Group Managing Director (MD) Guido Giachetti welcomed guests to the swanky Masa Centre with clear message that the group would hit the ground running regionally in Mozambique, Namibia and South Africa. The scale and geographic scope of the countries , to him, provides undoubted opportunity. More so that in Namibia sites for development of convenience shopping centres in Katima Mulilo & Tsumeb have been secured. Land allocation for the other 3 sites is in progress and construction is expected to start within the next six months, according to a publication from the company.
In Mozambique shareholders have already signed for the development of two convenience shopping centres; one which is said to be a partially completed centre in Xai-Xai and the other a new build in Maputo (Zimpeto suburb). The owners of Masa Centre expect construction to start within the next three months. The group’s interests in the developments in Mozambique will be held through two registered Mauritius subsidiaries of RDC Properties International (Proprietary) Limited, and a 100 percent subsidiary of RDC Properties Limited.
It’s been more than a year now since RDC has been studying the markets and the findings have eased Gaichetti’s fears of the financial uncertainty, especially in Mozambique. “IMF has stabilized the currency and the country is picking up” his sentiments are emblematic of Christopher Low, the MD at the helm of the colossal micro finance lender Letshego Holding Limited, even during a period in which forecasters have become more pessimistic about the southern African country’s prospects. The World Bank has downgraded its forecasts for Mozambican growth in 2017 and 2018 by 2.5 percent and 1.4 percent respectively, to the still respectable figures of 5.2 percent and 6.9 percent.
Mozambique is best known by investors for its past as the scene of economic meltdown, when the Metical, its currency suffered bouts of depreciation against trading partners. The Mozambican Metical was among the 10 biggest depreciating currencies in the world in 2016. It lost 60 percent of value against the Botswana Pula. Market gurus argue that should new investments be leased denominated in the country’s currency, losses are inevitable at such times of uncertainty.
Thankfully, Gaichetti says leases are in Dollars. Yet the Dollar is also trading sideways overshadowed by sentiments borne by the drama of United States President Donald Trump’s administration and the US rate confusion. This past week has been a tough week for the greenback. It depreciated by 1.44 percent against the domestic currency, Motswedi Securities points out. “The weakness prevailed following a rather dovish interest rate outlook by the Feds, after hiking the previous week. The bone of contention, well reduced optimism or calls for more than 2 more hikes for 2017.” Further pressure was placed on the Dollar by waning confidence in ‘Trumpflation’ as markets watched with caution how the Senate would vote on Trump’s healthcare bill, which eventually never saw the light of the day. On Wednesday, the dollar pulled back, “Some fed members have come out affirming further rate cuts for the year.”
Gaichetti confidently argues the Dollar has a little movement compared against the Pula. “The dollar is still much stronger than Pula.”
Tshephang Loeto, a Financial Analyst at Investec says the Pula performance is mainly driven by how the Rand performs against the Dollar. “So during the just ended year we saw the Rand appreciating against the Dollar and this filtered into the Pula given that the Rand has the biggest weight in the basket.” If a property company decides to repatriate the USD into Pulas, he argued that it would have to crystalize this negative performance given that it occurs at a period when the Pula may be doing well. “However, if not crystalized, on paper these are just translating losses that are for reporting currency purposes.”
Elsewhere in Namibia RDC says land has been purchased, the notarial deed signed and registered with land rezoning in progress. The MD says leases will be denominated in Rands which he admits has considerable exposures. The past week’s Rand performance has been at its prime thanks to recently published positive macros in South Africa. Available data showed that inflation for February penned down lower at 6.3 percent, down from 6.6 percent for January while the current account deficit for the 4th Quarter of 2016 narrowed to 1.7 percent bringing the yearly average to 3.1 percent compared to 4.1 by the previous year. The Rand appreciated by 1.33 percent against the Pula for the past week.
That momentum was short-lived. South African Media detailed how President Jacob Zuma instructed the Minister of Finance, Pravin Gordhan and Deputy Minister Mcebisi Jonas to cancel an international investment promotion roadshow to the United Kingdom and the United States and return to South Africa. This has fuelled speculation of a cabinet reshuffle. While markets await, pundits generally feel that the weeks ahead could prove critical for South Africa’s political and economic stability. An impact that may influence RDC as it is exploring opportunities in South Africa after acquiring shares in a private placement of property Listed REIT.
The last time Zuma replaced Gordon, the Rand dropped to record lows against the Pula. This Wednesday “the Rand traded sideways for the day, with rumours of the sacking of both the Finance minister and his right hand man abating. The divergence between the President and those at helm of the National Treasury could not be more apparent, and more costly to the Republic of South Africa,” researchers at Motswedi Securities Garry Juma and Moemedi Mosele wrote. “Political risk is priced in for a cabinet reshuffle, however it appears the president got a pushed back on his agenda by senior members of the ANC, possibly buying Gordhan and Jonas a little more time.”