Major International Business Headlines Brief::: 02 October 2020

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Major International Business Headlines Brief::: 02 October 2020

 


 

 


 <mailto:info at bulls.co.zw> 

 


 

 


 

 

ü  Thousands of UK firms may need to set up an EU office

ü  Singapore firm pushes ahead with Newcastle United bid

ü  Nearly 20,000 Covid-19 cases among Amazon workers

ü  US airlines lay off thousands of staff as federal relief ends

ü  Subway rolls ruled too sugary to be bread in Ireland

ü  Coronavirus: H&M to close 250 shops as Covid drives sales online

ü  Huawei 'failed to improve UK security standards'

ü  Coronavirus: Rolls-Royce to raise billions in Covid-lifeline

ü  Rwanda's clothing spat with the US helps China

ü  Fitch Revises Nigeria's Outlook to Stable, Affirms At 'B' Rating

ü  Govt Should Unlock Gas Potential for Economic Devt - Dangote

ü  Kenya, India Ink Emergency Flights Deal

 

 

 

 

 

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

Thousands of UK firms may need to set up an EU office

Thousands of UK businesses may need to set up an EU presence if they want to
export goods to European markets, according Blick Rothenberg, a law firm
specialising in international trade.

 

Both EU and UK law will require companies to "have a door to knock on" if
there are any disputes over payment and compliance with customs changes that
will treat the UK as if it were any other non-EU country after 1 January.

 

The only other option is to pay a customs and freight forwarding agent to
bear the risk that new paperwork and payment obligations are satisfied.

 

Given the new complexities, industry sources have told the BBC that few
agents will be prepared to take that risk. Those willing to take a risk will
likely charge a king's ransom to do so.

 

Trade lawyer Simon Sutcliffe, from Blick Rothenberg, told the BBC: "Any
agent will be 'joint and severally liable' for any customs debt should
something go awry or the local fiscal authorities find a problem with the
consignment. Understandably, these agents charge a lot of money to bear that
risk."

 

'Little time'

These requirements cut both ways. EU companies exporting to the UK will face
the same problem. EU exporters may have to set up UK offices - both EU and
UK law is clear that someone will have to bear the risks of any customs
problems.

 

Mr Sutcliffe added: "The problem is that thousands of businesses on both
sides of the channel just don't realise the implications of trading with
each other from 1 January, and they have very little time to work it out."

 

He said these issues would present a major challenge to UK-EU trade "unless
the company is willing to become 'established' and set up a presence,
maintaining business records, have some form of technical resources and
staffing, they will not be allowed submit any customs documents. This is
true on both sides of the channel".

 

Given that the UK imports far more from the EU than it exports, the onus may
fall more heavily on EU exporters to the UK. That may mean jeopardising the
flow of critical goods into the UK.

 

Alex Altmann, who heads Blick Rothenberg's Brexit Advisory Group and is also
a chairman at the British Chambers of Commerce in Germany, says: "The
government's communication is a disaster. We have 90 days to sort this out
now or EU supplies of food, medication, PPE and many other items won't be
allowed to enter the UK due to an overseen technically of the new customs
code. The UK government needs to comment on this very quickly now."

 

HM Revenue & Customs did not dispute the law firm's analysis and issued the
following statement: "The UK has a well-established Customs Agent community
and government has invested more than £80m in building further capacity,
supporting the customs intermediary sector with training, new IT and
recruitment. We urge people to go and talk to a customs expert to find out
what they need to do to get ready."

 

These issues will arise whether or not the UK and EU strike a free trade
agreement as both sides have insisted they would prefer.

 

HMRC estimates the cost of filling in 200 million customs declarations alone
- deal or no deal - will cost UK business more than £7bn a year.

 

What seems clear is that the UK's departure from the EU single market and
customs union will not mean less cost and paperwork but more when it comes
to dealing with the UK's closest and largest trading partner.--BBC

 

 

 

 

Singapore firm pushes ahead with Newcastle United bid

Singaporean-backed firm Bellagraph Nova says it is pushing ahead with its
bid for Newcastle United Football Club. 

 

One of the firm's co-founders Evangeline Shen told the BBC her team is in
regular contact with the Premier League club. 

 

Bellagraph Nova has been the subject of a number of revelations since its
bid was revealed in August. 

 

The company has been criticised for inconsistencies about its assets and has
retracted press statements.

 

Bellagraph Nova particularly came under fire for a photo-shopped picture of
its three founders meeting former US President Barack Obama. 

 

Revelations about the group have been covered extensively by Singaporean
media.

 

Ms Shen co-founded Bellagraph Nova with business partners and cousins Nelson
Loh and Terence Loh. All three are directors of the Paris-based group.

 

The newly-merged group is a complex network of companies spread across
consumer goods, luxury products and healthcare.

