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The East African : Mar 23rd 2015
The EastAfrican 44 STRUGGLING TO STAY AFLOAT EA currencies slide against strong dollar Uganda, Tanzania shillings take the biggest dip. Kenyan shilling and Rwandan f≥anc have also fallen By ALLAN OLINGO The EastAfrican dollar in the past two months, with the Ugandan and Tanzania shillings taking the biggest beating against the greenback. The dollar, which has surged on E expectation that the US Federal Reserve will raise interest rates, has seen the Uganda shilling lose 6.8 per cent, while the Tanzania currency has shed 5.6 per cent since the beginning of the year. The Kenya shilling has lost 3.1 per cent, and the Rwandan franc 2.4 per cent. Uganda blames increased corpo- rate demand for dollars and uncertainty over the government’s fiscal management and spending before the 2016 elections. By the end of last week, the Bank of Uganda had intervened for a record 10 times since the start of the year, selling dollars on the market to boost the shilling after it hit a low of 3,116/3,126 two weeks ago. BoU communications director Christine Alupo attributed the shilling’s weak performance to increased demand for dollars from the corporate sector, who are seeking to fund imports, and dividend payments to foreign shareholders following improved profits. “We have intervened by selling dollars several times this year to stem volatility and restore stability to the market,” Ms Alupo said. By the close of trading last week, ast African currencies have been struggling against a strong the Uganda shilling had dropped to Ush3,000.40, before gaining 0.42 per cent when the central bank sold an unspecified amount of dollars. Benoni Okwenje, a currency trad- er at Stanbic Bank Uganda Ltd, told Reuters that the shilling’s weakening can be attributed to investor apprehensiveness over expected pre-election government spending. “Foreign investors are selling off their government debts in the fear that expected government spending will fan inflation,” Mr Okwenje said. Last week, the Central Bank of Kenya announced plans to mop up $109 million in excess liquidity from the money markets using repurchase agreements and term auction deposits. According to research firm Stratlink Africa, since the beginning of the year, CBK has mopped up $448.1 million from the market. The shilling started the year at Ksh90.72 to the dollar, and is currently trading at Ksh92.14, with analysts at Standard Bank, Citi, Barclays Africa and Consensus Economics Forecast predicting that it will depreciate to about Ksh94.70 by the end of the year. Barclays head of Africa macro- economic and strategy research Jeff Gable said that they expect the Kenya shilling to continue to weaken against the dollar because of the the country’s sizeable current account deficit. After a two-year period of stabil- ity, the Tanzania shilling came under pressure from a stronger dollar BUSINESS MARCH 21-27,2015 Da≥ sta≥ts block t≥ain fo≥ ca≥go business By HELLEN NACHILONGO Special Correspondent TANZANIA HAS secured Tsh138 billion ($76.8 million) to expand its rail network to East African countries after the introduction of a block train scheduled to start operations next week. The train will speed up the movement of goods from Tanzania to other countries. On a block train, all wagons Regional currencies have been falling against the dollar. Picture: File CURRENT TRADING Against the dollar, the Uganda shilling is trading at Ush3,116, the Kenya shilling at Ksh92.14, the Tanzanian shilling at Tsh1,843, and the Rwandan franc at Rwf685. The Kenya shilling has been performing poorly against the Tanzania shilling, trading at a in 2014, particularly in the second half, depreciating by 8 per cent. In the three months of 2015, it has depreciated by 5.6 per cent to the dollar and is now trading at Tsh1,843. Barclays Bank predicts that it will average Tsh1.838 against the dollar in 2015 and Tsh1,912 in 2016. The Tanzanian currency’s poor performance has been blamed on demand for the dollar by the oil and manufacturing sectors, coupled with the delay in budget support from donors that has weighed on the shilling and stalled public spending. Last week, the World Bank and the African Development Bank said weighted average of 20.7 in March, representing a 6.6 per cent depreciation. It has however strengthened against the Uganda shilling as well as the Rwanda and Burundi francs, helped by a wider export base and