115 fresh cases outside Hubei announced on Monday, sharply down from nearly 450 a week ago.

But despite hopes that factories and shops are slowing getting back to normal, Apple's warning will underline that China's economy will be seriously affected by the coronavirus.

The head of the International Monetary Fund, Kristalina Georgieva, has said there could be a cut of about 0.1-0.2 percentage points to global growth, but stressed there was much uncertainty about the virus's economic impact.--BBC

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Jeff Bezos: World's richest man pledges $10bn to fight climate change

Amazon boss Jeff Bezos has pledged $10bn (£7.7bn) to help fight climate change.

The world's richest man said the money would finance work by scientists, activists and other groups.

He said: "I want to work alongside others both to amplify known ways and to explore new ways of fighting the devastating impact of climate change."

Writing on his Instagram account, Mr Bezos said the fund would begin distributing money this summer.

Mr Bezos has an estimated net worth of more than $130bn, so the pledge represents almost 8% of his fortune.

Some Amazon employees have urged him to do more to fight climate change. There have been walkouts and some staff have spoken publicly. Also, Mr Bezos is financing the Blue Origin space programme, criticised for its carbon footprint.

Compared to some multi-billionaires, Mr Bezos had done only limited philanthropy. His biggest donation before Monday's pledge is thought to have been $2bn in September 2018 to help homeless families and fund schools.

He has also been criticised for not signing the Giving Pledge, under which the super-rich promise to give away half of their wealth during their lifetimes.

The Seattle-based company is a neighbour of Microsoft, which in January unveiled a plan to become carbon negative by 2030.

Mr Bezos's full Instagram post read: "Today, I'm thrilled to announce I am launching the Bezos Earth Fund.⁣⁣⁣

⁣⁣⁣"Climate change is the biggest threat to our planet. I want to work alongside others both to amplify known ways and to explore new ways of fighting the devastating impact of climate change on this planet we all share. This global initiative will fund scientists, activists, NGOs - any effort that offers a real possibility to help preserve and protect the natural world.

"We can save Earth. It's going to take collective action from big companies, small companies, nation states, global organisations, and individuals. ⁣⁣⁣

⁣⁣⁣"I'm committing $10bn to start and will begin issuing grants this summer. Earth is the one thing we all have in common - let's protect it, together."⁣⁣⁣--BBC

GM scraps historic Holden car brand in Australia

General Motors has said it will retire the iconic Australian car brand Holden as it leaves more markets.

The American car giant said it will wind down Holden sales, design and engineering operations in Australia and New Zealand by next year.

It also said China's Great Wall Motors had agreed to buy its manufacturing plant in Thailand.

The announcement comes three years after GM ended manufacturing in Australia.

In a statement posted on GM's website, chief executive Mary Barra said: "I've often said that we will do the right thing, even when it's hard, and this is one of those times."

The statement did not say how many jobs would be lost as a result of the move but reports suggest it will mean up to 600 layoffs.

In response to the news, Australian Prime Minister Scott Morrison said: "I am disappointed but not surprised. But I am angry, like I think many Australians would be.

"Australian taxpayers put millions into this multinational company. They let the brand just wither away on their watch. Now they are leaving it behind," he added.

Historic car brand loved by families and surfers

Australian carmaking runs out of road

GM President Mark Reuss said the company had explored ways to keep the Holden brand but had decided that it would cost too much to remain in the "highly fragmented right-hand-drive market".

It comes as GM is accelerating its exit from unprofitable markets as it focuses on the US, China, Latin America and South Korea.

The move will end 160 years of the Holden name's association with Australia. The company was founded as a saddle maker in South Australia in 1856 before it started building vehicles in 1908.

Holden was bought by GM in 1931, beginning their 89-year history as a combined entity.

The hashtag #RIPHolden is trending on Twitter as people post pictures and memories of the much-loved Australian brand.

Late last year the company also said it would stop selling its most iconic model the Commodore after more than four decades.

At the end of 2013 Holden announced that it would halt production in Australia and start importing vehicles from its overseas plants. GM said a strong Australian currency, high manufacturing costs and a small domestic market were among the reasons behind its decision.

The ending of Australian production of Holdens in 2017 resulted in nearly 2,900 job losses.--BBC

Brexit: France warns UK of bitter trade negotiations

France has warned Britain to expect a bruising battle with the EU in post-Brexit trade negotiations.

