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Living the FATCA life in Africa: New U.S. tax regulations add to burden of compliance on financial institutions across Africa

Posted on 21 May 2013 by Eugene Skrynnyk

Eugene Skrynnyk

Eugene Skrynnyk (CIPM, MILE, BComm) is a senior manager and specialist for the asset management industry in the Africa Sub-Area at Ernst & Young in Cape Town, South Africa.

Eugene Skrynnyk is the Ernst & Young Senior Manager and specialist for the asset management industry in the Africa Sub-Area.

Eugene holds a Certificate in Investment Performance Measurement (CIPM), Master of International Law and Economics (MILE) and Bachelor of Commerce and Finance (B.Comm.).

 

When the U.S. Department of the Treasury (“Treasury”) and Internal Revenue Service (“IRS”) issued final Foreign Account Tax Compliance Act (“FATCA”) regulations in January of this year, there was a sigh of relief that the financial services industry in Africa could begin to digest FATCA’s obligations. However, achieving FATCA compliance remains a challenge for banks operating across Africa.

FATCA is already law in the U.S. but negotiations are under way to enshrine it in national law of countries around the world via intergovernmental agreements (“IGAs”) with the U.S. While a variety of African jurisdictions will each face unique obstacles with FATCA compliance, many in the industry share a general unease with FATCA’s scope, as well as scepticism that FATCA’s rewards (an estimated US$1 billion in additional tax revenue annually) justify its expenses. Generally, FATCA attempts to combat U.S. tax evasion by requiring that non-U.S. financial institutions report the identities of U.S. shareholders or customers, or otherwise face a 30% withholding tax on their U.S. source income. Overwhelmingly, FATCA compliance obligations apply even where there is very little risk of U.S. tax evasion and it impacts all payers, including foreign payers of “withholdable payments” made to any foreign entities affecting deposit accounts, custody and investments.

General issues in Africa

Concerns about privacy abound. FATCA requires financial institutions to report to the IRS certain information about U.S. persons. For this reason, IGAs are being put in place so that institutions could instead report information to their local tax authority rather than the IRS. In some jurisdictions, investment funds and insurance companies are permitted to disclose information with client consent. In other jurisdictions, such disclosure is prohibited without further changes to domestic law. The process to make necessary changes locally involves time and effort.

Cultural differences in Africa need to be considered. In certain situations FATCA requires that financial institutions ask a customer who was born in the United States to submit documents explaining why the customer abandoned U.S. citizenship or did not obtain it at birth. African financial institutions never pose such a delicate and private question to their customers. Even apparently straight-forward requirements may pose challenges; for example, FATCA requires that customers make representations about their identities “under penalty of perjury” in certain situations. Few countries have a custom of making legal oaths, so it would not be surprising if African customers will be reluctant to give them.

FATCA contains partial exemptions (i.e., “deemed compliance”) and also exceptions for certain financial institutions and products that are less likely to be used by U.S. tax evaders. It still has to be seen to what extent these exemptions have utility for financial institutions in Africa. For example, the regulations include an exemption for retirement funds and also partially exempt “restricted funds” — funds that prohibit investment by U.S. persons. Although many non-U.S. funds have long restricted investment by U.S. persons because of the U.S. federal securities laws, this exemption could be less useful than it first appears. It should be pointed out that the exemption also requires that funds be sold exclusively to limited categories of FATCA-compliant or exempt institutions and distributors. These categories are themselves difficult for African institutions to qualify for. For example, a restricted fund may sell to certain distributors who agree not to sell to U.S. persons (“restricted distributors”). But restricted distributors must operate solely in the country of their incorporation, a true obstacle in smaller markets where many distributors must operate regionally to attain scale.

Other permitted distribution channels for restricted funds are “local banks,” which are not allowed to have any operations outside of their jurisdiction of incorporation and may not advertise the availability of U.S. dollar denominated investments.

Challenges and lessons learned – the African perspective

Financial institutions will have to consider what steps to take to prepare for FATCA compliance and take into account other FATCA obligations, such as account due diligence and withholding against non-compliant U.S. accountholders and/or financial institutions.

The core of FATCA is the process of reviewing customer records to search for “U.S. indicia” — that is, evidence that a customer might be a U.S. taxpayer. Under certain circumstances, FATCA requires financial institutions to look through their customers and counterparties’ ownership to find “substantial U.S. owners” (generally, certain U.S. persons holding more than 10% of an entity). In many countries the existing anti-money laundering legislation generally requires that financial institutions look through entities only when there is a 20% or 25% owner, leaving a gap between information that may be needed for FATCA compliance and existing procedures. Even how to deal with non-FATCA compliant financial institutions and whether to completely disengage business ties with them, remains open.

The following is an outline of some of the lessons learned in approaching FATCA compliance and the considerations financial institutions should make:

Focus on reducing the problem

Reducing the problem through the analysis and filtering of legal entities, products, customer types, distribution channels and account values, which may be prudently de-scoped, can enable financial institutions to address their distinct challenges and to identify areas of significant impact across their businesses. This quickly scopes the problem areas and focuses the resource and budget effort to where it is most necessary.

Select the most optimal design solution

FATCA legislation is complex and comprehensive as it attempts to counter various potential approaches to evade taxes. Therefore, understanding the complexities of FATCA and distilling its key implications is crucial in formulating a well rounded, easily executable FATCA compliance programme in the limited time left.

Selecting an option for compliance is dependent on the nature of the business and the impact of FATCA on the financial institution. However, due to compliance time constraints and the number of changes required by financial institutions, the solution design may well require tactical solutions with minimal business impact and investment. This will allow financial institutions to achieve compliance by applying low cost ‘work arounds’ and process changes. Strategic and long-term solutions can be better planned and phased-in with less disruption to the financial institution thereafter.

Concentrate on critical activities for 2014

FATCA has phased timelines, which run from 2014 to 2017 and beyond. By focusing on the “must-do” activities, which require compliance as of 1 January 2014 – such as appointing a Responsible Officer, registering with the IRS, and addressing new client on-boarding processes and systems – financial institutions can dedicate the necessary resources more efficiently and effectively to meet immediate deadlines.