strong investor inflows. they would release $44 million of the promised but withheld $500 million for the 2014/15 budget. In Rwanda, the large current ac- count deficit coupled with a stronger dollar will see the franc weaken further in 2015. The franc depreciated by 6 per cent to the dollar in 2013, and 3.5 per cent in 2014 despite regular interventions by the BNR. In the past two months, the franc has lost 2.4 per cent to the dollar. The franc is expected to trade at Rwf698 against the dollar in 2015, and Rwf722 in 2016, representing a 2.4 per cent depreciation in 2015. Comesa moves to ha≥monise seed movement By HALIMA ABDALLAH Special Correspondent COMESA MEMBER states have moved to promote the sale of certified seeds across borders to help achieve food security. Last week, the Alliance for Commodity Trade in Eastern and Southern Africa (Actesa), a Comesa agency, launched the bloc’s seed trade harmonisation regulations to guide trade in seeds and grains among seven member states. Actesa will align country policies and build the infrastructure needed for the success of the project. These activities are slated to begin in April and go on until August. “The programme’s objective is to achieve im- proved functioning of national and regional staple food markets. This will be realised through the outcome of increased regional trade in food, and a greater number of people benefiting from participation in the national and cross-border value chains,” said John Mukuka, a seed expert at Actesa. The volumes of grain traded within Comesa remain low owing to the different rules governing cross-border trade. Actesa data shows that the Comesa seed trade is worth about $1.3 billion. The global seed trade value stands at $45 billion. FoodTrade East and Southern Africa will fund the programmes through Actesa to the tune of $1.774 million over the next three years. The beneficiaries are Burundi, Kenya, Rwanda, Uganda, Zambia, Malawi and Zimbabwe. “The programme’s objective is to achieve improved functioning of national and regional staple food markets.” John Mukula, seed expert at Actesa The funds will go towards the investment and development aspects of the project, especially innovative business models that deliver solutions. The development funds will be invested in micro, small and medium enterprises, including non-governmental organisations that help smallholder farmers access improved seeds and unlock policy bottlenecks and capacity constraints. “This will be achieved through providing in- vestment support to private companies involved in grain trading, as well as to non-profit companies,” said Daniel Njiwa, regional trade policy expert at FoodTrade. Seeds will be traded among countries free from the current encumbrances; some countries have regulations that do not allow entry of seeds except for research. Seed companies will have bigger markets to supply. There are about 80 million farmers within Comesa. The Dar es Salaam railway station. Picture: File carry the same commodity and are shipped from the same origin to the same destination, without being split up or stored en route. The main benefit of the block train is a shorter journey time compared with the system of single wagons shipments. According to Permanent Secretary in the Ministry of Transport Shaaban Mwijanka, the government has already spent $40.7 million to purchase 19 locomotives. “Our port is now an entry point to the East and Central African markets. In a bid to ease transportation of goods, Tanzania has decided to invest in a block train,” Mr Mwijanka said. He said the block train will start its route from Dar es Salaam to the northwestern towns of Kigoma and Isaka. One locomotive will be able to pull 21 wagons and carry 880 tonnes of cargo. Mr Mwinjaka said goods like fertiliser, cement, sugar and food products can be moved in bulk. Tanzania Railway Ltd director general Kipallo Kisamfu said the TRA plans to transport up to three million tonnes of cargo by 2016, up from 200,000 tonnes transported in 2012. Over the past five years, the overall cargo handled by all ports in the country has been increasing at an average rate of 13.4 per cent per year. Cargo increased from 7 million tonnes in 2008/09 to 11 million tonnes in 2012/13. Bulk liquid cargo through the port of Dar es Salaam increased from 2.4 million tonnes in 2008/09 to 4.3 million tonnes in 2012/13, an increase of 19 per cent per year.
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