French Foreign Minister Jean-Yves Le Drian predicted the two sides would "rip each other apart" as they strove for advantage in the negotiations.

He also said it would be tough for the UK to achieve its aim of agreeing a free trade deal by the end of the year.

The UK government said it wanted a deal based on "friendly co-operation between sovereign equals".

Boris Johnson's chief Brexit negotiator is expected to give more details of the UK's negotiating aims in a speech in Brussels later.

David Frost is expected to say the UK will be happy with a trade deal based on that agreed by the EU with Canada in 2016 but to rule out any form of regulatory alignment with the bloc from 2021 onwards.

What does the UK sell to the rest of the world?

What happens after Brexit?

What is the transition period?

The UK formally left the EU two weeks ago but still trades like a member under a transition period which ends on 31 December.

Talks on their future relationship are set to begin next month once the EU's 27 members have agreed the bloc's negotiating mandate.

Speaking at a security conference in Munich on Sunday, Mr Le Drian said the two sides were far apart on a range of issues.

He said: "I think that on trade issues and the mechanism for future relations, which we are going to start on, we are going to rip each other apart.

"But that is part of negotiations, everyone will defend their own interests."

European Commission President Ursula von der Leyen has previously cast doubt on Boris Johnson's aim to reach a comprehensive agreement by the end of the year

Mr Le Drian, a close ally of President Emmanuel Macron, is the latest senior EU figure to warn that the negotiations will be difficult.

European Commission President Ursula von der Leyen and chief negotiator Michel Barnier have both cast doubt on Boris Johnson's aim to reach a comprehensive agreement by the end of the year.

The EU has repeatedly warned that the UK cannot expect to enjoy continued "high-quality" market access if it insists on diverging from EU social and environmental standards.

Last week the European Parliament called for the UK to follow EU rules in a host of areas, such as chemicals regulation, food labelling and subsidies for companies, as part of a process of "dynamic alignment".

But UK ministers have repeatedly ruled out such a close regulatory relationship.

There is expected to be a particularly tough fight over fishing rights, with the EU insisting continued access to UK waters must form part of any agreement.

Mr Johnson, in turn, has said the UK will act as an "independent coastal state" taking control of its own fisheries.

A Downing Street spokesperson said: "Our approach is clear - we are not asking for anything special, bespoke or unique, but are looking for a deal like those the EU has struck previously with other friendly countries like Canada.

"We want a relationship based on friendly cooperation between sovereign equals, one centred on free trade and inspired by our shared history and values."--BBC

Japan's economy shrinks at fastest rate since 2014

Japan's economy shrank at the fastest rate in five years at the end of 2019 as it was hit by a sales tax rise, a major typhoon and weak global demand.

Annualised gross domestic product (GDP) fell by a much steeper than expected 6.3% in October-December.

There are also concerns the coronavirus outbreak will mean the slump continues this quarter.

That has raised fears that the world's third-biggest economy may fall into recession.

During the period Japanese consumer spending fell 2.9% after the country's sales tax was raised in October to 10% from 8%. In the same month Typhoon Hagibis hit large parts of the country.

Last quarter, capital spending dropped by 3.7% and exports slipped 0.1% amid the ongoing US-China trade war.

Investors are now watching to see whether the economy will rebound after the coronavirus forced China to shut down factories and led to a big drop in Chinese tourists visiting Japan.

In response to today's data economy minister Yasutoshi Nishimura said the Japanese government was ready to take all necessary steps to deal with the impact of the coronavirus outbreak on the economy and tourism.

In December Prime Minister Shinzo Abe's government approved $120bn (£90bn) in spending aimed at cushioning the impact of the sales tax rise.

The shrink in GDP was the first in more than a year and the largest since a 7.4% fall in 2014, the last time Japan raised its sales tax.--BBC

German firms Bayer and BASF fight $265m US fine over weedkiller

German chemical giant Bayer is to appeal against a Missouri court's award of $265m (£203m) to a US peach grower who blamed a herbicide for crop damage.

Farmer Bill Bader sued Bayer and BASF, alleging that dicamba weedkiller drifted onto his orchard from nearby fields, destroying them.

It is the first ruling in some 140 US cases against dicamba, a herbicide blamed for extensive crop damage.