 

Newcastle bid

In an exclusive interview Ms Shen told the BBC that "bidding for Newcastle
is part of our strategy because it's a well-known football club but still
has room to improve, and we believe that improvement is good for the club as
well as for our brand".

 

"We started real planning for the club such as whom to hire as trainer and
whom to sign for players," she added.  

 

The 128-year-old football club is owned by billionaire retailer Mike Ashley,
who put it up for sale in 2017.

 

A £300m bid put forward by Saudi Arabia's Private Investment Fund fell apart
in August due to protracted negotiations. 

 

Bellagraph Nova then stepped in with a £280m offer but has since become
mired in controversy.

 

But Ms Chen is confident about the pursuit of Newcastle United. "We are
always in contact and we are still very aggressive on trying to close the
deal.

 

"I can tell you our team just met Mike Ashley's representative last week on
the process in Paris again."

 

Out of nowhere

On its corporate website, Bellagraph Nova says it has 23,000 employees and
revenues for 2019 of $12bn (£9.3bn). 

 

Singapore-based corporate governance expert Mak Yuen Teen said it is not
unusual for some companies to exaggerate their credentials or
"window-dress". 

 

"I've seen listed companies continually misrepresent themselves including on
the Singapore Exchange - announcing deals that are false, using fake
degrees, but this is at a whole new level," he said. 

 

As Bellagraph Nova and its entities are not publicly listed on any stock
exchanges, apart from one linked company called Axington, their claims about
revenues and employees cannot be easily verified.  

 

"It's quite unbelievable that a $12bn company with 23,000 employees appear
out of nowhere. Most likely they are claiming potential partners as part of
their business," added Mr Yuen, who is an associate professor of accounting
at the National University of Singapore.

 

Ms Shen, pictured here in a handout from Bellagraph Nova, said her firm is
still pursuing the deal "aggressively"

Talking about the revenue and employee figures, Ms Shen said "the
calculation we have is a generic one because we can only base on what our
partner firms and our subsidiaries tell us to consolidate".

 

"I understand the numbers may look large, but as the nature of online
business, it's very normal to have a lot of employees," she added.

 

Failed bid?

Observers remain sceptical about Bellagraph Nova's ambitions.

 

"The bid has turned into a shambles for the bidders and appears dead in the
water," said Kevin McCullagh, senior analyst, Asia at SportBusiness.  

 

"Football clubs have always attracted colourful investors and owners, often
drawn by the allure of a high-profile asset and the status it can bring,
rather than a business case," added Mr McCullagh. 

 

In recent years, there has been increasing interest in British football
clubs from Asian investors.

 

English Premier League's Wolves football club was bought by Chinese leisure
group Fosun while rival Leicester City is owned by Thailand's King Power
travel retail group.

 

Newcastle United Football Club declined to comment on the bid when
approached by the BBC.

 

 

 

 

Nearly 20,000 Covid-19 cases among Amazon workers

Amazon said that more than 19,816 of its frontline workers in the US have
contracted Covid-19 since March.

 

The number equates to 1.44% of its 1.37 million workers across Amazon and
its subsidiary Whole Foods.

 

Amazon had faced criticism from employees, unions and elected officials, who
have accused the company of putting employees' health at risk.

 

But the online retailing giant said its infection rate is lower than
expected.

 

Amazon has kept its facilities open throughout the pandemic to meet a surge
in demand from shoppers stuck at home.

 

Staying open has proven very lucrative for the e-commerce firm, and has
added to the wealth of founder Jeff Bezos, who is the world's richest man.

 

The tech giant's sales soared 40% to $88.9bn (£67.9bn) in the three months
ending in June, and its quarterly profit of $5.2bn (£4bn) was its biggest
since the company started in 1994.

 

Low infections

In a blog post, Amazon argued that 33,952 workers would have contracted the
virus if Amazon's infection rate had equalled the wider population's, when
accounting for employees' age and geography.

 

The figures include seasonal staff and those who may have been infected
outside work.

 

The company said that it "introduced or changed over 150 processes",
distributed more than 100 million face masks, and implemented temperature
checks at its facilities around the world.

 

Amazon said it introduced social distancing measures and additional
cleaning, which "occurs across each site about every 90 minutes".

 

 

Media caption"Mr Bezos... why on Earth would one of your partners compare
your company to a drug dealer?"

Amazon challenged other companies to make public their own Covid-19
statistics.

 

"This information would be more powerful if there were similar data from
other major employers to compare it to," Amazon said in the blog post.

 

Athena, a coalition that has opposed Amazon on a wide range of labour,
planning and environmental issues, called on officials to investigate
further.

 

"Amazon allowed Covid-19 to spread like wildfire," Athena's director Dania
Rajendra said in a statement.--BBC

 

 

 

US airlines lay off thousands of staff as federal relief ends

US airlines have begun laying off thousands of workers after efforts to
negotiate a new economic relief plan in Congress stalled.

 

American Airlines says it shedding 19,000 workers and United Airlines
13,000.