Clear ownership – both centrally and within local subsidiaries

FATCA is a strategic issue for the business, requiring significant and widespread change. Typically it starts as a ‘tax issue’ but execution has impacts across IT, AML/KYC, operations, sales, distribution and client relationship management. It is imperative to get the right stakeholders and support onboard to ensure that the operational changes are being coordinated, managed and implemented by the necessary multidisciplinary teams across the organization. These include business operations, IT, marketing, and legal and compliance, to name but a few. Early involvement and clear ownership is key from the start.

Understand your footprint in Africa

Many African financial institutions have operations in various African countries and even overseas, and have strategically chosen to make further investments throughout Africa. The degree to which these African countries have exposure to the FATCA regulations needs to be understood. It is best to quickly engage with appropriate stakeholders, understand how FATCA impacts these African countries and the financial institutions’ foreign subsidiaries, and find solutions that enable pragmatic compliance.

What next for financial institutions in Africa?

Negotiations with the U.S. are under way with over 60 countries to enshrine FATCA in national law of countries around the world via IGAs. Implementation of FATCA is approaching on 1 January 2014 and many local financial institutions have either not started or are just at the early stages of addressing the potential impact of FATCA. In South Africa, only few of the leading banks are completing impact assessments and already optimizing solutions. Other financial services groups and asset management institutions are in the process of tackling the impact assessment. Industry representative in Ghana, Kenya, Mauritius, Namibia, Nigeria and Zimbabwe have started engaging relevant government and industry stakeholders, but the awareness is seemingly oblivious to date. In the rest of Africa, FATCA is mainly unheard of.

Financial institutions choosing to comply with FATCA will first need to appoint a responsible officer for FATCA and register with the IRS, ensure proper new client on-boarding procedures are in place, then identify and categorize all customers, and eventually report U.S. persons to the IRS (or local tax authorities in IGA jurisdictions). Institutions will also need to consider implementing a host of other time-consuming operational tasks, including revamping certain electronic systems to capture applicable accountholder information and/or to accommodate the new reporting and withholding requirements, enhancing customer on-boarding processes, and educating both customers and staff on the new regulations. Where possible, institutions should seek to achieve these tasks through enhancing existing initiations so as to minimise the cost and disruption to the business.

Conclusion

Financial institutions in Africa face tight FATCA compliance timelines with limited budgets, resources, time, and expertise available. This is coupled with having to fulfil multiple other regulatory requirements. To add to the burden, FATCA has given stimulus to several countries in the European Union to start discussing a multilateral effort against tax evasion. The support of other countries in the IGA process indicates that some of these countries will follow with their own FATCA-equivalent legislation in an attempt to increase local tax revenues at a time when economies around the world are under unprecedented pressure. The best approach for African financial services industry groups is to engage their local governments in dialogue with the IRS and Treasury, while for African financial institutions to pro-actively assess their FATCA strategic and operational burdens as they inevitably prepare for compliance.

 

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

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IMF Executive Board Concludes 2013 Article IV Consultation with Seychelles

Posted on 15 May 2013 by Africa Business

VICTORIA, Mahé, May 15, 2013/African Press Organization (APO)/ On May 8, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Seychelles. 1

Background

In the few years since the 2008 debt crisis, Seychelles has made remarkable strides, quickly restoring macroeconomic stability and creating room for private-sector activity. Macroeconomic developments in the tourism-based island economy have been favorable, despite the challenging global environment. Notably, growth held up as the tourism industry successfully attracted arrivals from non-traditional markets as European arrivals slumped, while a surge in foreign direct investment (FDI) supported construction in recent years. For the most part, inflation remained contained, and the external position improved markedly following liberalization of the exchange rate in 2008 and debt restructuring started in 2009.

In 2012, despite robust tourist arrivals, growth moderated to 2.9 percent as large investment projects were completed. Inflation spiked in July 2012 to 8.9 percent fueled by global as well as domestic developments, but has since abated as a result of successful monetary tightening. The external position continued to improve, albeit modestly. In particular, the current account deficit declined slightly, but remained high at around 22 percent of gross domestic product (GDP), but was fully financed by FDI and external borrowing, leading to a modest rise in reserves. Debt restructuring is nearly complete, with only one loan agreement awaiting signature.

Fiscal policy in 2012 continued to support debt sustainability. The primary surplus is projected to have risen to 6.2 percent of GDP, in part due to sizable windfall revenues which were partly saved. Buoyant revenue and grants paved the way for needed capital expenditure. Notwithstanding, public debt increased by over 3 percentage points of GDP due mostly to currency depreciation and the government assuming liabilities of Air Seychelles.

Monetary policy was tightened sharply in 2012 in response to rising inflation and an unhinging of the exchange rate, and has since been relaxed. Starting in late-2011, rising global food and fuel prices coupled with adjustments in administered prices pushed prices higher. This was reinforced by current account pressures resulting from lower exports of transportation services in the wake of the restructuring of Air Seychelles. The looming inflation-depreciation spiral was broken in mid-2012 by two small foreign exchange market interventions by the Central Bank of Seychelles and a tightening of monetary policy. By end-2012, inflation had fallen to 5.8 percent and the exchange rate had strengthened beyond its end-2011 level.

Broad-based structural reform over the past five years has worked to improve financial performance of the public sector and increase private sector participation in economic activity. Statistical capacity continues to be strengthened. Seychelles subscribes to the IMF’s General Data Dissemination Standard (GDDS) and is making progress at compiling higher frequency economic data which will support strengthened macroeconomic oversight and analysis.

Executive Board Assessment

Executive Directors commended the authorities for their strong policy implementation. Macroeconomic stability has been restored and growth has remained resilient. While the outlook is favorable, the economy is vulnerable to an uncertain global environment and domestic risks. Directors called for continued commitment to sound policies and structural reforms to preserve macroeconomic and financial stability, build policy buffers, and foster strong and inclusive growth.

