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Zambia - Four presidential candidates filed their nomination papers between 23 and 26 September 2008 for the
presidential by-elections scheduled for 30 October 2008. The main contenders are the ruling Movement for
Zambia Multiparty Democracy’s candidate, the current acting president, Rupiah Banda, the colourful Michael Sata of the
Patriotic Front and Hichelema Hakainde of the United Party for National Development (UPND). The prospects for
the UPND candidate, who performed surprisingly well in the 2006 general election, are expected to be diluted by the
fact that at the upcoming presidential by-election he will not be representing the three-party alliance, the United
Zimbabwe
Democratic Alliance, as he did in 2006. This time around, the UPND’s former alliance partners, the United National
Independence Party and the Forum for Democracy and Development, are backing the ruling MMD’s candidate, thus
boosting Banda’s prospects..
Botswana
Inflation continues to climb. Botswana’s inflation rate has The Bank of Botswana leaves policy rate unchanged.
tended to be high and averaged 8.6% from 2002 to 2007. This The Bank of Botswana’s Monetary Policy Committee (MPC)
year inflation has continued its upward trend, from a low of 6.3% kept the bank rate, the policy rate, unchanged at 15.5% at
y/y recorded in April 2007 to 15.1% y/y in August. Overall its meeting on 14 August. The MPC raised the bank rate by
inflation continues to breach the central bank’s upper limit of the 50 bps to 15.5% in June. The committee argued that
medium-term target of 3-6%. Food and non-alcoholic beverages interest rates are at a level that is sufficient to contain
have been the main drivers of the inflation rate, rising by over second-round effects, driven by administrative prices, and
18% y/y every month since January, rising to 18.8% y/y in dampen inflationary expectations, while avoiding the
August. Transport inflation rose by 37.3% y/y in July but eased retardation of economic growth. The real policy rate was at
to 35.5% y/y in August. Non-food inflation rose by a more a low of 0.5% in July. Monetary policy is more influenced by
subdued 14.7% y/y in July and August. Inflation is largely the BoB’s medium-term inflation forecast and less by credit
imported from South Africa. We expect inflation to average growth, as in the past. Rates are expected to remain at
12.5% this year. these levels.
Inflat ion r ate
18 18
17
15
16
12 15
14
9 13
6 12
11
3 10
0 2002 2003 2004 2005 2006 2007 2008
2002 2003 2004 2005 2006 2007 2008 Prime rate Bank rate 3m BoBC
Source: Bank of Botswana Source: Bank of Botswana
Rising inflation rate implies a weaker pula. Under Botswana’s Diamond production declining. IMF statistics show the
crawling band exchange rate system, introduced in 2005, the diamond sector contributes 30% of GDP, 75% of exports
pula trades in a narrow band of ±0.5% around central parity. The and 45% of government revenue on average. Botswana’s
band effectively rules out a large and unexpected adjustment in diamond production has reached a plateau and is expected
the exchange rate, which occurred in 2005. Botswana’s relatively to decline over the coming decade. Botswana needs to
high inflation rate implies that the pula should weaken diversify its output and export base. Indeed, diversification
proportionately in line with expected inflation differentials with its has been on the government’s agenda for some time, but
main trading partners. The crawling band arrangement and the process is proceeding slowly, despite some successes.
monetary policy are used jointly to achieve a competitive and In 2007 diamond exports amounted to USD3 359.2 million
stable real effective exchange rate, which promote exports and and USD3 412.9 million in 2006. Exports amounted to
diversification. The pula traded at an average of BWP6.82/USD USD793.8 million in Q2 08, compared to USD1 021.5 million
in September. We expect the pula to trade at an average of in Q1 08.
about BWP6.46/USD this year and BWP6.71/USD in 2009.
Page 2
Standard Bank
Standard Bank Group
Group Economics
Economics
0 Mining
Banking, Government
00 01 02 03 04 05 06 07 08f 09f 38.0% 16.5%
insurance
10.5%
Source: IMF Source: IMF
Foreign exchange reserves Trade balance – Pula million
US$ mn months
11,000 50 35,000
30,000
9,000 40 25,000
20,000
7,000 30
15,000
5,000 20 10,000
5,000
3,000 10 0
2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007p
Forex reserves Import cover Exports Imports Merchandise trade balance
Source: Bank of Botswana Source: Bank of Botswana
Government budget balance - % of GDP Diamond prices - US$ index, 1982 = 100
10 180
8
170
6
4 160
2 150
0 140
-2
130
-4
120
-6
2001 2002 2003 2004 2005 2006 2007 2008
02/03 03/04r 04/05r 05/06p 06/07b
Source: IMF Source: Bank of Botswana
Weights of consumer price index (CPI) constituents Botswana Stock Exchange indicators
Pula billion '000 month-end
40 12
31% 22%
30 9
19%
8% 20 6
11% 9%
10 3
0 0
Food Transport 2002 2003 2004 2005 2006 2007 2008
Alcohol & tobacco Housing
Clothing Other Market cap. (lh) Domestic index (rh)
Page 3
Standard
Standard Bank Bank Group Economics
Group Economics
Ghana
Inflation declines for two consecutive months. The Bank of Ghana keeps the policy rate at 17%. The
harvest season, which started in August, has provided some Monetary Policy Committee (MPC) hiked the policy rate
relief from food inflation and headline inflation declined to by 100 basis points to 17% in July in response to
18.1% y/y in August from 18.3% y/y in July and 18.4% y/y in accelerating inflation. The central bank policy rate (prime
June. Food, which represents around 45% of the CPI basket rate) was raised from 13.5% to 14.25% in March and
of goods, rose from 7.5% y/y in August 2007 to 17.7% in again in May by 175 basis points to 16%. Following the
June 2008. This was due to the restriction of local food MPC’s rate decision in July, average commercial bank
supply in the north of the country by drought in the first part lending rates were similarly revised upwards within a
of 2007, followed by flooding in September coupled with the range of 22% to 41%. (The commercial bank rates
upward trend in global food prices at a time of high transport continue to show high spreads between deposit and
costs. Over the same period, non-food inflation rose from lending rates and are also well above the Bank of
10.9% y/y to 18.9% y/y driven by changes in utility prices Ghana’s prime rate). Due to a declining inflation trend
and transport costs. The moderation in international crude oil we do not expect an interest rate hike but we do expect
prices and the improved domestic food supply on the back of monetary policy to remain tight in the presence of
the ongoing harvest season should continue to support a inflationary pressures stemming from pre-election
marginal declining trend. spending and high utility prices.