Bayer says its herbicides pose no unreasonable risk if used correctly.

The US agrochemical giant Monsanto, bought by Bayer for $63bn in 2018, sells dicamba-based herbicide and a similar, much-criticised product, Roundup.

US lawsuits against Monsanto's weedkillers may cost Bayer billions of dollars in damages.

It is not yet clear how Bayer and BASF may share the cost of the Missouri damages.

BASF said it would "use all available legal resources" to fight Saturday's ruling by a federal district court in Cape Girardeau, Missouri.

The firms were ordered to pay Mr Bader $15m in actual damages and $250m in fines. He argued that his 1,000-acre (405-hectare) orchard was destroyed by dicamba.

In a statement on Monday, Bayer said it "clearly disagrees with the jury's verdict and is very disappointed".

"We will swiftly appeal the decision. While we have great empathy for any farmer who suffers from crop losses, in the case of Mr Bader there was no competent evidence presented which showed that Monsanto's products were present on his farm and were responsible for his losses."

Dicamba-based herbicides have been blamed for damage to thousands of hectares of crops in US Midwestern states.

In November 2018 the US Environmental Protection Agency (EPA) imposed restrictions on dicamba use, because of the farmers' concerns.

Bayer insists that Monsanto herbicides are safe and "valuable tools for growers". The herbicides "do not pose any unreasonable risk of off-target movement when used according to label directions", the firm says.--BBC

Thomas Piketty says don't blame foreign workers

Economist Thomas Piketty's last book, Capital in the Twenty First Century, took the publishing world by surprise when it stormed to the top of the bestsellers list.

Despite containing a multitude of data and equations, the professor sold 2.5 million copies.

His central argument was that invested capital - in the stock market, in property - will grow faster than income. The solution, then, to inequality was to look at ways to redistribute this wealth and influence. Unsurprisingly, it divided opinion.

Was Piketty wrong about inequality?

Now he's back with an updated tome, Capital and Ideology, which comes in at a hefty 1,150 pages. At the heart of it is the idea of "participatory socialism".

Mr Piketty advocates income and property taxes of up to 90%, a "public inheritance" of £100,000 for every 25-year-old and caps on shareholders' influence.

He essentially argues that governments are focusing on limiting the movement of people rather than capital flows in answer to concerns about inequality - saying it is easier to "blame foreign workers" rather than try to deliver a more "complicated" message.

But this approach, he warns, could risk a further break-up of the EU.

Exit risk

In an interview for the BBC Radio 4 Today programme, he warned: "There is a tendency within the EU to say that Brexit is all because of these crazy British nationalists... I'm not so convinced."

He says that if the bloc doesn't take a closer look at the way it is organised, tackle social policy and taxation, "we'll risk another Brexit". He fears Italy could be the next to depart.

But are people willing to entertain such radical change? I put it to him that, given the victory of the Conservatives over Jeremy Corbyn's Labour party in the December general election, some of those that his ideas should help the most had emphatically rejected them at the ballot box.

He conceded this was an issue, but said he hoped that the ideas of the likes of Bernie Sanders, who advocates a wealth tax, might mobilise the poorest to vote in the forthcoming US presidential elections.

Ultimately, however, he conceded that it might take another financial crisis for his ideas to be more widely embraced in the mainstream.

And given the method used to enable recovery from the last one, the boosting of balance sheets via quantitative easing, he fears another crash is inevitable. But when that might happen is another question.--BBC

Shoe Zone: Retailer warns 100 shops could close

Shoe Zone has warned that it could be forced to close a fifth of its stores if business rates do not change.

The retailer will close 100 of its UK stores unless the property tax is overhauled.

Boss Anthony Smith told the BBC: "If people want vibrant High Streets, they really do need retailers like us to keep our shops open in smaller towns."

Retailers have called on HM Treasury to reform business rates in the Budget scheduled for next month.

Business rates are similar to council tax for business properties. They are paid by businesses, or landlords if a property is empty.

Mr Smith told Wake Up to Money that although rents had fallen across its 500 shops, the amount it pays in business rates had increased from 26% to 54% over the last 10 years.

High Street regeneration

Mr Smith said: "There is a lot of talk about the regeneration and repurposing of town centres, which we are all up for. But whatever goes into those shops, the rateable value is still simply too high."