Directors welcomed the steps to improve financial discipline at the central government level and the recent introduction of the VAT. They agreed that strengthening the oversight and financial position of parastatals, including through adequate price mechanisms, and further progress in public financial management will be key to ensuring fiscal sustainability. For the medium term, Directors supported the authorities’ fiscal policy stance which aims at targeting a primary fiscal surplus and reducing public debt to 50 percent of GDP. They welcomed that the debt restructuring is nearly complete and encouraged the authorities to exercise caution when contracting new external debt.

Directors called for continued efforts to improve the monetary framework in order to stabilize inflation expectations and policy interest rates. Absorbing excess liquidity over time will be important to strengthen the monetary anchor and monetary transmission mechanism. Directors considered that a further increase in international reserves, as market conditions permit, would provide a stronger buffer against shocks. Directors noted that the financial system is sound and welcomed the steps being taken to improve the functioning of the credit market.

Directors commended the efforts towards improving the business and investment climate, which is key to avoid a potential middle-income trap and to support broad-based growth. They encouraged the authorities to foster private sector-led growth by addressing infrastructure gaps, engendering lower cost and improved access to credit, correcting data weaknesses, and moving ahead with plans for greater workforce education and capacity building.

 

Seychelles: Selected Economic and Financial Indicators, 2010–14

 

2010    2011    2012    2013    2014

Actual    Actual    Est.    Proj.    Proj.

 

(Percentage change, unless otherwise indicated)

National income and prices

 

Nominal GDP (millions of Seychelles rupees)

11,746    13,119    14,145    15,292    16,461

Real GDP

5.6    5.0    2.9    3.3    3.9

CPI (annual average)

-2.4    2.6    7.1    4.5    3.4

CPI (end-of-period)

0.4    5.5    5.8    4.3    3.1

GDP deflator average

-3.6    6.4    4.8    4.6    3.6

(Percentage change, unless otherwise indicated)

Money and credit

 

Credit to the economy

21.4    6.2    2.5    13.0    …

Broad money

13.5    4.5    -2.3    0.1    …

Reserve money

34.7    -2.7    6.9    12.3    …

Velocity (GDP/broad money)

1.6    1.7    1.9    2.1    …

Money multiplier (broad money/reserve money)

4.2    4.5    4.1    3.6    …

(Percent of GDP)

Savings-Investment balance

 

External savings

23.0    22.7    21.7    23.2    18.4

Gross national savings

13.6    12.4    17.3    15.1    15.5

Of which: government savings

7.8    10.6    14.3    12.1    11.0

Gross investment

36.6    35.1    39.0    38.2    33.8

Of which: government investment

8.6    8.1    12.0    9.2    7.8


Government budget


Total revenue, excluding grants

34.1    35.8    37.6    36.4    35.6

Expenditure and net lending

32.5    35.7    40.2    38.5    36.0

Current expenditure

27.2    27.6    28.8    28.8    27.3

Capital expenditure and net lending

5.3    8.1    11.4    9.8    8.7

Overall balance, including grants

2.5    2.5    2.4    1.8    2.0

Primary balance

8.6    5.4    6.2    5.1    4.4

Total public debt

81.6    74.3    77.3    72.0    65.3

Domestic1

32.5    28.0    27.7    25.7    18.6

External

49.1    46.2    49.6    46.3    46.7

(Percent of GDP, unless otherwise indicated)

External sector

 

Current account balance including official transfers

-23.0    -22.7    -21.7    -23.2    -18.4

Total stock of arrears (millions of U.S. dollars)

30.3    9.0    2.7    …    …

Total public external debt outstanding (millions of U.S. dollars)

478    490    512    558    597

(percent of GDP)

49.1    46.2    49.6    46.3    46.7

Terms of trade (= – deterioration)

-6.7    -6.4    -0.4    0.6    1.2

Real effective exchange rate (average, percent change)

4.4    -7.4    …    …    …

Gross official reserves (end of year, millions of U.S. dollars)

254    277    305    317    326

Months of imports, c.i.f.

2.3    2.5    2.6    2.7    2.7

Exchange rate


Seychelles rupees per US$1 (end-of-period)

12.1    13.7    13.0    …    …

Seychelles rupees per US$1 (period average)

12.1    12.4    13.7    …    …

 

Sources: Central Bank of Seychelles; Ministry of Finance; and IMF staff estimates and projections.

1 Excludes debt issued in 2012 for monetary purposes (5.4 percent of GDP), as proceeds are kept in a blocked account with the Central Bank.

1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm

 

SOURCE

International Monetary Fund (IMF)

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ZIMFUND launches first phase of Zimbabwe’s water supply and sanitation rehab project

Posted on 14 May 2013 by Wallace Mawire

by Wallace Mawire

The Zimbabwe Multi-Donor Trust Fund (ZimFund) urgent Water Supply and Sanitation Rehabilitation Project phase one expected to increase the reliability, quality and availability of water, restore wastewater treatment capacity and reduce the incidence of cholera and other water related diseases has been launched, according to the Zimfund Manager,  Engineer Emmanuel Nzabanita.

The ZimFund Manager reports that Zimfund has handed-over the site of Mutare water and sanitation works to the contractor. This project, valued at  $9.04 million, is the first to be implemented under the Fund’s overall $29.65 million Urgent Water Supply and Sanitation Rehabilitation Project (UWSSRP), which will also see developments in the municipalities of Chegutu, Chitungwiza, Harare, Kwekwe and Masvingo.


The UWSSR project has been designed to improve the health and social well-being of the residents of the beneficiary cities, through the equitable provision of adequate water supply and sanitation services.

The ZimFund grant will enable the provision of urgent support for the restoration and stabilization of water supply and sanitation services in the six municipalities, by undertaking emergency rehabilitation to the systems and reducing pollution of the water sources.

In Mutare, the project comprises of  the partial rehabilitation of Odzani Water Treatment works, the completion of the Chikanga Reservoir, the completion of the Mutare Trunk Sewer, the rehabilitation of Gimboki Sewerage Treatment Works and  the supply of laboratory and other equipment for maintenance.