Inflation - % y/y Interest rates - %
26
35
22 30
25
18
20
14
15
10 10
5
6
2004 2005 2006 2007 2008
2004 2005 2006 2007 2008 Prime 91-day t-bill Lending
Page 4
Standard Bank
Standard Bank Group
Group Economics
Economics
Weights of consumer price index (CPI) constituents Ghana Stock Exchange index
12000
7%
10% 9% 6%
5% 10000
8000
52% 4%
4% 6000
3%
4000
Food & Bev. Clothing & Footwear
Utilities Furnishings
2000
Trans. & Comm. Enter.
Health Alcohol & Tobacco 2004 2005 2006 2007 2008
Misc.
Source: Bank of Ghana Source: Bloomberg
Page 5
Standard
Standard Bank Bank Group Economics
Group Economics
Kenya
Strong food price increase drives up September’s inflation to Short-term interest rates ease. Following the central
28.2% y/y. This year’s poor “long rains” season (on the heels of bank’s decision to hike the policy rate to 9% in June 2008,
insufficient rainfall in the end-2007 “short rains” season) has there was a parallel increase in the 91-day Treasury bill
exacerbated the deterioration in food security. Declining food yield to 8.03% in July. The tightening of policy was effective
stocks put upward pressure on prices, 2% m/m in September, and at moderating the liquidity situation, which has now
spurred an acceleration in food inflation to 37.2% y/y from 36.2% normalised. The central bank has insisted that the drivers of
y/y in August. The incline in non-food inflation was largely due to inflation are exogenous and due to liquidity to justify its
a significant increase in housing costs in September, 2% m/m. decision not to tighten policy despite high inflation. Greater
The fuel and power, and transport and communication sub- appetite for short-term debt over that with a longer maturity
indices reported softer price increases in September, 0.5% m/m partly explains the slide in short-term rates. Investors are
and 0.3% m/m respectively, from 3.6% m/m and 0.9% in August. uncertain about future prospects, given the global financial
Given the persistent food inflationary pressures, overall inflation is turmoil and recent political crisis in Kenya, are reluctant to
projected to only slip below 20% in the second quarter of 2009. put their money in long-dated debt instruments.
The Kenyan shilling slides. The shilling depreciated by a Liquidity pressures subside. As expected, broad money
significant 5.7% against the US dollar in September, compared (M3) growth decelerated in the third quarter of 2008 to
to the exchange rate in August, to a monthly average exchange 17.1% y/y in August, from this year’s peak of 28.5% y/y in
rate of KES71.65/USD. While the US dollar’s sharp gain of 3.7% April that reflected the surge in the growth rate of net foreign
against the euro contributed to the weakening of the exchange assets due to the capital inflows related to the Safaricom
rate, the decline in foreign exchange inflows stemming from IPO. The slowdown in M3 growth was partly due to the
agricultural exports, capital inflows and tourism revenue added payment of refunds related to investors that had
to the shilling’s woes. International reserves dropped to 3.2 oversubscribed to the IPO. M3 growth is expected to
months of imports at the end of September, from four months in stabilise at current levels. The deceleration of reserve
January, partly explaining the depreciation of the Kenya money growth to 16.7% y/y in May from 24.5% y/y in
currency. The shilling is now weaker against the US dollar than it January, reflects the decline in currency in circulation,
was during the political turmoil in the first quarter of 2008. particularly during the political crisis when economic activity
Depreciation pressures are expected to persist over the short was interrupted. However, from mid-2008 it is expected to
term. have picked up as the economy recovers.
60 6 0
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
KES/USD KES/EUR KES/ZAR (rhs) Broad money (M3) Reserve money
Sources: Bloomberg, Standard Bank Group est. Source: Central Bank of Kenya
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Standard Bank
Standard Bank Group
Group Economics
Economics
Source: Kenya National Bureau of Statistics, Standard Bank est. Source: Central Bank of Kenya
Government finance - % of GDP Tea, Mombasa, Kenya, Auction price – US cents per kilogram
1.0
350
0.5
0.0
-0.5 300
-1.0
-1.5 250
-2.0
-2.5 200
-3.0
-3.5
150
-4.0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Source: Central Bank of Kenya Source: IMF
Weights of consumer price index (CPI) constituents Nairobi Stock Exchange indicators
2% 2% 3%
Kshs billions
4% 6000 1400
6%
1200
5500
9% 1000
50%
5000 800
6% 12% 4500 600
6%
400
4000
200
Food and drink Housing
Recreation and education Household goods and services 3500 0
Clothing and footwear Transport and communication 2006 2007 2008
Fuel and power Medical goods and services Market Capitalisation (rhs)
Personal goods and services Alcohol and tobacco NSE 20 Share Index (1966=100)
Source: Central Bank of Kenya Source: Central Bank of Kenya
Page 7
Standard
Standard Bank Bank Group Economics
Group Economics
Lesotho
Overall inflation driven by food and energy prices. Inflation is Interest rates are linked to South African trends. Lesotho
largely imported from South Africa as almost 85% of Lesotho’s is a member of the Common Monetary Area (CMA) with
goods and services are sourced from there. High international South Africa, Namibia and Swaziland. Membership implies
and regional food prices and high crude oil prices have impacted that the county has limited control over monetary policy,
negatively on the inflation rate. Drought conditions also add to which is imported from South Africa. The Central Bank of
food price pressures as the subsistence economy is adversly Lesotho monetary policy targets net international reserves of
affected. In August overall inflation reached 11.2% y/y, one of US$500 million to support the 1:1 currency peg with the
the highest rates in years, from 10.5% y/y in the previous month. rand. The Lombard rate, the policy rate, is set at 400 basis
Food inflation was 15.2% y/y in August and 14.9% y/y in July, points above the 91-day Treasury bill rate. Interest rates in
somewhat lower than the high of 18.7% y/y recorded in South Africa have risen on the back of higher inflation, but
February. The food group has a weight of nearly 40% in the CPI. the prices could start easing in 2009, leaving room for the
Transport prices also rose steeply; by 14% y/y in August and central bank to start cutting rates, reducing the prime rate
12.4% y/y in July. from 15.5% to 13.5% in December next year.
0 5.0
2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
The currency depreciates. The loti is pegged at par to the South Basotho mineworkers in South Africa. Basotho mine-
Africa rand under the CMA agreement. Economic conditions in workers employed on South African mines, particularly gold
Lesotho have no effect on the exchange rate. Export mines, provide valuable income for Lesotho households.
competitiveness is, however, linked to the value of the currency. Even though the number of miners employed has fallen
The weaker long-term trend against the US dollar is welcome dramatically, the value of the remittances has continued to
relief for exporters, but imported food and fuel will become dearer rise. In 2000 the number of Basotho miners employed in
as a result, driving overall inflation higher. The exchange rate South Africa was 64 907, but fell to 51 595 in 2006. Over the
averaged LSL7.70/USD in August compared to LSL7.34/USD in same period the value of the remittances rose from M1 400
July. Standard Bank expects that the exchange rate will average million to M1 983 million, as the average annual wage rose
LSL7.78/USD in 2008; LSL7.97/USD in 2009 and LSL8.10/USD from M30 131 to M53 670. The higher gold prices should
in 2010. Turmoil in the banking and financial markets, falling help boost demand for mine labour.
commodity prices and a slowing world economy will ensure that
the exchange rate remains volatile.
