Market Atlas Review: Relief, Reform & Unrest Across Africa


Ghana gets World Bank support flagging economy. Tunisia revises growth figures. Nigeria’s reforms move ahead with key NNPC appointment. Egypt protests highlight fiscal challenges. 

Ghana: World Bank supports Ghana in its bid to raise much needed capital but tough reforms will be needed to ensure a return to macroeconomic stability and sustainable growth

World Bank President Jim Kim and Ghanian President John Dramani Mahama
World Bank President Jim Kim and Ghanian President John Dramani Mahama

On August 5, 2015 The World Bank and the Ghana Ministry of Finance agreed on the $220 million loan package, the majority of the funds will go towards the country’s general budget and public financial management reform.  The World Bank also pledged to guarantee $400 million of Ghana’s planned $1.5 billion Eurobond, and a larger $700 million in guarantees for Ghana’s Sankofa natural gas project which needs close to $ 8 billion in additional private investments.

Ghana has gone through a challenging year thus far with a rising current account deficit and downward revisions in its cocoa crop production.  Ghana’s finance minister recently raised his forecast for the 2015 budget shortfall to 7.3% of gross domestic product (GDP),  from an initial estimate of 6.5%.

Ghana seems to be trying to borrow its way out of it financial challenges with the hope that the economy will magically return to the growth rates it experienced earlier in the decade. According the AFDB Ghana’s economy is estimated to grow at 3.9% annual rate this year, a far cry from the 7.3% growth recorded in 2013. The economy is facing pressures from a severe energy crisis and unsustainable debt burdens.

We believe Ghana macroeconomic picture will continue to deteriorate until the country takes steps to reduce its public spending and spur increases in domestic production and consumption.  The government should focus on rationalizing the public sector and making it more efficient.  Ghana would also do well to increase support for the private sector by investing in domestic manufacturing and the service sector.  Ghana should focus on pro-growth policies that would strengthen its domestic economy and increase its tax base. The government is currently trying to borrow its way out of its problems which runs the risk of digging the country into a deeper macroeconomic hole.  

Tunisia: Government make a sharp downward revision on growth and take proactive steps to adjust spending in its new budget


On the 30th of July the government of July passed a supplementary budget where it downwardly revised its short term economic growth outlook.  GDP growth forecast for 2015 where dropped to 0.5% from a previous estimate of 3.0%.  A substantial contraction in tourism due to two major terrorist attacks and a drop in phosphate production due to local strikes are the primary reasons for this downward revision.  

The government also reduced its target for tax revenues by 6.6% to TD19.8bn and raised its target for non-tax revenues by 50% to 2.6bn dinars.  The government expects to receive close to 500m dinars in additional oil revenue and 100m dinars in further donor aid this year.  Overall total revenues have been revised down by $2.1%

Slim Chaker, the Tunisian Finance Minister, said total spending would fall in 2015 by 1.1 billion dinars, bringing down the deficit to 4.8 percent instead of the previously forecast 4.9 percent.  The government is using a 20% reduction in development funding to increase its defense budget in response to the recent spate of terrorist attacks.  

Over the last two years the government of Tunisia has been making substantial efforts to reduce recurrent expenditure and increase capital spending.  While the recent terrorist attacks will slow down Tunisia’s capital expenditure in the short-term, the government is still focused on supporting businesses to prevent a sharp decline in employment.  

Maintaining employment levels would make it harder for Jihadist groups to recruit in the country, support purchasing power and GDP growth, and maintain the popularity of the government.  Continued public support for the government would be critical to allow continued economic reform in the future.  

Tunisia is taking responsible and pragmatic steps to deal with the short-term economic challenges its facing. The government estimates that the adjustment of its budget will reduce its deficit spending by 10 basis points from 4.9% to 4.8%.   We think the country’s long term reform agenda is still intact.  We also see recent pledges by the World Bank and Algeria to lend Tunisia $230m and $100m respectively as a sign that the country still has international support.  

Tunisia is a good example that other countries may do well to emulate.  They are leveraging a good mix of budget reshuffling and disciplined borrowing to get them through short-term economic challenges, while maintaining a focus on sustaining employment and their long term reform agenda.

Nigeria: Positive Signs with the appointment of a new head of the Nigerian National Petroleum Corporation (NNPC)


President Muhammadu Buhari appointed Mr. Emmanuel Kachikwu as the new Group Managing Director of NNPC on Tuesday August 4, 2015.  Mr. Kachikwu is an oil industry veteran and was previously Executive Vice President and General Council of Exxon Mobil.  This is his first political appointment and he has been lauded by former colleagues for his diligence and personable nature, traits that he will need to carry out his new role effectively.

We see this appointment as a critical and positive first step in the long road to cleaning up Nigeria’s embattled oil sector.  All indications show that President Buhari, who has been criticized by some for being “slow” to as yet appoint a cabinet, is focused on finding the right people to reform and rebuild a country plagued by corrupt and weak national institutions.  

Mr. Kachikwu got straight to work by dismissing the eight members of NNPC executive committee the very next day.  The new executive committee will consist of four appointees that are yet to be officially announced.  Mr. Kachikwu’s immediate focus will be to rid NNPC of corruption, lead the recovery of stolen crude oil funds, and transform the operations of NNPC to make it internationally competitive. A herculean task to say the least but attainable with the support of President Buhari who looks dead set to make good on his campaign promises to rebuild Nigeria.

Egypt: Worker protest against civil service law is a reminder of the substantial fiscal challenges Egypt is facing

Egyptian Protester
Egyptian Protester

On August 10 over 2000 public sector employees staged a march in protest of a civil service law that was passed in March.  The protesters charged that the law limits the monthly bonuses and salary increases that they become accustomed to.  Workers are beginning to feel the effects of double digit inflation on their purchasing power as their incomes have stagnated.  The protesters also complained that the civil service law empowers lower-level managers which has led to increased incidences of nepotism and favoritism.  Managers now have the power to fire employees and replace them with friends and relatives.   

The law was passed through a decree by President Abdel Fattah Al-Sisi, the Egyptian government has been operating without a parliament over the last year.  Workers complained that they were not consulted by President Al-Sisi before the law was passed.  The unions are planning another protest on the 17th of August and an all-out strike at the end of the month if their demands are not addressed.

The Egyptian government is trying to manage real fiscal challenges through medicine that could prove worse than the disease. The masses are frustrated by favoritism like the kind that exempts Judges from the maximum wage rule in the civil service law.  They are also unhappy with the dictatorial approach of President Al-Sisi is taking to pass laws that are rife with loopholes and don’t seem to be well thought through.  

Egypt is clearly still being run by an establishment that is intent on maintaining its position of influence and power.  A government that continues to ignore the cries of the masses may see itself back in the midst of a popular revolt.  Hopefully the government will be wise enough to make the necessary concessions to avoid a crisis that would further exacerbate its economic problems.     
Every fortnight in partnership with Market Atlas, Ventures Africa brings you data, insight and analysis on  events that will affect market conditions across Africa’s economies. 

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