The rateable value is set by the government's Valuation Office Agency. It determines how much a firm has to pay in business rates, based on the value of the property.

He added: "It's a simple maths question. Every time a lease comes up, we'll look at the mathematics of it. If we are not making any money out of it... the shop will unfortunately close."

'Help us or you'll kill the High Street'

Empty business rates relief 'costs £1bn'

'End of an era' as shop closes after 108 years

In 2019, the firm's former chief executive Nick Davis stepped down, warning that profits would be lower than expected.

Anthony Smith was previously chief executive of the brand for 20 years, and last year took the role on again.

He told the BBC that the firm is closing about 20 stores each year, but pointed out that sales online and in out-of-town areas were "going well".

High Street stores have recently been under pressure due to a squeeze on consumer spending and the rise of online shopping.

Major supermarkets, department stores and others recently called on the government to overhaul the business rates system, saying they place an unfair burden on shops.

However, it is not clear whether the Budget scheduled for 11 March will go ahead as planned following last week's the resignation of former Chancellor Sajid Javid.--BBC

Laura Ashley appeals for funding as sales fall 10%

Laura Ashley shares have slumped 41% after it said it was in talks with its lender about accessing sufficient money to allow it to continue trading.

The fashion and home retailer said if it could not get the "requisite level of funding" then it would need to "consider all appropriate options".

Trading continued to be "challenging", with sales falling by nearly 11% in the second half of 2019, it said.

"Market headwinds" and weaker consumer spending were to blame, it said.

This had led to a decline in sales of larger, more expensive items, according to the retailer, whose majority shareholder is the Malaysian group MUI.

The poor performance has put pressure on the company's share price and customer deposit levels have shrunk. This in turn has triggered a restriction on how much it can draw from the loan facility it has with the US bank Wells Fargo.

In a stock market announcement on Monday, Laura Ashley welcomed the talks on funding between MUI and Wells Fargo, and said it was issuing a statement in "response to press speculation".

Chairman Andrew Khoo said: "We acknowledge that recent trading conditions, in line with the overall UK retail market, have indeed been challenging,"

He added there was a "robust plan" in place to turn the business around.

"The major shareholders have indicated their continued confidence in the business and are fully supportive of the management team and execution of the transformation plan," he said.

'Lost its way'

In December 2018, Laura Ashley earmarked 40 stores for closure, amid tough trading conditions on the UK High Street.

Total group sales fell 10.8% to £109.6 million pounds in the second half of 2019.

Retail expert Kate Hardcastle said the brand was being swept away by competition in both the fashion and homeware sectors.

"I should be their target consumer at 43, with three children and my own house to decorate, but they wouldn't even be in my mindset. There are lot of entrants in that marketplace, so lots of competition and good pricing, while Laura Ashley is very rarely surprising.

"It has a very bespoke, segmented look that has fallen in and out of fashion," she said.

"Looking at their fashion, we very much have an organisation that's lost its way. It has tried to reinvent itself but has been moved into a submissive position by brands like Zara. That chintzy British look was quite interesting to the Asian market place but Laura Ashley has not really found its way back in to heart and minds of consumers."

Founded in 1953, Laura Ashley was a prominent name on the UK high street and one of the world's leading clothing brands in the 1970s and 1980s.

But it has struggled to stay relevant, with the share price tumbling 90% over the past five years.

--BBC

Moody's cuts South Africa's 2020 GDP growth forecast to 0.7%

JOHANNESBURG (Reuters) - Ratings agency Moody’s has cut its 2020 growth forecast for South Africa to 0.7% from a September forecast of 1.5%, saying the economy remains stuck in low gear due to lacklustre domestic private-sector demand.

Moody’s also attributed the revised forecast to “the detrimental impact of widespread power outages on the manufacturing and mining activity,” it said in a research report.

The ratings agency left South Africa on the brink of “junk” status in November last year after it revised the outlook on the country’s last investment-grade credit rating to “negative,” piling pressure on President Cyril Ramaphosa to quicken the pace of reform.

Moody’s is the last of the major international agencies to keep an investment grade rating on the sovereign and is scheduled to review that assessment in March.

Ethiopia approves supplementary budget of 27.89 billion birr

ADDIS ABABA (Reuters) - Ethiopia’s council of ministers approved a supplementary budget of 27.89 billion birr ($877.87 million) for 2019/2020 to finance economic reforms, Prime Minister Abiy Ahmed’s office said in a statement on Monday.