Page 8
Standard Bank
Standard Bank Group
Group Economics
Economics
Government budget balance - % of GDP, including grants Manufacturing index – Index 2000=100
20 160
140
15
120
10
100
5
80
0
60
-5
40
-10 2002 2003 2004 2005 2006 2007 2008
02/03 03/04 04/05 05/06 06/07 07/08p Textile and clothing Total manufacturing
Source: IMF Source: Bureau of Statistics
Weights of consumer price index (CPI) constituents Capital account – US$ million
Other 400
Transport Alcoholic 13.3%
7.8% beverages & 200
tobacco
Clothing & 6.4% 0
footwear
15.6%
-200
-400
-600
Furnishings, -800
h/h equip, Food & non-
maint. alc. bev. 01 02 03 04 05 06e
17.0% 39.8% Trade balance
Current account (incl transfers)
Capital & financial account
Source: Central Bank of Lesotho Source: IMF
Page 9
Standard
Standard Bank Bank Group Economics
Group Economics
Malawi
Inflation accelerated to 9.1% y/y in August. Inflation Monetary Policy Committee keeps the policy rate
followed global trends, accelerating from 8.7% y/y in July, flat. In view of the current inflationary pressures
mainly due to fuel and maize price increases. In spite of high stemming from high international oil prices as well as
oil prices, inflation recorded the lowest rates in decades in accelerating money supply growth, the Monetary Policy
2007 and averaged just below 8%. However, oil prices that Committee maintained its monetary stance at its
kept reaching new highs as well as a marginal seasonal meeting, and kept the bank rate at 15% and the liquidity
increase in food inflation towards the end of last year saw reserve requirement at 15.5%. Despite the government’s
overall inflation starting to increase moderately from a intention to encourage private-sector-led development of
historical low of 7.1% y/y in September 2007 to 8.2% y/y in the economy, we expect monetary policy to remain tight
March 2008. Although inflation eased in April and May due in order to contain inflation expectations. However,
to the seasonal decline in food costs, the upward trend should inflation drop to the estimated levels of below 7%
continued in June. High oil prices and increased government presented in the 2008/09 budget, we expect interest
spending ahead of the 2009 election as well as money rates will be brought down to around 12%, as projected
supply growth pose further upside risks to overall inflation. in the 2008/09 budget.
8 25
4 15
0
2004 2005 2006 2007 2008 5
Overall Inflation Non-food inflation 2004 2005 2006 2007 2008
Food inflation Prime-avg Bank rate 91-day t-bill
Source: National Statistics Office Source: Reserve Bank of Malawi
Kwacha stability ensured through RBM intervention. The Tobacco auction floors more than doubled sales.
authorities attach importance to exchange rate stability as an The tobacco auction floors had processed about 143
intermediate measure in maintaining macroeconomic million kilograms valued at US$348 million as at the end
stability. The kwacha remained relatively stable against the of July 2008. In value terms, the quantity is almost
US dollar in the first three quarters of 2008 and averaged double that posted for the whole season last year
MWK140.35/USD, MWK140.63/US$ and MWK140.69 (US$185 million). As at 22 August, 168.7 kilograms of
respectively. In September the kwacha was slightly weaker the green gold had been sold, earning US$412.3 million
at MWK140.82. The economy is into the seasonal lean – an average price of 244 US cents per kilogram. Out of
period following the end of the tobacco auctions. The the total sold, burley contributed 145.9 million kilograms
pressure on foreign reserves from fertilisers and oil imports (86.5%) whereas flue-cured contributed 20.9 million
will remain a concern for some time, although the kwacha is kilograms (12.3%). All foreign currency payments for
expected to receive some support from donor funds and the tobacco sold in Malawi are now made through the
authorities. The RBM is expected to continue intervening in central bank and not commercial banks as in the past.
the foreign exchange market and we therefore expect the The onset of uranium exports next year will be an
kwacha to trade within a narrow band of MWK140/US$ and additional source of support for the local currency.
MWK142/US$.
220 22
300
180 20
250
140 18
100 16 200
60 14
150
2004 2005 2006 2007 2008
2004 2005 2006 2007
USD EUR ZAR (rhs)
Source: Bloomberg Source: Tobacco Control Commission
Page 10
Standard Bank
Standard Bank Group
Group Economics
Economics
150 2.5 0
-500
100 2.0
-1000
50 1.5 2001 2002 2003 2004 2005 2006 2007 2008
2004 2005 2006 2007 2008
Foreign reserves Import cover Imports Exports Trade Balance
Weights of consumer price index (CPI) constituents Malawi Stock Exchange index
5% 4% 6000
6%
6%
5000
9%
4000
58%
12%
3000
2000
1000
Food Housing
Clothing & footwear Misc. 0
Beverage & tobacco Transport 2006 2007 2008
Household operation
Source: Central Statistics Office Source: MSE
Page 11
Standard
Standard Bank Bank Group Economics
Group Economics
Mauritius
Continued pressure on inflation from high food and oil Further interest rate cuts ruled out. Against the
prices. Headline inflation has been on a declining trend backdrop of a reduction in policy interest rates by the US
since July last year but remained relatively high at around Federal Reserve and the Bank of England as well as
9%, largely as a result of the pass-through effects of high potential downside risk to economic growth stemming
food and energy prices. The appreciation of the rupee in the from decelerating growth in major trading partners, the
first four months of this year dampened the impact of BoM cut the repo rate by 25 basis point to 9% in
mounting import prices, and inflation came marginally down February, lowered it further to 8.5% in March and in May
to 8.8% y/y in May. After remaining level during June, again by 50 basis points to 8%. In view of growing
inflation accelerated to 9.1% y/y in July and to 9.5% y/y in demand-side pressures on inflation and no slowdown in
August. Once again the main pressure came from food and food and fuel prices, the BoM increased the repo rate on
fuel. With oil prices showing a softening bias and food prices 21 July to 8.25%. It is likely that the MPC will commit to
expected to plateau, external pressures are easing, although another interest rate rise, especially if inflation presses
domestic pressures such as strong demand are expected to closer to double digits. However, there are some positive
remain. Our expectation is that overall inflation will slightly signs, particularly with regard to commodity prices such
exceed the 8.6% average projected in the 2008/09 budget. as food and oil which are thought to have peaked.