 

The carriers - badly hit by the coronavirus pandemic - say they are ready to
reverse the decisions if more financing is found.

 

The airlines have received billions of dollars from the federal government.

 

Congress agreed the aid agreed earlier in the year as part of the
Coronavirus Aid, Relief, and Economic Security Act [Cares Act]. It was
conditional that the carriers did not lay off workers until 1 October.

 

Airlines worldwide have been hit by a massive fall in demand caused by the
pandemic.

 

In a letter to staff announcing the layoffs, American Airlines Chief
Executive Officer Doug Parker said: "I am extremely sorry we have reached
this outcome. It is not what you all deserve."

 

On Wednesday United Airlines, in a message to its employees, said it was
imploring "our elected leaders to reach a compromise, get a deal done now,
and save jobs".

 

"In a continuing effort to give the federal government every opportunity to
act, we have made clear to leadership in the administration, Congress and
among our union partners that we can and will reverse the furlough process
if the Cares Act Payroll Support Program is extended in the next few days."

 

It added: "To our departing 13,000 family members: thank you for your
dedication and we look forward to welcoming you back."

 

The layoffs increase pressure on Treasury Secretary Steven Mnuchin and House
of Representatives Speaker Nancy Pelosi who have been trying to agree on a
follow-up relief plan for the struggling US economy.

 

Democrats, who control the House, have been pushing for a $2.2tn (£1.7tn)
package while the White House wants to keep it to $1.6tn. The most recent
proposal includes $20bn for struggling airlines.

 

On Thursday House Democrats debated the impasse. The Senate, however,
adjourned until Monday evening, Reuters reported, suggesting that an end to
the deadlock was not close.

 

A spokesman for Ms Pelosi said "distance on key areas remain", following a
50 minute phone call with Mr Mnuchin on Thursday afternoon.--BBC

 

 

 

Subway rolls ruled too sugary to be bread in Ireland

The rolls used in Subway's hot sandwiches contain too much sugar to be
considered bread, according to Ireland's Supreme Court.

 

Ireland's highest court made the ruling in a case about how the bread is
taxed.

 

An Irish franchisee of the US company had claimed it should not pay VAT on
the rolls it uses in heated sandwiches.

 

But the court ruled that because of the level of sugar in the rolls they
cannot be taxed as bread, which is classed as a "staple product" with zero
VAT.

 

Under Ireland's VAT Act of 1972, ingredients in bread such as sugar and fat
should not exceed 2% of the weight of flour in the dough.

 

Are there good and bad sugars?

The five judges, who were considering an appeal by Bookfinders Ltd, a Subway
franchisee based near Galway, concluded that in Subway sandwiches the sugar
content is around 10% of the flour in the dough for both white and
wholegrain rolls.

 

"Subway's bread is, of course, bread," said a spokesperson for Subway.

 

"We have been baking fresh bread in our stores for more than three decades
and our guests return each day for sandwiches made on bread that smells as
good as it tastes."

 

In Irish law, bread is considered a staple food and has a zero rate of VAT.
Following the ruling, the rolls are subject to tax at 13.5%.

 

The case stems from a decision by Ireland's tax authority in 2006 to refuse
Bookfinders' request for a refund on VAT payments made between 2004 and
2005.

 

After an appeal commissioner upheld the tax authority's refusal of a refund,
Bookfinders took its case to the High Court which it lost before going to
the Court of Appeal, where it was also unsuccessful.

 

It is not the first time Subway's bread has been in the spotlight. In 2014,
the company announced it was removing azodicarbonamide - the so-called "yoga
mat" chemical - from its rolls.

 

Subway stopped using the so-called "yoga mat" chemical - azodicarbonamide -
in its bread in 2014

The chemical is used to whiten flour and improve the condition of dough. It
is also used to make vinyl foam products such as yoga mats and the underlay
for carpets.

 

Subway stopped using the agent six years ago but the US Food and Drug
Administration continues to approve the use of the chemical in produce.--BBC

 

 

 

 

Coronavirus: H&M to close 250 shops as Covid drives sales online

The world's second biggest fashion retailer, Sweden's H&M, says it plans to
cut 250 of its stores globally.

 

The closures will come next year after the firm said the Covid-19 pandemic
had moved more shoppers online.

 

Although it said sales had continued to recover in September, they were
still 5% lower than the same month in 2019.

 

The firm has 5,000 stores worldwide, but it is not yet clear how many
closures will be in the UK.

 

It said it was "too early for us to give any details on this, the numbers
will differ from [national] market to market".

 

H&M has the contractual right to renegotiate or end leases on about a
quarter of its stores every year. The retailer said that it planned a "net
decrease of around 250 stores" next year.

 

While its pre-tax profits fell to 2.37bn Swedish krona (£210m) for the nine
months to 31 August, this was better than analysts had expected.