ZimFund Manager, Eng. Emmanuel Nzabanita said, “I am delighted that this project that is expected to have a major impact on the people living in Mutare has commenced.”

The rehabilitation of Chikanga Water Reservoir, the Gimboki BNR Sewage treatment plant and the pipeline for the outfall sewer is expected to improve the water and sanitation services considerably.

The restoration of some wastewater treatment capacity in the project areas will reduce pollution to the fresh water sources and the immediate environment.

In addition to the water and sanitation projects, ZimFund is also supporting the Emergency Power Infrastructure Rehabilitation Project (EPIRP) to the tune of $35 million, benefitting the electricity consuming public in Zimbabwe – especially the poor.

The second project is expected to help rehabilitate the Ash Plant at Hwange Power Station (HPS), in addition to sub-transmission and distribution facilities in Atlanta (Murehwa), Criterion (Bulawayo), Gweru, Kadoma, Marvel (Bulawayo), Mazowe, Mpopoma (Bulawayo), Norton, Pomona (Harare), Redcliff, Sherwood (Kwe Kwe), Victoria Falls, Zisco (Redcliff), Zvishavane and electricity distribution facilities throughout the country.

Once complete, these refurbishments and reinforcements of the sub-transmission and distribution networks are expected to  improve system reliability and allow the restoration of supply services to about 22,000 customers in various neighbourhoods across the country that presently have no access to electricity services.

The EPIR Project is linked to UWSSR Project, in that it will also improve the electricity supply to the water treatment plant of the Harare city water supply as well as the other five urban water supply systems, with a possible contribution to the reduction in the incidence of cholera and other water related diseases, according to the Zimfund Mamager.

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Standard Bank uses sustainable strategy to mesh commercial reality and social relevance

Posted on 02 May 2013 by Africa Business

2012 Sustainability Report proves that Standard Bank’s strategy and sustainability programmes are mutually reinforcing and have served the company well in the past 12 months

Johannesburg, 2 May 2013 Standard Bank Group’s 2012 Sustainability Report indicates that the Group’s repositioning several years ago to focus on Africa and, therefore, linking its own sustainability with that of the people and businesses of the continent is paying dividends – for both the Group and its markets.

By embedding sustainability thinking and sustainable business practices at every level of the business, the Standard Bank Group (SBG) has, among others:

· Prevented fraud to the value of R1,1 billion

· Created R60 billion in wealth

· Banked more than 661 000 SMEs across Africa

· Enabled Standard Bank South Africa (SBSA) to spend R125 million in corporate social investment

· Increased SBSA’s Inclusive Banking customers to 6,2 million (2011: 5,4 million)

· Increased the number of women managers to 47% (2011: 46%)

· Increased training spend from R484 million in 2011 to R609 million in 2012

· Increased black representation at senior management level from 35% to 37%

· More than doubled the number of participants in leadership development programmes from 1 101 in 2011 to 2 498 in 2012

· Committed R9,4 billion to renewable energy projects in South Africa

· Enabled financing of 16 Equator Principle projects (2011: nine)

· Abated 19 million tons of greenhouse gas emissions through carbon financing.

“Only a banking group that is organisationally and financially healthy can deliver these kinds of sustainability results for its internal and external stakeholders,” says Karin Ireton, Head of Sustainability Management for Standard Bank. “So, our sustainability priority is to ensure that we operate in a way that makes business sense for us.

The maturing of our sustainability reporting gives us the ability to articulate and assess the value that sustainability management has for the Group. Making a commitment to better reporting to our stakeholders has the potential to improve the business.”

An example of the objectivity of Standard Bank’s reporting is the fact that this year’s report shows that the CO2 emissions for Standard Bank South Africa were 412 089 metric tons in 2012 as against 180 403 in 2011.

This is not because the bank’s carbon footprint has worsened but because its measure of energy usage has improved. The bank has designed an innovative methodology by means of which it can understand the costs of energy in an organisation running hundreds of sites, most with different energy suppliers, all billing in different ways.

“The information we now have enables us to make better decisions about reducing our carbon footprint across both our ATM network and our multiple branches and offices all with different lighting configurations and different levels of computer, air-conditioning, and photocopier usage,” Ms Ireton says.

SBG not only ensures that all strategic decisions incorporate sustainability related insight and analysis as well as intelligence gained from its stakeholder engagement activities, it also focuses on instilling an inclusive business culture and leadership style through its operations.

As a consequence, some of the success stories in the 2012 Sustainability Report include advances in transformation, inclusive and responsible banking products and services, and infrastructure, renewable energy, affordable housing, and agriculture financing.

“One of the reasons SBG has reached the venerable age of 150 years, is that it has always been responsive to the issues of the times,” Ms Ireton says. “In the modern era, sustainability is the issue, and the Group is responding to it holistically and in an integrated way.”

Local and international acknowledgement of SBG’s sustainability strategy includes:

· Corporate Knights Inc. 2013 Global 100 Most Sustainable Corporations in the World – SBG was the only African company included, ranking 98th

· Newsweek Green Rankings – of the largest 500 publicly traded companies globally, SBG ranked 21st in the financial sector category and 64th overall

· Bloomberg New Energy Finance Clean Energy & Energy Smart Technology League Tables – SBG ranked as the seventh international lead arranger for renewable energy financing

· 2012 JSE Socially Responsible Investment Index – Standard Bank was identified as a best performer, for the sixth consecutive year.

Standard Bank Africa footprint (Acrobat Reader, .pdf)

Standard Bank Rosebank (Acrobat Reader, .pdf)

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Year of the Artisan: Artisans needed to help grow the economy

Posted on 30 April 2013 by Africa Business

African Education Week to gather experts in Johannesburg in June

South Africa has a shortfall of about 40 000 skilled artisans and industries often have to import migrant workers at exorbitant costs.

In a recent speech, the South African Minister of Higher Education, Mr Blade Nzimande, quoted this figure when he opened a technical training academy in Cape Town.  Those involved in training artisans therefore rejoiced when Nzimande in March declared 2013 the Year of the Artisan.