12 12
10
10
8
8
6
6 4
4 2
2004 2005 2006 2007 2008
2
2004 2005 2006 2007 2008 Prime rate Bank rate
Lombard Rate Repo Rate
Source: Central Statistics Office Source: Bank of Mauritius
Rupee depreciated further in September to Tourist arrivals increased by 5.5% in the first half of
MUR28.67/USD. Supported by FDI inflows, record tourism 2008. Tourist arrivals increased to 455 758 compared to
earnings and the depreciation of the US dollar on currency 432 113 for the same period in 2007. Gross tourism
markets, the rupee appreciated by 9% in the first quarter of receipts for the first six months amounted to Rs22 170
this year to a four-year high of MUR25.5/US$. In April this million, an increase of 12.2% compared to Rs19 752
trend was reversed when the rupee averaged MUR26/US$, million for the same period in 2007. According to the
MUR26.5/US$ in May and MUR27.2/US$ in June. This was BoM, tourism receipts for this year will be around 13%
mainly on account of continued deterioration of the current higher than last year. Tourist arrivals for the year are
account as import prices, particularly food and fuel, pushed estimated to be between 965 000 and 975 000 against
up the import balance. The extent and duration of the global 903971 last year. Given the construction timeframe of
downturn will play a large part in export demand as Mauritius current hotel projects, the sector should receive a
is closely linked to international financial markets and the substantial increase in capacity through 2008 and 2009.
majority of its export demand (more than 50%) comes from The sector continues to play a large role in terms of
Europe and the US. The current account will therefore attracting FDI and is one of the main drivers of the
remain under pressure. FDI and tourism receipts should lend country’s economic recovery.
some support to the rupee.
40 5.0 50000
35 4.5 40000
30 4.0 30000
25 3.5 20000
20 3.0 10000
2004 2005 2006 2007 2008
MUR/USD MUR/Euro MUR/ZAR (rhs)
0
2001 2002 2003 2004 2005 2006 2007 2008
Page 12
Standard Bank
Standard Bank Group
Group Economics
Economics
10
-6 200
-7 0
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 2000 2001 2002 2003 2004 2005 2006 2007 2008
Weights of consumer price index (CPI) constituents Stock Exchange of Mauritius index
8% 9% 10% 2200
4%
16% 2000
9%
1800
13%
22% 4% 1600
5%
1400
1200
Clothing, footwear Housing, water, electricity 1000
Health Transport 800
Communication Furnishings, household 600
Recreation, culture Education 2005 2006 2007 2008
Restaurants, hotels Miscellaneous goods, services
Source: Central Statistical Office Source: Bloomberg
Page 13
Standard
Standard Bank Bank Group Economics
Group Economics
Mozambique
Marginal increase in overall inflation to 10.7% y/y in The interest rate on the 91-day Treasury bill edged up in
September. As projected, non-food inflation accelerated to 4% the third quarter. The climb of the interest rate on the
y/y in September as the low base effect kicked in. Other than short-term government security to 13.89% in August, after
food, the annualised inflation rates for the transport and being flat at 13.5% in the first half of 2008, reflects the
households’ goods sub-indices accelerated in September. tightening of monetary policy in response to the spurt in
Although food prices moderated by 0.1% m/m in September, its demand for money in the third quarter of 2007. The base
annualised inflation rate increased to 16.1% y/y, from 15.7% y/y money stock exceeded the September programme target
in August. The modest decrease in the food price in September is ceiling in July, on account of strong demand for currency
in our view temporal, especially as the lean season is from buyers acquiring newly harvested cash crops.
approaching implying that food stocks will decline, putting upward However, the spurt in base money was temporal and in
pressure on prices. However, a high base effect in the last quarter August had fallen to below the end-quarter target. The
of 2008 is expected to moderate the impact of higher food prices. approaching festive season is likely to prompt monetary
Single-digit inflation is thus projected to return in the first quarter expansion, as such monetary policy is expected to remain
of 2009, when the worst of the lean period, and the festive firm in the short term and thus the policy rate is expected
season has passed. stabilise over this period.
Inflation - % y/y Interest rates - %
25 30
20 25
15 20
10 15
5
10
0
5
2004 2005 2006 2007 2008
2004 2005 2006 2007 2008
Overall Food Non-food
Prime Standing lending facility 91 day t-bill
Source: Source: Instituto de Nacional Estatistica Source: Banco de Mocambique
The metical holds steady against hard currencies. The Base money fell below target ceiling in August, after
modest 0.7% depreciation of the Mozambican currency against overshooting in July. Strong demand for currency in July
the US dollar in September, to MZN24.05/USD, was largely due explains base money’s breach of the end of September
to a stronger US dollar. Conversely, the metical strengthened ceiling target of MZN17 347 million. It expanded by 15.6%
against the rand, the currency of Mozambique’s largest trading y/y in July and amounted to MZN17 479 million. This growth
partner, South Africa, and the euro. The sound build up of spurt was due to the purchase newly harvested cash crops,
international reserves to beyond six months of import cover has including cotton. In August, base money declined by 0.8%
provided resources for the Bank of Mozambique to lean towards m/m to MZN17 332 million, thus allowing for the monetary
foreign exchange sales to drain liquidity and place less emphasis aggregate to fall below the target ceiling. The long weekend
on Treasury bill issuances. The subsequent injection of foreign in early September may have spurred higher currency
exchange into the domestic market partly explains the strength of demand that may have countered the moderation of base
the metical in recent months. Added to that are the large donor money in August, implying a fair likelihood of a September
and foreign direct investment inflows. The metical is projected to breach. The approaching festive season implies a fair
hold steady at present levels over the short term. likelihood of monetary expansion in the short term.
40 4.6 35
30
36 4.3
25
32 4.0
20
28 3.7
15
24 3.4
10
20 3.1
5
16 2.8
2004 2005 2006 2007 2008
2004 2005 2006 2007 2008
MZN/USD MZN/EUR MZN/ZAR (rhs) M2 Base money
Page 14
Standard Bank
Standard Bank Group
Group Economics
Economics
-3 2700
-4
2300
-5
-6 1900
-7 1500
2003 2004 2005 2006 2007 2008p 2004 2005 2006 2007 2008
Source: IMF CR. No 08/220
Source: IMF
Weights of consumer price index (CPI) constituents Capital account – US$ million
13% 5% 1500
10% 1000
5% 500
52%
0
1% 3% -500
3%
2% -1000
2% 2% 2% -1500
Food & non-alcoholic drinks Dwellings,water,elec., gas & fuels -2000
Transport Mobile dwellings, hhold equip. & main.