 

However, it said 166 of its stores worldwide remained closed, and a large
number still had local restrictions and limited opening hours.

 

High Street stores hit

Analyst Richard Lim of Retail Economics told the BBC: "What we have seen
generally over the past few months of the pandemic has been a step change in
the number of sales going online.

 

"That has affected all parts of the industry, but particularly clothing and
footwear."

 

He also said that in terms of consumers physically visiting stores to do
shopping, there had been a move from High Streets and shopping centres
towards retail parks.

 

"People can go in their cars instead of using public transport, and they are
also able to buy in bigger bulk at retail parks," Mr Lim said.

 

'Worst is behind us'

H&M said it would now accelerate its plans to increase digital investment to
cope with growing online demand.

 

The Stockholm-based firm said it had taken "rapid and decisive action" to
manage the impact of the coronavirus, including changes to purchasing,
investments, rents, staffing and financing.

 

Chief executive Helena Helmersson added: "Although the challenges are far
from over, we believe that the worst is behind us and we are well placed to
come out of the crisis stronger."

 

Sofie Willmott, from analytics firm GlobalData, pointed out that H&M's sales
in September "fell just 5% demonstrating the relevance of its product offer
as shoppers start to feel more confident returning to stores".

 

But she said the firm "must enhance its online proposition given the
importance of digital channels, to succeed in a very tough market".

 

In addition, Ms Willmot said H&M should consider "more significant changes"
with regards to shop closures, or it will "continue to be hindered by its
excessive store estate".--BBC

 

 

 

Huawei 'failed to improve UK security standards'

Huawei has failed to adequately tackle security flaws in equipment used in
the UK's telecoms networks despite previous complaints, an official report
says.

 

It also flagged that a vulnerability "of national significance" had occurred
in 2019 but been fixed before it could be exploited.

 

The assessment was given by an oversight board, chaired by a member of the
cyber-spy agency GCHQ.

It could influence other nations weighing up use of Huawei's kit.

 

The report said that GCHQ's National Cyber Security Centre (NCSC) had seen
no evidence that Huawei had made a significant shift in its approach to the
matter.

And it added that while some improvements had been made, it had no
confidence they were sustainable.

 

As a result, it concluded, the board could only provide "limited assurance
that all risks to UK national security" could be mitigated in the long-term.

In July, the government announced that due to US sanctions Huawei would
eventually be excluded from the new 5G telecoms network by 2027, but the
Chinese company can continue to play a role in older mobile phone networks
and fixed broadband.

 

The US has argued that using Huawei's equipment creates a risk of the
Chinese state carrying out espionage or sabotage, something the company has
always denied.

Despite the criticisms, British security officials say they can manage the
current risks posed by using Huawei's existing kit, and they do not believe
the defects they have found are a result of Chinese state interference.

 

Huawei has responded saying the report highlights its commitment to openness
and transparency.

"The report acknowledges that while our software transformation process is
in its infancy, we have made some progress in improving our software
engineering capabilities," a spokesman said.

 

Although the company now has limited prospects in the UK, it is still hoping
to sell its 5G kits to other parts of Europe.

Earlier this week, the chief of its Italian business suggested that other
countries could carry out detailed inspections of their own to help overcome
security concerns.

 

"We will open our insides, we are available to be vivisected to respond to
all of this political pressure," said Luigi De Vecchis.

However, the Financial Times has reported that Germany is set to be next to
ban local networks from using the firm's 5G products.

One expert said setting up an operation like HSEC required a state to
provide considerable resources, and offered no guarantee of success.

"Even if Huawei passes the technical evaluation, which we see from today's
report is not certain, they may yet be blocked at the political level," said
Emily Taylor, editor of the Journal of Cyber Policy.

 

Delayed findings

Huawei equipment has been used in the UK for a decade and a half.

Since 2010, a special Huawei Cyber Security Evaluation Centre (HCSEC), based
in Banbury, has been tasked with checking its telecoms infrastructure
products.

An oversight board then examines the work of HCSEC and reports to the UK's
National Security Advisor annually, although the latest report covering 2019
was delayed because of the coronavirus pandemic.

 

Last year, the report raised serious concerns about standard of Huawei's
equipment and software, and there is no major change in the latest
assessment.

In 2018, Huawei committed to a $2bn (£1.5bn) five-year plan to improve its
software engineering processes in response to previous criticism.

 

But the new report complains that Huawei has yet to convince that it can
complete the effort on time, and adds that "unless a detailed and
satisfactory plan has been provided, it is not possible to offer any degree
of confidence that the identified problems can be addressed by Huawei".

 

In particular it highlighted "poor coding practices" and said there was a
"range of evidence" employees were not following Huawei's own guidelines.

Huawei argues it is still in the early stages of the plan and real
improvements will only be reflected in future reports.

 

Broadband flaw

The report adds the amount of vulnerabilities reported in 2019 were
"significantly beyond" the number found in 2018, but says this is partly due
to the increasing effectiveness of the checks rather than an overall decline
in standards.