“The Year of the Artisan is good news for the industry because we need to seriously focus on training people for the trades,” says Mr Sam Zungu, principal of the Umfolozi College, an institution for further education and training (FET) with five campuses in KwaZulu-Natal.

“Young people need to be made aware of the great need for skilled people. This country needs artisans across the board in fields such as electricity, plumbing, fitting and turning and mechanisation. The biggest need is in the energy sector where we need skilled people to maintain and build infrastructure.”

He continues:  “Eskom is battling and new power plants are being erected.  But we do not have a big enough pool of skilled people to draw from locally for these projects. We are moving towards the same situation as before 2010 when the country had to import artisans to work on the stadiums and infrastructure needed for the Soccer World Cup.”

The Year of the Artisan dovetails neatly with the South African government’s National Development Plan (NDP). This plan focuses on reducing poverty and inequality by 2013 and crucial to attaining to these goals is the stated aim of training at least 30 000 qualified artisans annually.

African Education Week
Sam Zungu is chairing a panel discussion on the future of FET Colleges during the upcoming African Education Week at the Sandton Convention Centre in Johannesburg from 19-22 June.

He explains that while artisans can earn quite high salaries, there is still a stigma attached to the trades which also impacts negatively on how the Further Education and Training (FET) colleges are viewed.

“We need to change perceptions and we need to create an awareness of the opportunities for artisans.  There are many opportunities for skilled people to become entrepreneurs thus creating work opportunities for others.”

South Africa needs specialist artisans
Another speaker at African Education Week, Wilson Nzimande, head of Imithente, an education and business consultancy, cautions that South Africa needs specialist artisans – amongst others in the maritime fields. Over 90% of South African trade takes place via the oceans.

“Many people want to train as, for example, general electricians or mechanics. But we need specialists – we need divers who can do specialist welding and painting underwater and we need ship building specialists.  In many fields South Africa relies on foreigners and this is not an acceptable strategy.  We need to develop artisans because they are incredibly important in helping to grow developing countries economically.”

He emphasises that strategic partnerships need to be formed between training institutions, government and the private sector.

“In this Year of the Artisan we need more than just words and rallies. We need a particular programme of action. This means that government should do more to structure incentive mechanisms to the benefit of all parties.”

Too much emphasis on university degree
Horst Weinert, managing director of Festo Didactics, says there is concern that the average age of South African artisans is 50.

“These people will soon be retiring and there will be few to take their place if we do not train enough people to fill their shoes.”

University educated Weinert believes there is too much emphasis on a university degree:  “there are about 800 000 university students and 600 000 students at universities of technology and only between 100 000 and 200 000 at FET colleges. This pyramid is the wrong way around. We need more enrolments at FET colleges.”

According to Weinert, artisans can demand monthly salaries of up to R50 000 and more.

“Highly skilled artisans are in short supply and those who can deliver the goods can basically determine their own salaries.”

His advice to people who are set on obtaining a university degree in fields such as engineering is to enrol at an FET college for at least one year.

“This practical training obtained at a FET college will enable the student to fly through university.”

Although the trades are dominated by men, Weinert says there are many opportunities for women in field such as fitting and turning, instrumentation mechanisation and mechatronics – a multidisciplinary field of engineering which combines mechanical, control, electrical and computer engineering.

“I am a huge supporter of competitions like WorldSkills International (previously known as the Skills Olympics). There top artisans from different countries compete against each other. These competitions set benchmarks. The winners are highly regarded and others look up to them as leaders and innovators in their field.  This can act as inspiration for young people to train as artisans. When magic is created productivity is boosted and this in turn boosts the economy,” says Weinert.

Highlights from African Education Week
The African Education Week Convention and Learning Expo is the meeting and trading platform for everyone who is passionate about improving the standard of education in Africa.  Now in its 7th year, it remains the continent’s leading educational resources and training event, attracting more education professionals than any other event.  The co-located Career Indaba attracted m
ore than 4000 learners last year.  The expo aims to bridge the gap for students between studying and entering the world of work.

Highlights of the African Education Week programme on Further and Higher Education:

· Panel discussion:  The turnaround strategy for FET Colleges:  Creating institutions of choice

o Chairperson and panelist:  Sam Zungu, CEO, Umfolozi College, South Africa

o Panelist:  Dan Nkosi, CEO, South West College, South Africa

o Panelist:  Wilson Nzimande, CEO, Imethente, South Africa

· Panel discussion:  Strategies to equip learners with the skills to build their own future in tomorrow’s world

o Chairperson:  Amanda van der Vyver, Centre for Prospective Students, University of Stellenbosch, South Africa

o Do we equip learners for the workplace? The solution to take education to the next level
Elaine van Rensburg, MD, Compass Academy of Learning, South Africa

o Developing an extended curicula for NCV L2
Gert Hanekom, Manager, Centre for Teaching and Learning, University of the Free State, South Africa

o Aligning courses with the needs of the workplace
Mziwakhe Ramos Sibuqashe, Centre for Curriculum Development, Central University of Technology, Free State, South Africa

o Entrepreneurship Education in Secondary Schools in Mauritius
Dr Sheik Abbass, Lecturer, Business Education Department, Mauritius Institute of Education, Mauritius

Event dates:
Wednesday, 19 June 2013: Preconference workshops
Thursday, 20 June 2013:  Opening keynote session, Learning Expo opens
Friday, 21 June 2013: Conference sessions, Learning Expo open
Saturday, 22 June 2013: Learning Expo open, Post conference workshops

Location: Sandton Convention Centre, South Africa
Websites: www.educationweek.co.za ; www.careerindaba.co.za

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Mr. Aaron Sen, Singapore Branch Head of Ship and Aircraft Finance Asia Pacific, Norddeutsche Landesbank Girozentrale speak about his experience and knowledge on the freight forwarding industry at PowerLogistics Asia 2013 Conference on 30th-31st October 2013 at Marina Bay Sands, Singapore

Posted on 23 April 2013 by Africa Business

PowerLift Company Ltd. (PowerLift) will organize its second annual event “PowerLogistics Asia 2013”. This event is specifically focused to the project logistics service providers, mainly Asia based, as well as for the consumers of these services, namely:

Oil & gas

Heavy engineering

wind power

Mining

Hear Mr. Aaron Sen, Singapore Branch Head of Ship and Aircraft Finance Asia Pacific, Norddeutsche Landesbank Girozentrale speak about his experience and knowledge on the freight forwarding industry at PowerLogistics Asia 2013 Conference on 30th-31st October 2013 at Marina Bay Sands, Singapore.