-2500
Clothes & footwear Health
Leisure, recreation & culture Communications 2006 2007 2008p 2009p 2010p
Alcohol & tobacco Restaurants & hotels
Miscellaneous Education
Foreign borrowing Amortisation Direct investment
Page 15
Standard
Standard Bank Bank Group Economics
Group Economics
Namibia
Inflation may have peaked. As 85% of Namibia’s goods and Monetary Policy Committee keeps policy rate flat.
services are sourced from South Africa, inflation is largely Namibia’s policy stance is closely linked to that of the South
imported. This year inflation rose from 7.8% y/y in January to African Reserve Bank’s (SARB) through membership of the
12% y/y in August. Inflation is mainly driven by the escalation in Common Monetary Area (CMA). Namibia’s monetary policy
food and energy prices. The food group has the largest weight in focuses on maintaining the Namibian dollar’s peg to the
the overall consumer price index at 29.6%. Food inflation rose South African rand at par by holding adequate foreign
from 15% y/y in January to 18.8% y/y in July, but eased to 18.3% exchange reserves. Namibia’s interest rates have remained
y/y in August. Food prices may have peaked which suggests unchanged this year, whereas the SARB hiked rates in April
overall inflation could ease. However, transport inflation (weight and June. Namibia’s policy or bank rate is 10.5% and the
14.8%) remained high at 18.1% y/y in July and August. South prime rate is 15.25%. The Central Bank of Namibia (BoN) no
Africa’s producer price inflation is an important leading indicator longer meets on the same day as the SARB. Interest rates
of Namibia’s inflation rate and rose by 19.1% y/y in August. have started to diverge from South Africa’s, signalling some
Although high it is expected to ease in coming months. degree of policy independence.
20 20
16 16
12
12
8
4 8
0
4
-4
2002 2003 2004 2005 2006 2007 2008
2004 2005 2006 2007 2008
CPI Food Prime rate Bank rate 91-day TB
The Namibian dollar is under pressure to depreciate. The Diamond mining’s contribution to GDP declining. The
Namibian dollar (NAD) is pegged to the South African rand important diamond mining contributed 5.9% of GDP in 2007,
(ZAR) at 1:1. Several factors are affecting the exchange rate, below the high of over 10.4% in 2002. The sector
such as South Africa’s large trade and current account deficits, contributed an average of 8.3% to GDP from 2000 to 2007.
emerging markets jitters and global uncertainty from the sub- Diamond mining output amounted to N$3.11 billion in 2007,
prime debacle, and are exposing the rand to further weakness. marginally below N$4.05 billion in 2006. The sector’s growth
The weaker exchange rate could help boost the export sector, is erratic: between 2002 and 2007 it grew by 17.3%, -3.5%,
but equally could underpin imported inflation. Greater exchange 38.6%, -3.4%, 25.2% and -0.3% respectively in real terms.
rate uncertainty and volatility can be expected. The projected The mining and quarrying sector as a whole also exhibited
exchange rates for the rand/Namibian dollar exchange rate to the volatility. Diamond prices, as measured by the Antwerp
US dollar are: NAD8.05/USD in Q4 2008; NAD8.17/USD in Q1 Diamond Index, surged to 171.7 in June this year (the latest
2009 and NAD8.12 in Q2 2009. The 12-month trading range is available) from 140.9 a year earlier, after being relatively
NAD7.30 to NAD8.50 to the US dollar. stable in 2006 (see Botswana Picture Gallery).
8 2.0 6%
7 1.0 4%
6
0.0 2%
5
00 01 02 03 04 05 06 07
00 01 02 03 04 05 06 07 08
Diamond mining (lh) % of GDP (rh)
Source: Bloomberg Source: Bank of Namibia
Page 16
Standard Bank
Standard Bank Group
Group Economics
Economics
Weights of consumer price index (CPI) constituents Namibia Stock Exchange index
20% 1,100
30%
1,000
7% 900
7% 800
21%
700
15%
600
500
400
Food & non-alc. bev. Housing, water, electricity 300
Transport Education 200
Misc. goods & services Other 2002 2003 2004 2005 2006 2007 2008
Page 17
Standard
Standard Bank Bank Group Economics
Group Economics
Nigeria
Risk to inflation remains high. Headline inflation declined from Monetary policy rate (MPR) reduced by 50 basis points.
14% y/y in July to 12.4% y/y in August 2008 driven by a decline As core inflation remains in single digits, the central bank
in food prices. Food prices (which account for about 64% of the continues to divert its focus to liquidity management to avert
CPI basket) declined from an average of 20.9% y/y to an the long-term inflationary pressures from fiscal expansion
average of 18.8% over the same period. Despite headline and high inflows of oil revenue rather than fight the short-
inflation remaining in double digits, core inflation (headline term inflationary impact of rising food prices. Following an
inflation, excluding food) declined from an average of 4.8% y/y in emergency monetary policy committee meeting on 18
July to an average of 3.9% y/y in August 2008. We expect the September, the MPR was reduced from 10.25% to 9.75% in
improvement in agricultural production to ease food supply an attempt to address liquidity shortages in the system.
problems thereby reducing food prices through 2008. Significant However, excess liquidity from fiscal expansion and rapid
growth in broad money, M2, mostly fuelled by rising private private sector credit extension, which is driving high money
sector credit growth continues to pose an upward risk to supply growth, continues to pose major interest rate risks.
inflation. We have revised our inflation forecast upwards to Overall, we expect monetary policy to remain restrictive
average 10.7% in 2008. through 2008.
30 16
20
12
9.75
10
8
0
-10 4
-20 0
2005 2006 2007 2008 2005 2006 2007 2008
CPI inflation CPI ex food
CPI ex food & energy Transport Policy rate Prime 91-day TB
Source: National Bureau of Statistics Source: Central Bank of Nigeria
Naira exchange rate remains relatively strong. The central Non-oil sector continue to drive economic growth. First
bank continues to uphold its strong stance of a strong and stable quarter GDP growth was revised downwards from 6.5% to
exchange rate. The exchange rate continues to trade within a 5.5%. The economy grew by 6.7% in the second quarter of
narrow range fluctuating around NGN117 per US dollar. A strong 2008 mainly driven by 8.5% growth in the non-oil sector.
naira should also help curb the high import bill, especially from Non-oil sector growth was driven by strong agriculture
food and energy. Due to high oil revenues and fiscal expansion, performance following favourable weather conditions and
we expect the monetary authority to remain active in the forex high prices of agriculture products that increased by between
market. This should help reduce the surge in money supply and 16% and 40% for the nine monitored agriculture
be an effective way of managing excess liquidity that is posing commodities. The unrest in the Niger Delta area continues to
significant long-term risks to inflation. We expect the naira to constrain oil production thereby leading to slowdown in the
remain relatively strong and to average NGN116.50 per US dollar oil sector growth. The manufacturing sector contracted by
in the fourth quarter of 2008. 2.2% in the second quarter due to poor electricity supply.
Overall, we expect GDP growth to remain strong in 2008 due
to strong performance in the non-oil sector.