 

But it highlights one vulnerability of "national significance" in 2019,
which required extraordinary measures to fix.

 

The BBC has learned this was related to broadband - but officials do not
believe anyone exploited the flaw.

The report covers 2019, and so does not address the period when the US
imposed new sanctions affecting Huawei.

 

Those sanctions technically affect HCSEC itself, since it is part of Huawei,
and will require changes in its organisational structure.

 

Huawei is also currently building an alternative supply chain for crucial
technology affected by the sanctions.

 

The report comes a day after NCSC's ex-chief explained why the UK had to be
alert to the risks of using Huawei's kit in unusually plain language.

 

"We have to plan on the basis that at some point, Huawei could be made
subservient operationally to the Chinese state," Ciaran Martin told a
committee of MPs.

"You always have to have in mind a scenario where every bit of involvement
of Huawei was turned against the UK.

 

"And you don't make that assumption for Nokia, you don't make that
assumption for Ericsson."--BBC

 

 

 

Coronavirus: Rolls-Royce to raise billions in Covid-lifeline

Rolls-Royce has announced it will seek to raise billions of pounds to
bolster its finances after a "sharp deterioration" in civil aerospace
because of the pandemic.

 

The plane engine maker will seek to raise £2bn from its shareholders through
a rights issue.

 

Rolls-Royce will also raise funds by issuing new debt, while the rights
issue could unlock further financing.

 

The company has been hit by the fall in air travel amid the Covid-19
outbreak.

 

The rights issue could trigger a further £1bn loan from UK Export Finance,
the government's trade finance body. Rolls-Royce has already borrowed £2bn
from the state.

 

But Rolls-Royce said an extension of a government loan was dependent on both
UK Export Finance and HM Treasury approving the terms of the rights issue.
"There is therefore no guarantee that this increase will take place," it
said.

 

The government holds a "golden share" in Rolls-Royce which prevents the
company - which is deemed to be of strategic interest to the UK - from
coming under foreign control.

 

There had been rumours that Rolls-Royce had been in talks with sovereign
wealth funds in Singapore and Kuwait to invest in the business.

 

The company also said it had secured commitments for a new £1bn two-year
loan facility andit is planning to issue bonds to raise a further £1bn.

 

Rolls-Royce chief executive Warren East, said: "The capital raise announced
today improves our resilience to navigate the current uncertain operating
environment.

 

"The sudden and material effect of the Covid-19 pandemic has had a
significant impact on the commercial aviation industry, resulting in a sharp
deterioration in the financial performance of our civil aerospace business
and, to a lesser extent, our power systems business."

 

After flirting with the investment arms of the governments of Kuwait and
Singapore, Rolls-Royce has turned to its existing shareholders to come up
with the money it needs to survive the pandemic.

 

It makes money not from selling engines, but from the payments airlines make
when those engines are flying. Flying hours have roughly halved since the
pandemic started, and Rolls-Royce - and everyone else - does not really know
when they will go back to pre-coronavirus levels.

 

If the rights issue is successful - and it is fully-underwritten by City
banks, and pitched at a deep discount to the current market price of
Roll-Royce shares - it will unlock another £3bn worth of loans. The £5bn
recapitalisation should be enough, the company says, to see it through most
forecasts of another coronavirus spike.

 

There is an element of government support here for what is one of the UK's
most important exporters. One third of the new loans will be guaranteed by
UK Export Finance, an arm of the government - although Rolls-Royce cautions
the support is conditional on the rights issue going through, and further
negotiations with the Treasury.

 

The big question now is whether Rolls-Royce has done enough. The course of
the virus is difficult to predict, as is the future behaviour of air
travellers even if it is defeated. Shareholders being asked to stump up the
cash would like some certainty - and that is in short supply.

 

'Room for manoeuvre'

Under the rights issue, investors will get 10 shares for every three they,
own priced at 32p - a heavy discount to its share price on 30 September
which closed at 130p.

 

Rolls-Rolls has already announced it will cut 9,000 jobs in an effort to
save costs and plans to sell-off parts of its business to raise £2bn.

 

Rolls-Royce chief executive Warren East said the fund-raising "improves our
resilience"

While the engineering group also designs and makes products such as engines
and turbines for the defence, marine, and oil and gas industries, civil
aerospace is by far its biggest business and accounts for 51% of its
revenues.

 

It operates a "power by hour" model, which means Rolls-Royce makes money
every time a plane using one of its engines is flown, generating around £4bn
a year.

 

However, the airline industry has virtually ground to a halt since the
coronavirus crisis emerged.

 

"There is little end in sight for the falling demand for new planes," said
Susannah Streeter, senior investment and markets analyst at Hargreaves
Lansdown.

 

But she said its financing plans should give Rolls-Royce "a lot more room
for manoeuvre to help it navigate the Covid crisis".

