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Finance Minister Malusi Gigaba delivers his budget address at Parliament in Cape Town, South Africa February 21, 2018. REUTERS/Mike Hutchings - RC1CDF261880
Africa in focus

Africa in the news: South Africa’s 2018 budget, Tanzania’s new mining regulations, and Nigeria’s electricity loan

South Africa announces budget for 2018 and raises VAT rates for first time in 25 years

On Wednesday, February 21, as part of his budget speech, South African Finance Minister Malusi Gigaba announced an increase in the (value-added tax) VAT from 14 percent to 15 percent. This is the first increase in the VAT rate in 25 years. Justifying his decision, Gigaba said, “Increasing VAT was unavoidable if we are to maintain the integrity of public finances.” The increase in the VAT is expected to raise an additional 2 billion dollars in revenue for the government in 2018. The opposition reacted strongly to the increase, with opposition leader Mmusi Maimane calling it “an assault against poor people” and the result of “nine years of mismanagement of the economy by the ANC.” The VAT increase along with budget cuts of 85 billion rand ($7.3 billion) over the next three years is expected to help narrow the budget deficit and stabilize the country’s credit rating. According to Bloomberg, the proposed budget should help the country avoid another credit downgrade by Moody’s, the only major rating agency that presently ranks the country’s debt at investment grade. 

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The budget also included several other smaller tax increases such as a 52-cent per liter hike on fuel and the excise duty on luxury goods rising from 7 to 9 percent. The budget also raises the forecasted growth for 2018 to 1.5 percent from the 1 percent estimated earlier.

Tanzania enacts strict mining laws to encourage local businesses and competition

Earlier this week, the government of Tanzania passed a law setting out strict parameters on licensing, equipment procurement, and banking for foreign mining companies operating in Tanzania. The law, which gives companies three months to comply, was created to increase the competitiveness of local firms, encourage local hiring and expenditures, and continue to prevent corruption and illegal practices. Specifically, foreign companies and contractors must hold accounts in local banks that are majority Tanzanian shareholders; they must be insured by local firms; and they must obtain licenses in order to use services outside the country. Also, according to Reuters, foreign-owned mining companies must offer shares to local and government companies. In addition, local, domestic companies will be given preference when it comes to procurement or mining licenses. 

Tanzania has seen a major shakeup of its mining industry over the past year. In October 2017, President John Magufuli split the Ministry of Energy and Mining in two. In July 2017, the government passed a law that both increased taxes on mining operations and requires that the government own at least a 16 percent stake in mining projects. Authorities have also been cracking down on illegal mining and mining practices, shutting down companies’ operations temporarily for audits and unpaid taxes, and aggressively seizing and fining illegitimate shipments.  It also banned the export of unprocessed minerals.

Nigeria receives $486 million loan for electricity generation and Boko Haram strikes again

This week, the World Bank approved a $486 million credit facility to improve Nigeria’s electric grid, which has struggled to meet demand in the past. The investment, as part of the Nigeria Electricity Transmission Project, will increase power transfer capacity of the transmission network and enable distribution companies to supply consumers with additional power. The increased electricity generation should spark change in the country’s access to energy as, historically, there has been a rather high reliance on expensive back-up generators to fill the electrical void. Relatedly, the Nigerian Federal Executive Council has initially approved a memo presented by the Minister of Transportation Rotimi Amaechi for the construction of a rail line connecting the state of Ibadan and Oyo. The project is estimated to cost $6.7 billion, with a completion period of three years if the estimated costs and completion time frame remain on track.

In other Nigeria news, Monday night, Boko Haram militants attacked a boarding school in Dapchi, in northeast Nigeria and abducted a number of children. On Wednesday, government officials revealed that 76 schoolgirls were rescued while approximately 13 remain missing. This attack comes near the four-year anniversary of the abduction of the Chibok girls. In recent weeks, Nigerian courts have been trying Boko Haram militants. According to a Justice Ministry statement put out on Monday, a Nigeria high court convicted 205 Boko Haram suspects for their involvement with the group. Conversely, due to lack of evidence, Nigerian officials released hundreds of Boko Haram suspects who were accused of either belonging to Boko Haram or having concealed information about the group’s plans and whereabouts.

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