Source: Bloomberg & Federal Ministry of Finance Source: National Bureau of Statistics
Page 18
Standard Bank
Standard Bank Group
Group Economics
Economics
12 Manufacturin
10.3 10.6 Wholesale & g, 4.0 Telecommun
10 9.4 retail trade, ication, 2.3 Agriculture,
8.6
16.2 42.2
8
6.2 6.4
6 5.4
2 Finance &
insurance, Building &
0 3.9 Oil & gas,
construction,
2003 2004 2005 2006 2007 2008f 2009f 1.7 19.4
70000 100
80
60000
60
50000 40
40000 20
30000 0
-20
20000 -40
10000 -60
0 2004 2005 2006 2007 2008f
2003 2004 2005 2006 2007 2008
Exports Imports Trade surplus
Source: Bloomberg Source: IIMF
Weights of consumer price index (CPI) constituents Nigerian stock exchange – All share index
70000
18%
4%
60000
4%
64% 50000
3%
2%
40000
5%
30000
Food & non-alcoholic bev. Hse water, elec, gas & other fuel 20000
Transport Furn & hshld equip maint
Clothing & footwear Alcohol, tobacco & kola
10000
Other 2003 2004 2005 2006 2007 2008
Page 19
Standard
Standard Bank Bank Group Economics
Group Economics
Swaziland
High food and transport prices driving inflation. Inflation is Interest rates linked to South Africa’s. Swaziland’s
largely imported from South Africa through close trade links. monetary policy focuses mainly on maintaining its 1:1
Almost 90% of Swaziland’s imports are sourced from South currency peg to the rand by holding adequate foreign
Africa. Swaziland’s inflation averaged 14.7% y/y in August, exchange reserves. The Common Monetary Area rules limit
above 13.3% y/y in July. Although food inflation data is not Swaziland’s policy independence and policy is effectively
readily available, it can be assumed that food prices follow imported from South Africa. The Central Bank of Swaziland
South African trends. Swaziland has rebased its CPI in April did not raise its discount rate in June when the SARB raised
2007; the food group’s weight rose from 25.3% to 37.7% and the the repo rate to 12%, keeping the discount rate at 11.5%. In
transport group’s from 7.9% to 8.6% in the index. The greater the 2008 MPC statement, the committee argued that a less
weights of these two important groups, which both experienced restrictive policy may be followed to avoid stifling economic
price surges, are more reason why inflation is at these high growth and encourage the agricultural sector, helping to
levels. South Africa’s inflation rate is expected to peak in the offset imported food price pressures. Also, higher local
next few months, which should bring some relief. interest rates do not affect prices determined internationally.
16 18
14 16
12 14
10 12
8 10
6 8
4 6
2 4
0 2002 2003 2004 2005 2006 2007 2008
2002 2003 2004 2005 2006 2007 2008 Prime rate Discount rate TB rate
Source: Central Bank of Swaziland Source: Central Bank of Swaziland
Depreciation in the offing. The lilangeni is pegged at par to the Sugar production. Sugar is the backbone of the economy,
South African rand under the CMA agreement. The rand is legal but recent changes in the global trade regime has meant
tender in Swaziland, but not vice versa. Economic conditions in that the industry will suffer. European Union sugar prices
Swaziland do not affect the exchange rate of the ZAR, only continue to fall. Sugar production is also vulnerable to
South African and global economic conditions. The SZL/ZAR is weather conditions, particularly water for irrigation. Sugar
expected to trade at an average of SZL8.05/USD in the fourth production has been relatively stable between 2004/05
quarter of 2008 and SZL7.78/USD for the whole of 2008; (597 563 MT) and 2007/08 (631 236 MT), despite being
SZL8.17/USD in the first quarter and SZL8.12/USD in the lower than in 2005/06 (652 735 MT). About half the
second quarter of 2009; and SZL7.97/USD for 2009. The 12- production is sold domestically. The value of exports,
month trading range is SZL7.30-8.5/USD. However, South however, has risen from E758.4 million to E1 126.0 million
Africa’s large trade and current account deficits, emerging over the same period. Export earnings were boosted by the
markets jitters and global uncertainty from the sub-prime weaker exchange rate, but a lower international sugar price
debacle expose the rand to further weakness. dampened earnings (see the picture gallery below).
Page 20
Standard Bank
Standard Bank Group
Group Economics
Economics
0
Agriculture Other
00 01 02 03 04 05 06 07 08f 09f 12.1% 2.5%
Source: IMF Source: IMF
Foreign exchange reserves Trade balance – US$ million
US$ mn Months 2,500
1000 6
900 2,000
5
800 1,500
700 4
600 1,000
3
500
400 2 500
300 0
1
200
100 0 -500
2004 2005 2006 2007 2008 2002 2003 2004 2005 2006e 2007p
Government budget balance - % of GDP, including grants Sugar prices – international - Sugar No. 11 contract – US$/lb
12 20
10
8 16
6
12
4
2 8
0
-2 4
-4
0
-6
95 96 97 98 99 00 01 02 03 04 05 06 07 08
03/04 04/05 05/06 06/07 07/08p 08/09p
Weights of consumer price index (CPI) constituents Capital account – US$ million
400
Education
Transport Health
5.38%
8.60% 3.58% Other 200
12.34%
0
Furniture
11.88%
-200
Page 21
Standard
Standard Bank Bank Group Economics
Group Economics
Tanzania
Second round effects of high oil prices. Headline inflation Upside risk to interest rates. The declining interest rates
increased from 9.5% y/y in July to 9.8% y/y in August mostly environment experienced since November 2007 seems to be
driven by high energy and transport costs. The food component fading. Having declined from a high of 15.14% in October
(which constitutes about 55.9% of the consumer price index – 2007 to 4.95% in May 2008, the 91-day Treasury bill (T-bill)
CPI- basket) declined marginally from 11.2% y/y in July to 11.1% rate increased to 8.62% in August 2008. As developments in
y/y in August as the country enters the harvest period. Energy T-bill yields continue to provide an anchor for market-
prices (which constitute about 8.5% of the CPI basket) increased determined interest rates, the yields for all maturities have
from 12% y/y in July to 12.7% y/y in August as the country started increasing as well. The overall weighted average T-
continues to import its full quota of oil. Second-round effects of bill rate also increased from a low of 7% in May to 9.47% in
high energy prices are now evident as transport costs increased August 2008. The high inflation environment should lead to
from 5.5% y/y in July to 9.9% y/y in August. Thus we expect an increase in nominal lending rates through 2008, which
softer oil prices and increased food supply to bring some relief should help to maintain stable real interest rates. Overall, the
through 2008. We have revised our inflation forecast downwards risks to interest rates are on the upside. We forecast the
to average 9.5% in 2008. end-year T-bill rate to reach 11.4%.