Here’s a brief interview with Aaron Sen, on his views about the finance industry and the heavylift industry.

1. What Impact is the global financial meltdown having, and what will this mean in the coming years?

The global financial crisis has a severe impact on ship finance. Several banks are either reducing their exposure in this specialized industry or even gradually exiting. This will mean in the coming years that ship lending will become a scarce commodity.

2. What challenges have you faced after the financial meltdown?

Directly after the financial meltdown back in 2008 the foremost relevant challenge was to keep funding and liquidity intact. Following the financial crisis the focus switched to the problems then occurring due to the sharp cool-down of the world economy.

3. Is your industry credit crunch immune?

Banking is not credit crunch immune as still bank to bank business forms a relevant part of a banks funding strategy.

4. What are the effects of the new world finance order on the heavy lift industry?

It is, and mostly likely will be in the near future, more difficult to get lending for newbuilding projects for heavy lift vessels.

See you there at PowerLogistics Asia 2013 Exhibition and Conference on 30th-31st October 2013 at Marina Bay Sands, Singapore.

Visit www.powerlogisticsasia2013.com for more information.

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Standard Bank Group ranked the world’s 12th greenest bank

Posted on 23 April 2013 by Africa Business

Standard Bank Group has been ranked the 12th “greenest” bank in the world and the cleanest in Africa by Bloomberg Markets.

According to Bloomberg: “The biggest gain in renewable energy came from a newcomer: South Africa’s Standard Bank Group Ltd. ranked 12th after agreeing to underwrite $1.1-billion in government-approved projects, including $314-million for solar parks.

“As Europe scales back and the US regroups, such initiatives may become the seeds that sustain growth in the green landscape.”

This was the third annual ranking by Bloomberg Markets to assess the top 40 global banks based on their lending to clean-energy projects and reduction in their own power consumption and carbon footprints.

Alastair Campbell, Executive Vice President, Power & Infrastructure Finance, at Standard Bank Group, says Standard Bank Group’s entry to the rankings is the result of three years of behind-the-scenes work commencing from the government’s first announcement of the renewable energy programme and its subsequent evolution into the current renewable energy independent power producer (REIPP) programme.

“We have adopted a proactive approach to this strategic and socially important sector and actively sought out deals to underwrite. We’re delighted to have our commitment to the sector acknowledged with an international no.12 ranking,” he says.

He believes its ranking may yet improve, given Standard Bank’s commitment to government’s renewable energy programme “as the next two to three years will continue to be a time of intense activity not just domestically in South Africa but on the African continent.

Given that the government’s strategy envisages 3,725 MW being tendered in the first three years, it is clear that the scale is enormous: perhaps R60-70-billion of capital is required, of which the quantum of debt will be approximately 70%. The ranking was based on Standard Bank Group’s success in first round of the REIPP procurement process, backing a total of 11 wind and solar projects valued at R9.4-billion. In the second round the bank is participating in a further seven deals (out of 19) valued at R7.1-billion.

These deals have been awarded preferred bidder status and are due to close shortly. Mr Campbell says the bank is hoping that its market leader status will continue as the third window gets under way in August.

In the first round, Standard Bank provided comprehensive corporate and investment banking services to all its clients, including underwriting R9.4 billion worth of debt, providing interest and currency hedges, carbon trading credits, and corporate bonding and guarantee facilities. Its mandated clients comprised 338MW of wind and 235MW of solar photovoltaic (SPV), out of the combined 1416MW per year expected to be produced by all the projects, making it the largest funder of the 28 wind and solar power projects awarded in the first round.

“This leading position was made possible by our in-depth understanding of the sector and the South African market,” says Mr Campbell.

Bidding rounds are scheduled to take place annually until the initiall allocation of 3725MW has been awarded. Mr Campbell is confident that Standard Bank Group will play a meaningful role in each of the roll-outs. He says Standard Bank Group is already busy preparing financing packages to support the third bidding window.

To ensure its readiness for this multi-year process, Standard recently signed a R20-billion Funding Support Agreement for Renewable Energy Projects in South Africa with the Industrial and Commercial Bank of China (ICBC), the bank’s single largest shareholder.

“Furthermore, we believe that the procurement process that South Africa has run is likely to be used as a blueprint for the rest of sub-Saharan Africa to follow in terms of renewable energy.” Says Mr Campbell. In addition to South Africa, general interest in countries such as Morocco, Kenya, Namibia, Botswana and Ghana are readying themselves for the roll-out of comprehensive renewable energy programs.

Bloomberg also looked at what banks were doing to reduce their own environmental impact, and here Standard Bank Group’s rating was boosted by various initiatives, particularly its new Rosebank building, rated five-star by the Green Building Council of South Africa.

“The Bloomberg ranking represents Standard Bank Group’s commitment to sustainability in every aspect of our business operations in South Africa and elsewhere, and is physically manifested in the structures we build. Our newer buildings are built to optimise energy efficiency,” says Mr Campbell.

How Bloomberg Markets ranks banks

To rank banks’ environmental records, Bloomberg Markets looked at their efforts to reduce their own waste and carbon footprints and at their investments in clean energy.

Bloomberg New Energy Finance and Bloomberg’s ESG Data group, which collects information on environmental, social and governance issues, gathered material from annual and corporate social responsibility reports, websites and other public documents. The teams conducted independent research and used surveys and telephone interviews to secure additional data and verify the accuracy of their findings.

The second consideration, reducing environmental impact, accounted for 30 percent of the score. It looked at reductions in air emissions and water use and at gains in energy efficiency.

