Tuesday, 21 October 2014

How large is Tanzania's GDP,how robust her growth?

 These questions will be robustly answered come the end of this month when Tanzania re-bases her GDP accounting period to 2007.

Tanzania will re-base her GDP accounting year to 2007 from 2001. The re-base will rope in new sectors and is expected announce a new larger GDP. Economists estimate that Tanzania's GDP  is between 20 and 25 per cent larger than current estimates.

 According to Daily News, at the end of 2013, Tanzania’s GDP stood at US$33.26 billion. Economists therefore estimate the GDP to have been anywhere between US$39.5 billion and $42 billion by the end of 2013. This will be confirmed at the end of this month when a new base year and new GDP are announced.

Re-basing of the national account series (which includes the GDP) is the process of replacing an old base year with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared.

Re-basing is meant to reflect recent developments in the economy and expand the basket of consumer goods to reflect changing tastes and preferences. Consequently, countries re-base their economy once in a decade although the UN recommends that re-basing be done every five years.

The structure of the Tanzanian economy has changed dramatically since 2001 with new industries coming up especially in the mining sector. The services sector has also posted tremendous, discernible growth with the telecommunications sector growing from an estimated 500,000 telephone lines in 2001 to nearly 28 million as at the end of March 2014.

 In 2001 internet communication was through cyber cafes and was expensive. To date internet is available on the majority of handsets. There was no mobile money transfer then, now it is diffuse.

Although there were some LNG resources at Sonko sonko, they were not fully exploited and the quantity of LNG available in Tanzania is estimated at 53tcf.

Concomitant with the elevation of GDP will be the rise in GDP per capita  which will see the country move closer to achieving its target of being a middle income economy by 2020. Estimates based on the 2012 census place the population of Tanzania at 47 million. This works to a GDP per capita $894 compared to $708 in the current estimates.

 And given the new larger economy, the growth rates per quarter and per year will also change. Economists say they will not be surprised if Tanzania has been posting double digit growth for a while now.

 There are benefits too such as the decline in national debt to GDP ratio which by end of April stood at US$17.853, says the Central Bank of Tanzania.  At the old estimates this amount of debt was the equivalent of 53 per cent of GDP.

 A debt ratio higher than 50 per cent of one‘s income is considered irrational. However the new base year will trim the debt ratio to 42 per cent of GDP. Tanzania will thus be comfortable to borrow US$1 billion in the Eurobond Market.

Thursday, 16 October 2014

Kenya the hottest oil scene in Africa?

THE FAST PACED NEWS  of oil discovery -after -discovery is making Kenya the hottest oil scene in Africa. And investors are trooping in. Not even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere in Kenya, where commercial oil production is expected to begin in 2016 .

When it comes to new oil and gas frontiers, today it's all about Africa. And more specifically, it's all about the eastern coast, with Kenya the clear darling--not just because it's outpacing neighboring Uganda by leaps and bounds, but also because despite some political instability hiccups and the threat of militant al-Shabaab, it's still one of the safest venues in the region.

Six of the last 10 biggest finds have been in Africa, where—all told--there are some 130 billion barrels of crude oil waiting to be tapped by more than 500 companies, according to a recent report by PricewaterhouseCoopers.

Topping this list are Kenya's Anza and South Lokichar basins where the discovery and development news has been fast-paced.  Earlier estimates indicated that Kenya sits on 10billion barrel of crude. Read http://eaers.blogspot.com/2013/03/kenyas-oil-deposits-can-run-her-for-300.html  Now  that number appears small as more estimates keep coming in. 

In the last days of August, Tullow Oil—the British explorer behind Kenya's oil discovery debut in 2012—announced another oil find that will extend the already proven South Lokichar basin "significantly northwards."
Earlier this year, in May, Tullow and partner Africa Oil Corporation left a hefty impression on the market with the announcement of the country's first commercial oil discovery, worth $10 billion, in this basin.

And the next testing ground will be the neighboring Kerio Basin, which should get off the ground later this month, while there has been a flurry of attention lately surrounding the Ogaden basin where initial estimates are enough to send stocks soaring.

In the meantime, while bigger players such as Tullow and Africa Oil have benefited from the fame of their initial discoveries, they have also become burdened by the pressure of rising expectations for more discoveries. Not so the smaller players on this scene, who stand to benefit from the original discoveries and continued drilling—without the pressure. Investors will now be looking at who is poised to make the next discovery.

Africa Oil and Marathon are currently drilling an appraisal well on the Sala gas discovery in the Anza Graben Basin onshore Kenya, which will benefit other explorers with acreage just south of this, including UK-listed Afren Plc, UK-listed Tower Resources and Taipan Resources Inc, which has two onshore blocks in key basins. If these explorers come up with their own first find, it will be a superior risk-reward scenario.

In the Ogaden Basin, the market will certainly take notice of Afren's new estimates late last month that a large under-explored sub-basin, El Wak, contains up to 6.65 billion barrels of oil. If this estimate is accurate—and it comes in well above partner Taipan Resources' earlier estimates of about a quarter of that—they would be looking at the largest onshore target ever drilled anywhere in Africa. Later this year, Afren will be conducting seismic surveys to further define El Wak's potential, and investors will be watching closely.

