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The East African : Dec 12th 2015
MONEY AND EQUITY MARKETS DECEMBER 12-18,2015 DECLINE IN OUTPUT Tanzania mining industry cuts jobs as gold price slumps Acacia Mining Plc and TanzaniteOne have announced plans to shed 1,685 jobs By ADAM IHUCHA Special Correspondent T he tumbling price of gold and poor gemstone output have forced mining companies to lay off hundreds of workers. Two leading mining firms — Acacia Mining Plc and TanzaniteOne — have announced plans to shed 1,685 jobs or 16 per cent of the mining industry’s 10,000 strong formal workforce by the end of this year. Whereas Tanzania’s largest gold miner, Acacia Mining Plc will cut 1,050 jobs in the next few months, TanzaniteOne will lay off 635 workers. Acacia said in a statement that the move to cut back on staff was taken in response to the current slump in the price of gold and low performance. The world market gold price has fallen from $1,800 per ounce three years ago to $1,072 per ounce last week. “As a result, approximately 1,050 of our people, representing 27 per cent of our workforce, have either left or are expected to leave over the next few months,” Acacia’s statement reads. Bulyanhulu mines will be most affected by the cuts. Acacia also operates Buzwagi and North Mara in northwest Tanzania: . The restructuring is expected to lead to an annual saving of $25 million, prior to a restructuring charge of approximately $11 million predominantly incurred in 2015. This is one of a number of initiatives to ensure costs within the business are optimised and in turn enhance cash flow generation. Acacia is also working to further refine capital expenditure, discussions with contractors and major to improve their rates, rationalise renew suppliers corporate administration spend and ensure its community spending is in line with the corporate strategy . Acacia CEO Brad Gordon says that after honouring its debts in June, Acacia had $145 million cash in its coffers, which fell to $99 million at the end of September. In September 2015, the company reported that it had incurred a $13 million net loss in the third quarter, owing to lower output and high operational costs. “Acacia had been one of the shining lights on the London Stock Exchange but the underperformance in the September quarter led to a 25 per cent fall in our share price relative to our peers” Mr Gordon says. Financial difficulties Tanzania’s largest miner, which has produced nearly eight million ounces over a decade, said the $13 million loss was against a net profit of $28 million in the third quarter of 2014. The loss reflected a 20 per cent slump in revenue to $193 million on the backdrop of declines in output and sales. During the quarter, gold production at the company’s mines fell 14 per cent to 163,888 ounces while sales went down six per cent to 176,116 ounces. The cost of producing an SAVINGS The restructuring is expected to lead to an annual saving of $25 million Acacia had $145 million cash in its coffers, which fell to $99 million at the end of September. Gold production at the company’s mines fell 14 per cent to 163,888 ounces while sales went down six per cent to 176,116 ounces. Costs to produce an ounce of gold rose nine per cent on the year to $1,195 ounce of the precious metal rose nine per cent on the year to $1,195, which Acacia attributed to short-term operational challenges at its Bulyanhulu and Buzwagi mines. TanzaniteOne has justifiedits decision to shed 50 per cent of the workforce by citing the decline in Tanzanite gemstone production. Last week, TanzaniteOne, owned by Sky Associates and the State Mining Corporation announced that it would send way 635 staff out of its 1,284 strong workforce. TanzaniteOne mining manager, Apolinary Modest said that the company was undergoing financial difficulty, thanks to the low production of the precious stone at Mererani Hills in Simanjiro district, Manyara Region. Mining is one of biggest private sector employers in Tanzania, providing jobs for nearly 10,000 people. 49 Uganda adjusts consume≥ p≥ice index By MARTIN LUTHER OKETCH Special Correspondent UGANDA WILL start releasing inflation figures using the new improved series from December 31 after rebasing compilation of the Consumer Price Index (CPI), the statistics body has revealed. The international best practice requires that the CPI be rebased once every five years to reflect the latest consumption patterns and composition of goods and services consumed by households in the country. But the Uganda Bureau of Statistics (UBOS) last rebased the CPI in 2002. Dr Chris Mukiza, the director of macroeconomic statistics at UBOS said the old CPI had more than 1,000 items in the basket of goods and services, but some old items will be dropped and new ones added in the new series. “In the new series, the items are going to be more than double the items in the old CPI basket of goods and services,” he said. UBOS has rebased the CPI figures using the base year 2009/10, which is considered a normal year for Uganda’s economy – one for which data is readily available, and a year with relative economic stability. CPI weights Last year, UBOS rebased Uganda’s gross domestic product (GDP) using 2009/10 as the base year, which revealed that the size of Uganda’s economy had expanded to Ush40.946 trillion ($12.52 billion) compared with Ush34.908 trillion ($10.7 billion) in the 2002 base year — an increase of 17.3 per cent, with new items included. Currently UBOS collects price data from seven centres to compile inflation figures, however, Dr Mukiza says in the rebased CPI, the data collection centres have been increased to 10, to give representative inflation figures across the country. Uganda’s annual head- Hundreds of mine workers have lost their jobs. Picture: File line inflation rate increased to 9.1 per cent for the year ending November, compared with 8.8 per cent for the year ended November 2014. During the same period, annual core inflation grew from 6.3 per cent to 6.7 per cent. While government policy makers use CPI as a measure of consumer price inflation, as an input in the formulation of especially monetary and fiscal policy, statisticians use it mainly as an input in the compilation of economic statistics at constant prices. UBOS collects price sta- tistics through a combination of data collection modes; the frequency of price collection depends on the price behaviour of a particular item Consumption expenditure incurred by resident In the new series, the items are going to be more than double the items in the old CPI basket of goods and services.” Dr Chris Mukiza from UBOS households covered in the CPI includes goods and services commonly purchased from a wide range of retailers and service providers. The CPI weights reflect the relative importance of each item in the basket of goods and services. Rachael Sebudde, the senior economist at the World Bank country office, said that the weights and basket of CPI are based on the spending pattern of consumers. Ms Sebudde added that changes in the CPI represent a weighted average of price changes, pointing out that adjustment or revisions to the weights, which are based on consumer buying patterns, can have a significant effect on the level of the indices. “Things keep on chang- ing because consumers change what they buy and what they spend on different types of items. These adjustments must be factored into the CPI to ensure its continued relevance particularly for monetary policy decision,” she said.
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