Overall market risk: East Africa’s financial markets are set for growth as Central Bank governors in the region implement measures to curb inflation and drive economic recovery. Both inflation and global economic dynamics have significantly influenced monetary policy directions.
Looking ahead to late 2024, Stanbic Uganda forecasts an appreciation of the Uganda shilling and a stable trading environment for the Kenya shilling, supported by seasonal trends and prudent monetary strategies. This aligns with broader trends in the region, where central banks are taking proactive steps to address inflationary pressures and foster economic stability.
In countries with well-anchored inflation expectations, such as South Africa, Kenya, Rwanda, and Mozambique, there is room for monetary easing, as some have already begun reducing interest rates. This trend highlights the strategic flexibility central banks employ to balance growth and inflation. Overall, the financial outlook for East Africa appears optimistic, underpinned by thoughtful monetary interventions and improving regional dynamics. (CNBC Africa, World Bank).
In the fertilizer market, India’s IPL has dominated attention in the Urea sector. Early November saw Urea prices dip as buyers hesitated, awaiting the results of a tender for over one million tons. Despite expectations for a price surge after the tender’s closure on November 11, oversupply continued to push prices lower. In the phosphate market, the Ethiopian Agricultural Businesses Corporation (EABC) has emerged as a key player. Weak global demand has driven both traders and producers to look to Ethiopia as a significant alternative market.
Availability and Affordability: In East Africa, farmers are transitioning from the short rain season and preparing for the dry season in January-February, which has led to lower fertilizer demand. Meanwhile, traders and importers are positioning their fertilizer stocks ahead of the main season next year. In Kenya, about 670,000 MT of fertilizer has been imported, covering 89% of the annual demand, with no shortages expected for the rest of the year. Tanzania has imported 400,000 MT, 70% of its annual consumption, and the government continues to provide fertilizer subsidies. In Malawi, imports from January to October total 287,686 MT, which is over 100,000 MT short of the national average consumption of approximately 400,000 MT.
High fertilizer prices are a growing concern as the planting season approaches, with rising prices attributed to foreign exchange issues. In Ethiopia, the EABC has secured 700,000 MT of DAP for the 2024/25 season and closed another tender for 200,000 MT of Urea. A surge in demand for basal fertilizers is expected in southern and central Mozambique, where recorded rainfall since October may slightly increase fertilizer prices. In South Africa, fertilizer imports have decreased due to the end of the solid period season (July-September), resulting in lower trading activity.
Distribution: Overall, most ports in the East region are operating normally.
The protests in Mozambique have disrupted key trade routes, including the closure of the border with South Africa and potential blockades of the Beira and Maputo ports. These disruptions are impacting regional trade, particularly for landlocked countries like Zimbabwe, Zambia, and the Democratic Republic of Congo, which rely on these routes for exports.
Freight costs have remained relatively stable month on month. From Baltic to East Coast Africa is 74$/ton while to South Africa is 43$/ton. From the Middle East to East Coast, it is 21$/ton and to South Africa is 19$/ton.