The bigger picture, though, is of an East African country that has the advantage over its neighbors due to a convergence of add-on factors, including infrastructure aims, relative stability and what appears to be a smarter use of natural resources to generate more investment and economic growth, according to Jennifer Cooke of the Center for Strategic and International Studies.

Among other planned infrastructure projects of a massive scale, discussions are under way for a pipeline from neighboring Uganda, which would pass through the South Lokichar basin and come close enough to some of the prime drilling areas that could be the site of Kenya's next discoveries.
The World Bank's approval in July of $50 million for the Kenyan government to boost its management and distribution of natural resource revenues, with an eye on long-term sustainable growth, has provided further confidence for developments in the region. 

In the meantime, political stability has also been given a slight reprieve with the International Criminal Court's (ICC) indefinite adjournment of the trial against Kenyan President Uhuru Kenyatta due to lack of evidence that he organized post-election ethnic violence in 2007.

But the security situation with the regrouping of the Somalia-based al-Shabaab militant group and an uptick of the group's apparent attacks on Kenya continue to be problematic, even more so because no one seems to be sure whether the threat is emanating entirely from al-Shabaab.

While this remains a clear threat, it has not affected exploration and development—and it certainly has done little to scare foreign investors from this hydrocarbon frenzy that is expected to continue over the next five years, further boosted by relatively cheap exploration licenses. 

In this race, Kenya is the top contender, moving forward at double the speed of neighboring Uganda which discovered oil in 2006, six years before Kenya, but will lag a year behind the newcomer in terms of commercial production.
From Oil price.com

Tuesday, 7 October 2014

Kenya is Officially a middle income country

KENYA is now a middle income country.  Its GDP is US$55.2 billion, 25 per cent higher than the previous estimate of US$44.1 billion, says the national statistics office. The Office carried out a rebasing of the GDP accounting period from 2001 to 2009. The exercise established that the Kenya economy was larger than office data since 2006.

Further, the rebase established, the economy more than doubled in the eight year period to December 2013, rising from US$25 billion in 2006 to $55.2 billion in 2013- a 214 per cent increase.  The previous estimates indicated that the economy grew by 196 per cent over the same period from US$22.5 billion to US$44.1 billion.

 Consequently, the rebasing found that GDP per capita has risen to US$1246, catapulting the country into a middle income economy. The World’s bank entry into middle income economy is US$1035, meaning that Kenya has just passed the threshold.

  Although the findings of the rebasing vary from this publications' earlier  findings which stated that Kenya's per capita income has risen to US$1040.55 from US$991 last year. Go to  http://eaers.blogspot.com/2014/01/kenya-enters-middle-income-class.html, they are generally in tandem with the thrust of our reports. The rebase established that Kenya entered the middle income level in 2012. Our report had found that the rebase happened in 2013.

 The rebase also improved on another of our earlier reports which stated that Kenya’s GDP would be US$53 billion. That level was reached in 2012 and by December 31, 2013, the economy’s size was $55.2 billion. http://eaers.blogspot.com/2014/07/kenyas-gdp-to-shoot-to-53bn-on-rebase.html.

Following the rebase Kenya is now the 9th largest economy in Africa. Previously, it was number 13 in the continent while it’s GDP per capita has catapulted her to position 7 in the developing world. Previously it was in position 15.

 There were no spectacular changes in the structure of the economy. However, it established that some sectors were grossly under estimated. Among these is the real estate sector, which is a new entrant into GDP calculations. The sector now contributes 8.2 per cent of GDP. It was a sector, that was previously grossly underestimated the review established.

 Previously its gross value added estimates were just below a third of its real value. By 2013 for instance its GVA was estimated at US$941 million while the sector is nearly five times larger. The new data found that the sector’s GVA was US$4.2 billion, the fast growing ICT sector was also in this category. While it’s gross Value Added was estimated at just below one billion dollars, it is worth US$2 billion. Other sectors that were significantly under estimated included agriculture and financial service.

Due to the previous undervaluation even GDP growth rates were not accurate. For instance GDP is 2008 was estimated to have grown by 1.3 per cent. The rebased data shows that growth rate was 0.2 per cent.

But revised after rebasing, the GDP growth rate was higher than estimated in all the years between 2007 and 2013. In 2013 the new base shows, the GDP grew by 5.7 per cent compared to the old system which estimated the growth to have been 4.7 per cent. Consequently all quarterly estimates this year are inaccurate and will need to be revised.

The Kenyan economy is relatively diversified and resilient, even more robust than previously estimated. It has weathered a lot of storms. These include the Post- election violence that hit the country in 2007/08 that left the economy on its knees.  The violence was by followed a string of external shocks that slowed Kenya’s economic performance. These include the Oil shock of 2008 which at one point rose to $150 per barrel followed by the financial crisis in the West and a severe drought in 2010/11. 

Despite this unholy alliance, the economy has trudged along posting a 3.7 per cent growth in 2009, which peaked at 8.4 in 2010 before retreating to 6.1 per cent in 2011.  It edged up to 4.5 per cent in 2012 as fears of the political violence due to elections in 2012 held back economic activity. With elections out of the way, the economy grew by 5.7 per cent last year. And according to World Bank officials last week, poverty has declined to 25 per cent down from 43 per cent in 2009.