Each data point is peer ranked on a scale of zero to 100. For example, in underwriting activities, the banks reporting the highest-dollar-value deals received the highest scores. Those scores were then multiplied by the weight factor assigned to that category to determine the overall value in the section. This was done for every grouping to determine a total score for the opportunity and environmental impact categories.

For more on Standard Bank Group’s sustainable business initiatives, see www.standardbank.com/sustainability.

Source: StandardBank.com

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Statement by an IMF Mission to The Gambia for Concluding Discussions of the First Review of the ECF Arrangement

Posted on 15 April 2013 by Africa Business

BANJUL, Gambia, April 15, 2013/African Press Organization (APO)/ An IMF mission led by Mr. David Dunn visited The Gambia during April 4-10, 2013, to conclude discussions on the first review of the authorities’ macroeconomic and financial program that is supported by the IMF under its Extended Credit Facility (ECF). The mission met with His Excellency President Yahya AJJ Jammeh, Honorable Minister of Finance and Economic Affairs Abdou Kolley, Governor of the Central Bank of The Gambia (CBG) Amadou Colley, and other senior officials.

At the conclusion of the visit, Mr. Dunn made the following statement in Banjul:

“The Gambian economy is still recovering from the severe drought of 2011. Real gross domestic product (GDP) grew by an estimated 4 percent in 2012, led by a partial rebound in crop production and strength in the tourism sector. Inflation remained under control, ending the year at just under 5 percent, despite the depreciation of the Gambian dalasi during the second half of the year. A substantial overrun in government spending late in the year resulted in higher-than-budgeted domestic borrowing (3½ percent of GDP).

“The outlook for the economy is generally favorable for 2013, but there are risks. Real GDP growth is expected to accelerate, if the recovery in crop production is sustained. Also, by accessing new markets, the potential for growth in tourism looks good. Inflation, however, has picked up, partly due to side effects from the introduction of the value-added tax (VAT) at the beginning of the year. For example, although the VAT is applied to firms with a turnover of at least one million dalasis, we understand that many smaller businesses also raised their prices opportunistically. During the first quarter of 2013, government spending once again exceeded planned allocations, contributing to an uptick in Treasury-bill yields. Correspondingly high bank lending rates are discouraging private sector borrowing.

“The mission welcomes the Government’s decision to tighten fiscal policy by reducing its domestic borrowing needs to 1½ percent of GDP in 2013 and then to ½ percent of GDP a year or less, beginning in 2014, which will help lower the heavy domestic debt burden. The mission also welcomes the intention of the Government to submit a fully-funded supplementary budget to the National Assembly later this month.

“The mission also welcomes the CBG’s prudent monetary policy. Targets for reserve and broad money growth have been tightened to stem potential inflationary pressures and stabilize the dalasi, which has continued to weaken against most major currencies.

“The mission was encouraged by the authorities’ determination to strengthen the Government’s revenue collection. It supported the target of the Large Taxpayers Unit of the Gambia Revenue Authority (GRA) to achieve 100 percent compliance with taxpayers’ income tax filings in the current year, which will help broaden the tax base. This is necessary if business-friendly tax reforms—such as a reduction in tax rates—are to be considered in the future. The mission also welcomed efforts by the GRA to strengthen its audit functions.

“The mission reached agreement, ad referendum, on program targets for 2013. The IMF Executive Board could consider the completion of the review by end-May 2013.

“The mission thanks the authorities for candid and constructive policy discussions and expresses its appreciation for the excellent cooperation during its visit.”

 

SOURCE

International Monetary Fund (IMF)

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Norway allocates NOK 700 million to Tanzanian rural energy fund

Posted on 11 April 2013 by Africa Business

OSLO, Norway, April 11, 2013/African Press Organization (APO)/ Norway and Tanzania have signed an agreement under which Norway will provide NOK 700 million to Tanzania over a four-year period. This funding will be channelled to a rural energy fund in Tanzania that will give people in rural areas access to electricity.

“Access to electricity is essential for reducing poverty and generating economic growth. Providing electricity in rural areas is a way of giving the majority of the population in Tanzania the freedom to choose not to use paraffin, diesel and other less reliable energy sources that are damaging to health. Electricity provides light for doing homework and opportunities for creating jobs and generating income, and enables health clinics to function better,” said Minister of International Development Heikki Eidsvoll Holmås.

Mr Holmås and Tanzanian Minister of Energy and Minerals Sospeter Muhongo signed the agreement in Oslo on 9 April. Both of them were taking part in the High Level Meeting on Energy and the Post-2015 Development Agenda.

In Tanzania, eight out of ten people live in rural areas. Of these people, only 6 % have access to modern forms of energy. Increasing access to energy will take many years and will require substantial public subsidies. The rural energy fund is the Tanzanian authorities’ most important tool in this context. The fund will be managed by the Rural Energy Agency (REA). Sweden, the World Bank and the EU are also supporting the fund. Norway will now be the biggest single donor to the fund.

“Increased access to electricity is absolutely essential for ensuring equitable development in Tanzania. Having said this, it is difficult to achieve. Those who use electricity have to pay for it themselves. We will keep a close eye on the quality of individual projects, as well as making sure that necessary reforms are carried out, that the Rural Energy Agency has sufficient capacity and that any threats to sustainability are addressed,” Mr Holmås commented.

So far, more than 90 % of the investments in the fund have gone to expanding the electricity grid, as this is the most effective way of reaching rural areas. But the funds from Norway will also be used for local solutions enabling the production of renewable energy in areas that are not covered by the electricity grid.

Tanzania’s aim is to increase the percentage of the population that has access to electricity from 14.5 % to 30 % on a national basis, and from 6.5 % to 15 % in rural areas, by 2025. In order to achieve this, investments in the rural energy fund will probably need to increase tenfold.