The funds add to the 386.9 billion birr of government spending that the Horn of Africa nation of 109 million people approved in 2019.

“18 billion birr from the total supplementary budget is allocated to overcome current economic challenges,” the statement posted on the Prime Minister’s office Facebook page said, without giving specifics.

“The rest of the money, which is 2 billion birr and 7.9 billion birr, will be allocated for safety net programs and the national implementation of equal pay for equal work, respectively.”

Abiy, who took office in 2018, has embarked on ambitious economic reforms trying to open up one of Africa’s fastest-growing but most closed economies. It has already begun the process of privatising its telecoms, banking and sugar sectors.

($1 = 31.7700 birr)

Anglo American Platinum CEO Griffith to step down, earnings soar

JOHANNESBURG (Reuters) - Chief Executive Chris Griffith said on Monday he will step down in April from the helm of Anglo American Platinum (Amplats), which on Monday reported a doubling in annual earnings, driven by higher metals prices.

Amplats, a unit of global mining giant Anglo American, said Griffith’s successor was expected to be an internal candidate and would be announced soon.

“After more than seven years at the helm, and given all that we as a team have achieved, this is now the natural time for the next generation of leadership to take this business forward and deliver further value,” Griffith said.

Shares in Amplats were up 4% at 1,311.97 rand by 1222 GMT.

Fifty-five year old Griffith, who has a background in mining engineering, said he did not yet have plans for what he would do next and would not rule out a career outside mining.

Appointed CEO in September 2012, Griffith headed Amplats during its turnaround plan to cut production and costs in response to platinum prices, which then were depressed.

South Africa is the world’s leading miner of the metal used in catalytic converters, medical equipment and jewellery.

The sector has suffered from industry unrest, including a five-month strike in 2014 followed by deep job cuts, as well as volatile demand.

“Over the course of a few years, having to retrench 20,000 people was I think the worst time in my career,” Griffith said.

Griffith’s first job was at Amplat’s Amandelbult in Limpopo, where he helped to move ore and waste rock in the underground operations during his university holidays. He rose through the ranks to become the youngest mine general manager in the company’s history in his early 30s.

PALLADIUM AND RHODIUM BOOST PROFITS

The South Africa-based miner, which also has operations in Zimbabwe, said higher metal prices had driven its annual headline earnings per share - the main profit measure used in South Africa - nearly 2-1/2 times higher at 70.87 rand, versus 28.93 rand a year earlier.

Palladium and rhodium prices, widely used in vehicle exhausts to reduce harmful emissions, have climbed as tighter environmental regulations force carmakers to buy more of the precious metal used in catalytic converters.

The price rise has boosted profits at miners such as Amplats, Sibanye-Stillwater, and Impala Platinum after several years of losses.

Earnings before interest, tax, depreciation and amortisation (EBITDA) doubled to 30 billion rand ($2.02 billion) from the year-ago period.

Amplats declared a final dividend of 41.60 rand per share, made up of 16.60 rand base dividend and 25.00 rand special dividend, bringing the gross dividend, the highest since 2006, to 52.60 rand per share compared with 11.25 rand on-year.

Platinum group metal (PGM) production rose 1% to 4.4 million ounces.

($1 = 14.8602 rand)

Maroc Telecom reports $620 mln profit in 2019

RABAT (Reuters) - Maroc Telecom, Morocco’s largest telecoms operator, on Monday reported an adjusted profit of 6 billion dirhams ($620 million) in 2019, up 1% compared with a year earlier.

The result was achieved on the back of higher mobile data activity in Morocco and in African subsidiaries, the company said in a statement.

Total revenue grew 1.3% to 36.5 billion dirhams ($3.76 billion), while the EBITDA margin rose 1.25% to 51.8%.

The company said its customer base rose 11.1% to 67.5 million citing a growth in demand for its mobile broadband and landlines in Morocco.

Maroc Telecom also said it would pay a dividend of 5.54 dirhams per share, totalling 4.9 billion dirhams.

Last month, Morocco’s telecom regulator (ANRT) fined Maroc Telecom 3.3 billion dirhams for abusing its dominant position in the market by hindering competitors’ access to unbundling on its network and the fixed market.