Inflation - % y/y Interest rates - %
15 25
12 20
15
9
10
6
5
3 0
The shilling exchange rate to strengthen through 2008. As Tourism leading the export sector improvements.
the country enters the agriculture harvest period, we expect the Tanzania’s economy depends heavily on the agriculture,
currency to strengthen throughout the remainder of the year. commodity and tourism sectors. Trade, hotels and
Export performance continues to determine fluctuations in the restaurants (accounting for about 25% of the country’s forex
exchange rate as the economy is heavily dependent on the earnings) should continue to grow as tourism remains
agriculture and commodity sectors. Increased demand for tourism strong. The low-cost high volume tourism strategy continues
services and continued inflow of donor aid should also support a to attract more visitors into the country, thereby generating
strong currency. As the boom in the world commodity market more revenue. Travel receipts, of which tourism is 80%,
continues, this should further improve mining exports thereby dominates the export sector followed by gold receipts.
strengthening the currency. The shilling appreciated from an Infrastructural bottlenecks will have to be addressed if the
average of TZS1 160.33 per US dollar in tourism sector is to reach its full potential. Following the
August to an average of TZS1 159.16 per US dollar in September aggressive marketing drive by the tourism authorities, we
2008. expect a continued increase in tourism services in the
medium term.
1100 40 200
1050 0 0
Page 22
Standard Bank
Standard Bank Group
Group Economics
Economics
Government deficit – % of GDP Services receipts – year ending May - US$ million
0 1200
-1 1000
-2
800
-3
600
-4
-5 400
-6 200
-7 0
2000 2001 2002 2003 2004 2005 2006 2007 2008f Transportation Travel (Tourism) Other Services
Weights in consumer price index (CPI) constituents Capital account - US$ million
6.9% 6.4%
1.4% 6000
2.1%
4000
9.7%
2.6% 2.1% 3000
0.8%
2000
1.5%
Food Drinks and Tobacco 1000
Clothing and Footwear Rents
Fuel, Power and Water Furniture & Household Equipment
0
Household Operations&Maintenance Personal Care & Health
Recreation & Entertainment Transportation 2000 2001 2002 2003 2004 2005 2006 2007e
Education Miscellaneous Goods and Services
Page 23
Standard
Standard Bank Bank Group Economics
Group Economics
Uganda
Overall inflation subdued by slowing food inflation. Overall Central bank governor signals lower interest rates. The
inflation slowed to 15.2% y/y in September from 15.8% y/y in Bank of Uganda’s outlook for inflation is positive and the
August on the back of a deceleration in food inflation to 30.7% y/y governor suggested in September that there were grounds
from 33.6% y/y. Nevertheless, food prices are expected to remain to cut interest rates, especially as the inflationary pressures
high because despite favourable domestic production, demand are exogenous. Following the suspension of Treasury bill
from neighbouring countries, including Kenya, is projected to auctions in July, which prompted a spike in the 91-day
deplete food stocks and thus maintain upward pressure on food Treasury bill yield of 9.1%, the yield eased to 8.6% at the
prices in the short term. The softening of the international oil price end of September. The rediscount rate was higher in the
is expected to reduce the inflationary pressures stemming from third quarter of 2008 than it was in the first half of the year,
the transport and fuel sub-indices. Nevertheless, overall inflation implying a tightening of monetary policy as liquidity
is projected to remain stubbornly high for longer and persist until increased. This reflects the upward pressure of sterilisation
the second quarter of 2009. on interest rates, mainly through debt issuances.
The shilling stabilises. The 1.4% depreciation of the Ugandan Large foreign exchange inflows raise liquidity. Strong
currency against the US dollar in September, compared to foreign exchange inflows due to growing capital inflows and
August, to UGX1 646.27/USD, in relation to its appreciation buoyant export revenue have proven a challenge for the
against the rand and the euro reflects the effect of a stronger US authorities to sterilise, hence the breaching of the indicative
dollar. The Ugandan shilling has benefited from large inflows of target on base money at the end of 2007 and end of March
foreign exchange due to sound export earnings, capital inflows 2008. The acceleration of money supply growth over the
and aid. The Bank of Uganda’s preference for foreign exchange past two years from the teens to the 20-30% range on an
sales for open market operations, made possible by the prudent annual basis is testimony to these increasing inflows. To
accumulation of international reserves to about six months of accommodate the permanent effect on the level of food and
import cover, has also boosted the value of the shilling. The fuel prices, the base money target for June 2008 was
moderation of the oil price is likely to ease pressure on the upwardly adjusted. To subdue second-round effects, the
current account, which is shilling friendly. The risk to the shilling authorities have based their target for June 2009 on a
is investors’ increasing risk aversion to emerging market assets. conservative core inflation projection of 5%.
Page 24
Standard Bank
Standard Bank Group
Group Economics
Economics
0 4.5 0 -540
2004 2005 2006 2007 2008 2005 2006 2007 2008
Forex reserves Import cover (rhs) Exports Imports Trade balance (rhs)
-1 120
80
-2
40
-3
0
2004 2005 2006 2007 2008
-4
2005/06 2006/07 2007/08 2008/09p Robusta price (rhs) Arabica price (rhs)
Weights of consumer price index (CPI) constituents Capital and financial account – US$ million
4000
16.8%
14.7% 3000
27.2%
2000
12.8%
1000
14.8% 0
4.5%
-1000
Food 4.7%
Beverages and tobacco -2000
Clothing and footwear 4.4% -3000
Rent, fuel and utilities Capital FDI and Other Short-term
Household and personal goods account portfolio investment investment
Transport and communication (MDRI) investment
Education 2005/06 2006/07 2007/08 2008/09p
Source: Uganda Bureau of Statistics Source: IMF CR No. 08/236
Page 25
Standard
Standard Bank Bank Group Economics
Group Economics
Zambia
Inflation accelerates to 14.2% y/y in September. The persistent Interest rates edge up. Uncertainty surrounding Zambia’s
incline of inflation from 13.2% y/y in August was due to food, fuel imminent presidential elections, the global financial turmoil
and transport prices. Food inflation remained steady at 16.2% y/y and high inflation contributed to the increase in short-term
in September. However, the rent, fuel and lighting sub-index’s interest rates in September. In recent years, yields on
inflation accelerated to 17.7% y/y from 14.5% y/y, while the Treasury instruments have been largely influenced by
transport and communication sub-index’s inflation surged to portfolio capital inflows. Over the past year, portfolio
11.5% y/y from 5.3% y/y. The price of fuel is very high and feeds investors have sought longer dated instruments, thus easing
into transport costs and final goods and services. To ease the the downward pressure on yields. However, in the second
pressure of high fuel prices on production and inflation, the half of 2008 these flows slowed, hence the increase in the
authorities cut import tariffs on diesel and petrol to 7% and 36% yield on the 91-day Treasury bill to 12.5% in September
from 15% and 45% respectively. This is projected to ease fuel from 10.9% in March. Even the sticky lending rate edged up
prices and transport costs; however, the approaching lean to 25.6% in September. Interest rates are expected to
season will keep food prices elevated in the short term. moderate over the short term as uncertainty recedes.