 

Rolls-Royce's share price fell 5.85% to 122.4p in early trading in
London.--BBC

 

 

 

Rwanda's clothing spat with the US helps China

More than 100 sewing machines rattle away at a factory on the outskirts of
Kigali, the capital of Rwanda.

 

A cooperative of 83 of the African nation's tailors established the company
- the Kigali Garment Centre - last year.

 

Located in an industrial area built on one of the rolling green hills
surrounding the city, it was set up in line with the Rwandan government's
strategy of boosting the country's clothing manufacturing sector.

 

"We've trained 130 youngsters, of whom 97% are female, since the factory
launched," says the firm's director general and co-founder Jerome Mugabo.

 

Behind him on the main factory floor, employees, who all seem to be in their
teens or 20s, are producing chino trousers.

 

Rwanda's efforts to boost its domestic garment industry have seen it fight a
lonely, and continuing, trade battle with the US that dates back to 2015.

 

Back then the six members of the East Africa Community (EAC) block of
countries - Burundi, Kenya, Rwanda, South-Sudan, Tanzania, and Uganda -
announced that they would all put in place high tariffs on the import of
second-hand clothing or "chagua".

 

The idea behind the de-facto ban was to stop the importation of large
quantities of cheap used clothing, mostly from the US and the UK, which the
African nations said were stifling the growth of their nascent garment
industries.

 

The extent of the issue for the six countries was shown by widely reported
2015 figures from the US Agency for International Development (USAID). The
USAID said that in that year, the EAC states accounted for almost 13%
($274m; £213m) of the global imports of used clothing.

 

The study also found that almost two thirds of the combined populations
purchased some second-hand clothes.

 

Keen to hang on to its share of these exports, the US responded that the
proposed ban would violate free-trade agreements, and it threatened to
remove the EAC countries from the African Growth and Opportunity Act (Agoa).

 

Enacted back in 2000, this allows 39 sub-Saharan African nations to export
thousands of goods duty-free to the US.

 

After the US's announcement, all EAC members except for Rwanda backed out.
It went on to introduce a tariff of $4 per kilogram on imports of used
clothing in 2018. The US responded by putting tariffs of 30% on Rwandan
clothing, where there had previously been none.

 

While Rwanda was only exporting about $1.5m of clothing per year to the US
at the time, this stopped that overnight, and meant that the African nation
could not hope to increase it.

 

However, Jerome Mugabo say he remains pleased by Rwanda's decision to go it
alone. "It helped us to set up our business, as we get more customers since
the ban," he says.

 

Ritesh Patel, managing director of Rwanda's oldest garment factory -
Utexrwa, which was founded in 1984 - agrees.

 

"Rwanda needs to do this to be able to grow its economy," he says. "As
people were able to buy a second-hand men's shirt for 800 Rwandan francs [84
US cents; 64p], they were not interested in a new men's shirts of 4,000
Rwandan francs that we could produce."

 

For years Utexrwa had focused solely on the production of uniforms, for the
police, companies and schools. But since the ban on second-hand clothing
imports, it has expanded into ordinary clothes, like men's shirts.

 

"It really helps that we no longer have to compete with cheap chagua, while
we simultaneously witness a quickly growing middle class that will be able
to afford "Made in Rwanda" products," adds Mr Patel.

 

Yet where there are winners, there are also losers. "Life has become very
difficult," says Rajabu Nzeyimana, who stands behind a wooden market table
piled high with second-hand boxer shorts, and a basket full of second-hand
socks.

 

The 42-year old father has sold used clothing for seven years, but since
2018 has been forced to start buying it at a much higher price from traders
who smuggle it from the Congolese border town Goma into Rwanda.

 

"My sales plumped because I had to increase my prices fivefold to be able to
make a living," he says.

 

Mr Nzeyimana adds that he now struggles to pay his children's school fees.

 

The withdrawal of the Agoa trade benefits for apparel also makes Rwanda less
attractive as a manufacturing base for international garment producers.

 

Chinese firm C&H Garment closed its factory in Kigali a few months after the
US retaliated. It had exported more than half of its production to the US.

 

Another Chinese clothing firm with an operation in Rwanda - Hong Kong's C&D
Products - agrees that the stand off with the US is an issue. "It is
obviously a problem," says Maryse Mbonyumutwa, co-owner of its Rwandan
subsidiary.

 

Such Chinese firms are increasingly interested in opening factories in
Africa, as the labour costs are much lower than in China. What C&D is now
doing is exporting to Europe from its Rwandan factory, while planning to
build two manufacturing sites in Tanzania to focus on the US market.

 

To help the country's clothing manufacturers, the Rwandan government has
removed import taxes on raw materials such as cotton. And new factories get
grants and loans.