“Tanzania aims to become a middle-income country in the space of 12 years. We will gradually scale down our assistance to the country as this process proceeds. Increased access to electricity is absolutely essential if Tanzania is to achieve its goal. In order to succeed, Tanzanians must think big and improve their systems over and above the individual project level. The agreement between Norway and Tanzania is divided into two phases to ensure that the quality of projects is as intended and that the efforts to bring energy to the rural population progress according to plan,” Mr Holmås said.

 

SOURCE

Norway – Ministry of Foreign Affairs

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Director, Product Marketing, Etisalat: “FTTH is necessary for businesses and consumers”

Posted on 02 April 2013 by Africa Business

Ahead of the Broadband MEA 2013 conference, taking place on the 19th-20th March 2013 at the JW Marriott Marquis Hotel, Dubai, UAE, Dubai, UAE, we speak to Maen Haddad, Director/Product Marketing, Etisalat on the latest broadband developments in the region and his views on issues such as piracy and FTTH deployment.

What major developments have there been for the broadband industry in your region over the past year?

Etisalat has played a key role in Broadband growth in the UAE with the latest fibre optic technology being implemented across the country. This major initiative involved rolling out a fibre network throughout the UAE, providing customers with high-speed internet of up to 300Mbps.

As demand from consumers and businesses for broadband in the MENA region increases, the number of broadband lines is expected to increase exponentially. The UAE has reached a broadband penetration level that is on par with many advanced nations. This is a key indicator for national competitiveness and economic development.

Which would you choose? Investing in coverage or investing in increasing speeds to existing customers?

To be able to provide maximum value to its customer base, Etisalat has adopted a two-pronged approach where both coverage and speed are improved. Conducted in phases, the initial focus was on covering the UAE with a fibre network and later, offering variety of high speeds and bundled services that are designed to suit all customer needs.

To what extent does wifi offload come into your thinking?

As mobile broadband adoption increases rapidly, demand for data traffic has also simultaneously gone up. Therefore, wifi offload is a solution for the industry today not only for data offload but also for voice and messaging, offering a wider opportunity for the usage of wifi within our service portfolio.

Wifi services today are a value-add in our broadband product portfolio. This enables customers to connect to the Internet anywhere and at anytime. Customers choose to use the wifi instead of 3G due to different price structures.

Are curated, operator-managed OTT/IPTV services the best way of reducing piracy?

OTT and IPTV demand will trigger increasing pressure on broadband access to providers to increase delivery speeds and the permissible download volume. Content providers and distributors will have to make major decisions about how consumers will access content to reduce piracy.

In the best case scenario, content providers enjoy greater audience aggregation opportunities, while consumers benefit from more flexible and possibly more diversified access.

Piracy rates can come down when consumers perceive that they can benefit from new options, including the ability to select and pay for specific content rather than having to pay for tiered service containing plenty of undesired content.

Telecom operators in the region face credible threats to core revenue streams and piracy is indeed one growing threat. They have responded by reducing availability of “free” content and enhancing availability of content to paying subscribers. Some incumbents also have resorted to strategies including caps on monthly downloads and new service tiers based on download volume.

OTT and IPTV alone, however, cannot successfully compete and defeat piracy unless more aggressive enforcement tactics are carried out, e.g., suspension and termination of end user subscriptions and blocking access to specific sites.

Is FTTH really necessary for businesses and consumers and what are the stumbling blocks to rolling it out?

FTTH is necessary and very important for businesses and consumers in the UAE, especially since the country ranks the highest in terms of internet penetration in the region. At the same time, the stumbling blocks to FTTH blocks have been:

  • The customer’s availability and willingness to install Optical Network Terminal (ONT) in his/her home.
  • Putting fibre in the relevant areas where it is needed.
  • The ability to monetise from an early stage.

Are there enough services out there to drive adoption of faster speeds and is it up to the operators to get involved?

Yes there are enough services, and there are always more bandwidth-hungry services in the pipeline. Operators have a critical role to get involved. Etisalat is a regional player and based in a country with a high subscriber base so it clearly understands that there is limited opportunity for growth of revenue by only adding new subscribers. The focus is now expected to shift to other areas such as higher mobile data services adoption and value-added services. Mobile data services adoption will be driven by the availability of compatible mobile devices, affordable data plans and the rapidly rising mobile internet user.

Today a high number of ecommerce transactions taking place in the UAE are through mobile devices. With an increasing penetration of OTT-delivered services and multiscreen access to TV and other video, marketing innovation to drive revenues through these growing use models is the winning strategy.

Etisalat has taken a lead in investing in futuristic technologies especially LTE, to meet these increasing demands in the market. With this investment, Etisalat has also continuously launched a great value added services meeting the requirements of consumers as well as enterprises.

Where does fixed wireless come into your planning and if so what technologies will you be using?

Currently Etisalat is using WiMax and is trialling LTE for triple-play services. Due to the portability of the WiMax technology, it has seen high adoption among enterprises in the region. It can be quickly deployed to remote locations. In terms of costs it cuts down investments on the network, when compared to GSM and 3G, enhancing speeds and operability at greater distances.

The commercial offering of Etisalat’s LTE service began in December 2011 with the launch of LTE USB modems that enabled customers to access LTE (4G) super-speeds of up to 150Mbps. To date, Etisalat has integrated hundreds of base stations with complete mobility to the 3G network, covering 80 per cent of the populated area of UAE. In 2012, Etisalat successfully tested the world’s highest 4G LTE speeds of 300 Mbps.

Do you see customer resistance to bandwidth caps, line throttling and traffic management?

Currently Etisalat doesn’t have bandwidth caps on fixed services and at the same time have a fair-usage policy to ensure high quality of service to all customers.

What are the biggest challenges you expect to be facing over the next 12 months?

With the upcoming Bitstream project, we expect the competition to increase leading us to bring to market solutions satisfying the needs and requirements of customers.

Maen Haddad, Director/Product Marketing, Etisalat is speaking in the Customer Experience Improvement Strategy stream at the Broadband MEA conference, taking place on the 19th-20th March 2013 at the JW Marriott Marquis Hotel, Dubai, UAE, Dubai, UAE.

Source: http://mea.broadbandworldforum.com/director-product-marketing-etisalat/

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