Kwacha weakened by pre-election jitters and a softer copper M3 growth slows on the back of softening growth of
price. The Zambian currency depreciated against three hard foreign currency deposits. The slowdown in the growth
currencies, namely the US dollar, euro and rand, in September. rate of broad money (M3) to 29.2% y/y in July from 34.6%
The kwacha’s loss in value is due to a slowdown in portfolio y/y in January is reflective of a significant deceleration in the
capital inflows on account of uncertainty surrounding domestic growth of the foreign currency deposits constituent of broad
events, turmoil in global financial markets and the 15.4% m/m money to 10.1% y/y in August from 57.3% y/y in January.
drop in the copper price to USD6 388 per tonne at the end of The weakness of the US dollar in the first half of the year
September. Accelerating inflation has also aggravated the value and relatively lower appetite for Zambian debt partly explains
of the kwacha, as the inflation differential with that of its trade this year’s decline in foreign currency deposits. Reserve
partners widens thus spurring a weaker currency. A stable money’s cumulative increase target of ZMK22 billion was
kwacha is projected in the short term on the grounds that policy met in June 2008; however, at the end of August, the ceiling
continuity is all but assured under new leadership. Although the target for September was exceeded by ZMK127 billion, likely
copper price has softened it is not expected to fall off. due to the challenge of fully sterilising net purchases of
foreign exchange.
Page 26
Standard Bank
Standard Bank Group
Group Economics
Economics
Page 27
Standard
Standard Bank Bank Group Economics
Group Economics
Zimbabwe
Hyperinflation environment remains a major challenge. Lack Monetary policy remains restrictive and ineffective.
of foreign exchange, shortages of goods and services and a Continued depreciation of the currency and the
resultant increase in food prices, high global energy prices, hyperinflation environment remains a major challenge for
sharp depreciation of the currency and rapid growth of money the monetary authorities to conduct monetary policy
supply continue to drive inflation to new record highs. The effectively. Secured overnight accommodation rate remains
government continue to print money to finance quasi fiscal unchanged at 8500%. This tight monetary policy
spending and that is also fuelling the hyperinflation environment. environment has completely crowded out any meaningful
However, in the absence of any official inflation and monetary economic activity, as access to credit is severely limited.
survey data, it remains difficult to quantify the extent of the The central bank continues to maintain stringent statutory
country’s economic crisis. Also, in the absence of substantial reserve requirements that impose a heavy administrative
productive activities, hyperinflation will continue. The last official burden on commercial banks. Commercial banks’ lending
inflation recorded for June 2008 was 11.2 million per cent. remains unprofitable. Overall, real lending rates remain
deeply in negative territory and this should escalate the
hyperinflation environment.
Depreciating currency. Since the redenomination of the Sectoral performance remains dismal. Overall, we expect
currency by a factor of 1:10 000 000 000 on 1 August 2008, the the economy to contract by about 7% in 2008 as most
Zimbabwe dollar continues to depreciate significantly. The official sectors continue to operate below capacity. The country’s
interbank exchange rate depreciated from Z$7.78 per US dollar inability to secure essential raw materials, machinery and
on 1 August 2008 to Z$132.30 per US dollar on 30 September equipment should continue to fuel the slump in production in
2008. The parallel exchange rate was Z$750 000 per US dollar most sectors of the economy. The agricultural sector
on 30 September 2008. Even with the recent political settlement, continues to perform dismally. Because the sector has been
foreign exchange management will continue to be a major the largest purchaser of goods and services (for example,
challenge to all the efforts to institute any meaningful economic manufactured products) and the anchor around which
reforms. Continued shortages of foreign exchange should lead to industries and services developed, its poor performance
a further depreciation of the currency. continues to hinder developments of other sectors.
Page 28
Standard Bank
Standard Bank Group
Group Economics
Economics
0 19% 20%
4%
-2 8%
-4
18% 22%
-6
-8 9%
-10
-12
-14 Agriculture Mining & quarrying
-16 Other Transport & comm.
2000 2001 2002 2003 2004 2005 2006 2007 2008f Distribution Finance & insurance
Manufacturing
Source:IMF & Standard Bank Source: Central Statistical Offices
Foreign reserves – months of import cover International trade – exports shipment by sector US$ million
1.4 Tobacco
1.2 Mining
1.0
Manufacturing
0.8
Hunting
0.6
0.4 Horticulture
0.2 Agriculture
0.0
0 100 200 300 400 500
2003 2004 2005 2006 2007
2008H1 2007H1
Source: IMF
Source: Reserve Bank of Zimbabwe
Education, Restaurants
2.9% and hotels, Miscellaneous 200000
Recreation and 1.5% goods and
culture, 5.7% services, 3.9% Food and non- 160000
Communication alcoholic
, 1.0% beverages,
31.9% 120000
Transport, 9.8%
80000
Health, 1.3% Alcoholic
beverages and
Rents plus tobacco, 4.9% 40000
furniture, Housing water
household electricity gas Clothing and 0
equipment & and other fuels, footwear, 5.7%
maintenance, 16.2% 2006 2007 2008
15.1%
M3 Claims on Private Sector
Source: Reserve Bank of Zimbabwe Source: IMF
Page 29
Standard Bank Group Economics
Standard Bank Group Economics
Group Economics
Goolam Ballim – Group Economist
+27-11-636-2910 goolam.ballim@standardbank.co.za
South Africa
Johan Botha Shireen Darmalingam Jeremy Stevens Danelee van Dyk
+27-11-636-2463 +27-11-636-2905 +27-11-631-7855 +27-11-636-6242
Johan.botha2@standardbank.co.za Shireen.darmalingam@standardbank.co.za Jeremy.Stevens@standardbank.co.za Danelee.vanDyk@standardbank.co.za
Rest of Africa
Jan Duvenage Anita Last Yvonne Mhango Victor Munyama
+27-11-636-4557 +27-11-631-5990 +27-11-631-2190 +27 11-631-1279
Jan.duvenage@standardbank.co.za Anita.last@standardbank.co.za Yvonne.Mhango@standardbank.co.za Victor.Munyama@standardbank.co.za
Botswana Angola Kenya DRC
Lesotho Ghana Mozambique Nigeria
Namibia Malawi Uganda Tanzania
Swaziland Mauritius Zambia Zimbabwe
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Page 30