 

Some experts, however, doubt if Rwanda will be able to build a competitive
clothing industry. While Uganda, Kenya, Tanzania, Ethiopia and Burundi are
major cotton producing countries, Rwanda needs to import this raw material,
as the tiny state isn't suitable for major cotton production, being a
mountainous and extremely densely populated country.

 

Water and electricity are also costly, and road transport is extremely
bureaucratic and expensive as Rwanda is a landlocked country.

 

The ban on used clothes also seems to have a totally different - unintended
- effect as it pushes Rwandans to start buying cheap, imported new Chinese
clothes.

 

"The government should have waited until the country had build a mature
textile industry before banning chagua," says clothes seller Felicien
Maniraguha. He has switched from selling imported used clothes to imported
new Chinese ones.

 

Global Trade

 

More from the BBC's series taking an international perspective on trade:

 

·         How much gold is there left to mine in the world?

·         'You have to protect the grapes from getting sunburn'

·         India's kite-makers see sales fly during lockdown

·         Blueberry farmers warn of 'disaster' crop

·         'We have had parents crying for us to open'

·         The millions being made from cardboard theft

Mr Maniraguha says that local clothing production is still on too small a
scale, and that the garments are not fashionable enough.

 

"Local garment factories currently only ensemble boring clothes that look
like uniforms," says the 30-year-old.

 

He contrasts this with the fashionable Chinese-made jeans and floral pint
T-shirts that he is currently selling.

 

"Rwandans prefer clothes that look modern," he says. "I doubt if the local
textile industry will ever be able to produce nice, fashionable clothes that
will become more popular than cheap Chinese imports."--BBC

 

 

 

 

Fitch Revises Nigeria's Outlook to Stable, Affirms At 'B' Rating

Fitch Ratings has revised the outlook on Nigeria's long-term
foreign-currency issuer default rating (IDR) to stable, from negative.

 

It also affirmed the country's IDR at 'B'. According to a statement, the
revision of the outlook reflects a decrease in the level of uncertainty
surrounding the impact of the global pandemic shock on the Nigerian economy.

 

It pointed out that oil prices have stabilised, while global funding
conditions have eased and domestic restrictions on movement have started to
be relaxed.

 

"Nigeria has navigated external liquidity pressures from the shock through
partial exchange rate adjustment combined with de facto capital flow
management measures and foreign-currency (FC) restrictions, while
disbursement of external official loans has supported the level of
international reserves.

"While external vulnerability persists from currency overvaluation and a
possibly large FC demand backlog, this is adequately captured by the 'B'
rating, in our view," it added.

 

The global rating agency noted that the Central Bank of Nigeria (CBN) has
continued to prioritise exchange rate stability over other policy goals.

 

It further pointed out that, "the Central Bank of Nigeria (CBN) has achieved
progress towards its stated goal of unifying the exchange rate, following a
cumulative 19 per cent two-step devaluation of the 'official' exchange rate,
which is mostly used for the government and the oil sector's FC
transactions."

According to Fitch, the broad stability of the I&E rate since end-March has
been mostly achieved through a severe contraction in FC supply, illustrated
by a drop in the average value of daily transactions on the I&E window by 87
per cent in April-August relative to the first quarter 2020 average.

 

Tightening FC supply for trade and financial transactions could harm growth
and exacerbate inflationary pressures, driving further misalignment of the
naira's real exchange rate, the agency warned.

 

"Unfulfilled FC demand could constitute a drain on reserves once supply is
relaxed. The CBN has started to increase FC provision in September through a
combination of spot and forward sales but the magnitude of actual FC
outflows in case of full supply normalisation is unknown.

 

"We understand that the stock of outstanding non-resident holdings of CBN
open-market operation (OMO) bills was around $10 billion in August.
Non-resident investments in short-term money market instruments amounted to
$27.7 billion at end-2019, equivalent to 72 per cent of international
reserves at the time, more than half of which were in OMO bills.

"De facto FC restrictions could also damage investor confidence and possibly
lead to Nigeria's exclusion from benchmark equity indices, durably impeding
a return of foreign inflows.

 

"This would place the onus of rebuilding reserves on sovereign external
borrowing amid continued current account (CA) deficits. The government has
secured multilateral loans of $4 billion in 2020, of which $3.4 billion is
from the International Monetary Fund (IMF), helping a recovery in
international reserves from a 30-month low of USD 33.4 billion in April to
$35.8 billion on 24 September. We understand that around 15 per cent of
international reserves are pledged in swaps," Fitch added.

 

According to Fitch, the 'B' rating also reflects the country's weak fiscal
revenues, comparatively low governance and development indicators, high
dependence on hydrocarbons and a track record of subdued growth and high
inflation.

 

It pointed out that the rating weaknesses were balanced against the large
size of Nigeria's economy, low general government (GG) debt relative to GDP,
small FC indebtedness of the sovereign and a comparatively developed
financial system with a deep domestic debt market.

