Sub-Saharan Africa's growth slows - A look at Nigeria and Kenya
A report by Renaissance Capital
Low commodity prices, soft global demand and domestic structural constraints have conspired to slow growth in Sub-Saharan Africa’s oil exporting and importing countries alike. We lower our 2015 growth forecast for Kenya to 5.2 percent (versus 6.0 percent previously), and highlight downside risks to Nigeria’s.
Kenya: Quicker growth is deferred
We expect the (investment-driven) acceleration in Kenya’s growth to be deferred, partly due to tighter monetary policy. Although growth quickened in 1Q15 to 4.9 percent YoY, from 4.7 percent YoY a year earlier, it was softer than the previous quarter’s growth of 5.5 percent YoY. Over the past two months, we have seen the central bank hike the policy rate by more than the market expected – 300bpts to 11.5 percent –to defend the weakening shilling. We expect further hikes in 2H15 from a more proactive central bank – and as such we increase our YE15 rate view to 13.0 percent, from 11.0percent initially – to contain the vulnerable shilling.
But it will slow credit growth from 19.6 percent YoY in March, which is negative for consumption and private sector-led construction activity. We expect insecurity to continue to dog tourism, which means the hotel and restaurant sector’s decline may persist. We also see exports underperformance continuing, partly due to a lack of competitiveness that is undermining manufactured exports. Given these headwinds and softer-than-expected 1Q15 growth, we lower our 2015 growth forecast for Kenya to 5.2 percent, from 6.0 percent.
Nigeria: Mounting headwinds on the supply side
The downside risks to Nigeria’s growth outlook continue to mount. On the supply-side this includes fuel shortages. These are expected to recur in the near term, partly because fuel marketers will not supply petrol until they have been paid the $1.5 billion arrears that they believe is due to them. Fuel scarcity has the potential to bring the economy to a halt, as transportation stalls, generators fail to produce power, which hinders the operations of banks, telcos and industry.
On the demand-side, Nigeria’s headwinds include unpaid salaries, a fall in government spending and the de facto import ban. Unpaid salaries to government workers (who make up about one-third of the 11 million formal workforce) were estimated to be $2 billion in 2Q15, by the transition committee. As the government is the formal sector’s biggest employer, this has material implications for consumption. The de facto ban on 41 items, including poultry, rice and building materials, is negative for consumption and makes it harder to invest, which is negative for growth. The prices of these items are likely to rise in the short term, on the back of this policy. We see inflation at roughly 13 percent at YE15, from 9.0 percent YoY in May. The halving of the oil price implies government spending is a fraction of what it was a year ago, which is negative for growth. We think our 3.4 percent growth forecast for 2015 (which we lowered from 4.5 percent in our 14 April note) accounts for some of these risks and allows for a further slowdown from 4.0 percent YoY in 1Q15 during the course of the year.
5 minutes with... Janthana Kaenprakhamroy, CEO, Tapoly
Founder and CEO of award-winning insurtech firm Tapoly, Janthana Kaenprakhamroy heads up Europe’s first on-demand insurance platform for the gig economy, winning industry awards, innovating in the digital insurance space, and leading with inclusivity.
Here, Business Chief talks to Janthana about her leadership style and skills.
What do you do, in a nutshell?
I’m founder and CEO of Tapoly, a digital MGA providing a full stack of commercial lines insurance specifically for SMEs and freelancers, as well as a SaaS solution to connect insurers with their distribution partners. We build bespoke, end-to-end platforms encompassing the whole customer journey, but can also integrate our APIs within existing systems. We were proud to win Insurance Provider of the Year at the British Small Business Awards 2018 and receive silver in the Insurtech category at the Efma & Accenture Innovation in Insurance Awards 2019.
How would you describe your leadership style?
I try to be as inclusive a leader as possible. I’m committed to creating space for everyone to shine. Many of the roles at Tapoly are performed by women and I speak at industry events to encourage more people to get involved in insurance/insurtech. Similarly, I always try to maintain a growth mindset. I think it’s important to retain values to support learning and development, like reliability, working hard and punctuality.
What’s the best leadership advice you’ve received?
Build your network and seek advice. As a leader, you need smart people around you to help you grow your business. It’s not about personally being the best, but being able to find resources and get help where needed.
How do you see leadership changing in a COVID world?
I think the pandemic has proven the importance of inclusive leadership so that everyone feels supported and valued. It’s also shown the importance of being flexible as a leader. We’ve had to remain adaptable to continue delivering high levels of customer service. This flexibility has also been important when supporting employees as everyone has had individual pressures to deal with during this time. Leaders should continue to embed this flexibility within their organisations moving forward.
They say ‘from every crisis comes opportunity’, what opportunities do you see?
The past year has been challenging, but it has also proven the importance of digital transformation in insurance. When working from home was required, it was much harder for insurers to adjust who had not embedded technology within their operating processes because they did not have data stored in the cloud and it caused communication delays with concerned customers at a time when this communication should have been a priority, which ultimately impacts the level of customer satisfaction. This demonstrates the importance of what we are trying to achieve at Tapoly in driving digitalisation in insurance and making communication between insurers and distribution partners seamless.
What advice would you give to your younger self just starting out in the industry?
Start sooner, don’t be afraid to take (calculated) risks and make sure you raise enough money to get you through the initial seed stage.