Maroc Telecom said it would appeal the decision adding that it had made a provision for the fine.

Maroc Telecom, which is listed on the Casablanca Stock Exchange and Euronext Paris, is 53% controlled by the UAE’s Etisalat, with the Moroccan state owning 22%.

It operates subsidiaries in Benin, Burkina Faso, Ivory Coast, Gabon, Mali, Mauritania, Niger, Chad, Togo and the Central African Republic.

Ivory Coast to issue domestic bonds worth $184 million

ABIDJAN (Reuters) - Ivory Coast is issuing 110 billion CFA francs ($184 million) in bonds on the West African bourse to finance infrastructure projects, two lead managers of the ongoing auction told Reuters on Monday.

The auction includes 80 billion CFA francs in seven-year bond at a 5.8% rate and a 30 billion CFA franc ten-year bond at 5.9%, said the lead managers from NSIA bank and SOGEBOURSE, the investment banking arm of bank SocGen.

The bonds, which will be sold in units of 10,000 CFA francs, are being marketed to investors across West Africa’s CFA currency zone from Feb. 12-25.

Ivory Coast, Francophone West Africa’s largest economy and the world’s biggest cocoa producer, has tapped international bond markets several times in the past few years.

($1 = 595.1000 CFA francs)

Kenya's KCB sees loan growth tripling to 15% after rate cap repeal

NAIROBI (Reuters) - Kenya’s biggest lender by assets, KCB Group, expects its loan growth to triple to 15% this year after a cap on lending rates was repealed, its chief executive said on Friday.

The government removed the cap last November after it was blamed for curbing credit growth during its three years of existence.

“We see strong opportunities to grow,” Joshua Oigara told Reuters at an interview in his office, adding that the group’s annual loan growth had slowed to 5% during the cap.

KCB, which also operates in neighbouring Uganda, Tanzania, Rwanda, Burundi and South Sudan, expects to set a base lending rate at the start of March, which will allow it to offer varying rates to customers.

Banks use a base rate that is normally the cost of funds, plus a margin and a risk premium, to determine how much they should charge a particular customer.

The cap, which set rates at 4 percentage points above the central bank’s benchmark lending for all customers, had taken out that equation and the flexibility that lenders say they need in order to accommodate customers deemed as risky borrowers.

“What will change is the price premium based on the customer’s risk profile. That generally could increase the prices of credit in the market,” Oigara said.

Together with delays in government payments to its suppliers, the cap had led to an acute slowdown in economic activity, with many people complaining of hardships and lack of cash.

Oigara said that has started to change slowly after the government ordered its ministries, agencies, departments and local authorities to pay up pending bills last year.

“Liquidity has come back to the market since they started paying last year. There is strong cash flow for businesses now,” he said.

“They have been paid their pending bills. They are going back to the market. They are going to pay their suppliers, buying goods.”

KCB injected 5 billion shillings ($49.73 million) into National Bank of Kenya (NBK) last month after acquiring it last September in a 1-for-10 share swap deal.

Oigara said the bank had also put experienced executives in charge of the critical functions of NBK, to turn it around within the next three years, after which it is required to run it as a separate bank.

NBK accounts for a 10th of KCB’s assets, contributing less than 1% to the group’s profit, but Oigara said it wanted to boost the profit contribution to 20% of the group’s total.

“If they (NBK) make a strong contribution to the group, we have no problem with them remaining as they are,” he said.

($1 = 100.5500 Kenyan shillings)

INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

Companies under Cautionary

Bindura Nickel Corporation

Padenga Holdings

Delta Corporation

Meikles Limited

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Blog:            <http://www.google.com/url?q=http%3A%2F%2Fwww.bulls.co.zw%2Fblog&sa=D&sntz=1&usg=AFQjCNFoIy6F9IXAiYnSoPSgWDYsr8Sqtw> www.bulls.co.zw/blog

Twitter:         @bullsbears2010

LinkedIn:       Bulls n Bears Zimbabwe

Facebook:      <http://www.google.com/url?q=http%3A%2F%2Fwww.facebook.com%2FBullsBearsZimbabwe&sa=D&sntz=1&usg=AFQjCNGhb_A5rp4biV1dGHbgiAhUxQqBXA> www.facebook.com/BullsBearsZimbabwe

Skype:         Bulls.Bears 

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