 

"Low fiscal revenues are a major credit weakness. GG receipts averaged 6.8
per cent of GDP in 2015-2019, well below the current 'B' median of 22 per
cent. Revenues will benefit from the removal of the fuel subsidy, which has
cumulatively cost the budget around seven per cent of 2019 GDP in 2016-2019.

 

"The government has affirmed its firm commitment to this reform as well as
its intention to continue phasing out costly electricity subsidies. However,
the energy price reform faces strong opposition from labour unions and the
authorities have reinstated subsidies in the past in response to social
protests."-This Day.

 

 

 

Govt Should Unlock Gas Potential for Economic Devt - Dangote

The Group Executive Director in charge of Strategy, Capital Projects and
Portfolio Development, Dangote Industries Limited (DIL), Mr. Devakumar
Edwin, has urged the federal government to deploy new strategy to unlock the
potentials and maximise the use of the available vast natural gas resources
to improve the nation's economy.

 

Edwin said there was the need to find ways to exploit and utilise Nigeria's
natural gas resources to impact positively on the nation's economy.

 

Edwin was on a panel at a session of BusinessDay Newspaper's Energy Series
2020 Virtual Conference with the theme: "Gas Market Development - the
Opportunities, Drivers and Challenges."

He emphasised the necessity for managers of the nation's oil and gas sector
to adding value to natural gas in order to transform Nigeria from exporter
of raw materials to exporter of finished products.

 

According to him, adding value to natural gas would strengthen the
petrochemical industry and thus making it possible for the country to change
from exporting raw materials to value-added products supplier. "In the same
vein, it will boost the economy and solve the "hydra - headed" problem of
unemployment in Nigeria with its multiplier employment effect", he stated.

 

The DIL helmsman noted: "The industry uses a varieties of hydrocarbon
feedstock from refinery and natural gas. One of the problems facing the
industry is lack of reliable feedstock supplies. Nigeria has the potential
to be a major petrochemicals producer. With proven gas reserves, not much
has been accomplished with respect to the effective exploitation and
utilization of this resource as most of the nation's natural gas production
has been liquefied for export.

 

"In sub-Saharan Africa, we produce raw materials and export to other
countries. Our products are refined or manufactured and exported back into
the continent. Really, the raw materials are taken out and value added and
brought back to the continent.

 

"Nigeria has done well in respect to the reduction of gas flaring to almost
10 per cent and exporting natural gas to generate revenue.

 

But, our focus at Dangote is how to add value to the natural gas. After all,
this Liquefied Natural Gas (LNG) that is being imported by various countries
is used as fixed stock. They use this natural gas to generate power, fuel
and as feedstock. The value-added products are thereby exported to
Nigeria.-This Day.

 

 

Kenya, India Ink Emergency Flights Deal

India has approved Kenya's request for special landing rights for emergency
aircraft during the Covid-19 pandemic season.

 

The arrangement announced on Wednesday means both countries have agreed to
allow each other's aircraft to land even when their respective airspaces are
closed.

 

India's Civil Aviation Minister Hardeep Singh Puri said on Wednesday that
the Asian country has signed similar bilateral arrangements with 15 other
countries to specifically allow flights in and out of their territories, in
a quid-pro-quo understanding.

 

"In order to further boost bilateral international air connectivity, Air
Bubble arrangements are now in place with Kenya and Bhutan. Indian carriers
will be able to operate to these countries. Carriers of these countries will
be able to fly to India," Mr Puri said on Twitter.

The countries include Kenya, Australia, Italy, Japan, New Zealand, Nigeria,
Bahrain, Israel, Philippines, Russia, Singapore, South Korea and Thailand.

 

This comes a month after Kenya's High Commissioner to India, Willy Bett,
revealed that he had proposed special unrestricted flights especially those
bringing in emergency cases.

 

With India on lockdown since March, the airspace has been closed and only
repatriation flights have been allowed in under special circumstances.

 

India is still under lockdown with local virus cases rising by an average of
70,000 a day.

 

The Kenyan diplomat had told the Nation that Kenya has been negotiating with
Indian authorities, especially those in charge of aviation regulation, for a
special passage.

 

"We have been negotiating so that Kenya Airways is allowed at least two
special flights to and from India every end month," said Mr Bett in an
earlier interview with the Nation, during which he argued the idea was to
keep the window for affordable health care open for Kenyans especially now
that the Kenyan system is getting stretched by Covid-19.

 

"I see a travel bubble arrangement as a long-term solution that will bring
consistency and enable those seeking medical care to plan as a schedule will
be in place."

 

Kenya Airways has already airlifted about 2,000 Kenyans stranded in India
under a special permission from New Delhi.

 

"I have waited so long for this moment," says Mr Peter Kimani , a Kenyan
engineer living and working in Maharashtra, Mumbai ."-Nation.

 

 

 

 

 


 


 


Invest Wisely!

Bulls n Bears 

 

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INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
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been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
report shall be solely responsible for making their own independent
investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


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