Africa's top 4 economies are in trouble

Growth in Africa has outpaced most emerging markets in recent years, but that's changing fast as a slew of problems beset its leading economies.

Cheap oil, political uncertainty and weak banks are all to blame.

Here's what you need to know about sub-Saharan Africa's big four:

South Africa

The prospects for Africa's most advanced economy are not looking good. The country is set to grow by just 0.6% this year, according to the International Monetary Fund. It's one of the slowest growing countries in one of the world's fastest growing territories.

The rand plummeted 30% last year, and not just because of an emerging market sell-off. Political turmoil has also had a big impact.

Just this month, South African President Jacob Zuma survived impeachment despite the highest court in the land finding him guilty of breaching the constitution over how public money was spent renovating his home. Well known figures from the anti-apartheid struggle are now calling for Zuma to step down.

Chaos in government isn't helping either. Zuma stunned investors by replacing Finance Minister Nhlanhla Nene with a little known politician. The president then backtracked and asked Nene's predecessor Pravin Gordhan to take the position in order to stop the rand's freefall.

The rand has steadied this year, rallying by about 7%. It's been helped by a broader rally in markets driven by rising commodity prices. As a platinum, gold and coal producer, South Africa is sensitive to shifts in the commodity cycle.

But the country is not out of the woods yet. It's on the brink of a ratings downgrade that would plunge its sovereign debt into junk status.

Still, investors are showing some renewed confidence, buying up $1.86 billion worth of bonds so far in 2016 -- the best start to a year since 2010.


Africa's largest economy is buckling under the low oil price.

Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country's budget. For an emerging market that can only mean one thing -- slower growth.

The West African nation is expected to clock in growth of 2.3%, the lowest rate in 15 years, according to the IMF. Its facing a shortfall of $11 billion in its 2016 budget.

Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility that would be tied to policy reforms.

It has drawn down its currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for companies and two South African businesses have already pulled out.

Index compiler MSCI is considering removing Nigeria from its frontier market index because the restrictions have made it harder for investors to repatriate money.

To make matters worse, the country is facing a fuel crisis. Despite being Africa's largest oil producer, it has never had enough refining capacity, and the scarcity of dollars is making it harder for importers to bring gas into the country.

The war against Al-Qaeda linked terror group Boko Haram, which the government has vowed to eradicate, is placing further strain on the country's finances.


What was once one of Africa's fastest growing economies is now on its knees and asking for help from the IMF. Angola is Africa's second largest oil producer and relies on oil for 95% of government revenue.

After debuting on the international debt market last year, the country appears unable to meet its budget and debt obligations. It has requested assistance from the IMF in the form of monetary support.

Angola is also bound to money-for-oil deals with China. It has used oil as collateral for loans from China, and that is further squeezing state finances.

The country is set to grow by 3.5% this year, down from 6.8% in 2013, according to the IMF.


Kenya's economy is more resilient and diversified but there's trouble brewing in its banking sector.

Three banks are being wound down by the central bank. Two of the banks failed last year, and a third was forced into the arms of the lender of last resort this month. A fourth bank is being investigated, and analysts believe consolidation in the industry is inevitable.

The East African nation has 43 banks, most of which have overstated profits and are buckling under the weight of non-performing loans and a big fall in deposits. A dozen banks may end up under central bank control as it tries to clean up the sector.

All this is weighing on Kenya's growth prospects: The IMF has just cut its forecast to 6% for 2016, down from 6.8% previously.

Source: FOX NEWS

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Goodyear is working on spherical tires

Goodyear thinks that if we're going to reinvent the car, we might as well reinvent the tires too.

The tire maker has revealed a new concept: spherical rubber tires that can move in any direction. For a self-driving car without a steering wheel, why not try something radically different?

Goodyear (GT) says its Eagle-360 tires would allow self-driving cars to navigate tight spaces, such as parking spots or busy city roads. Instead of axles, they'll connect to the car using magnetic levitation -- potholes would no longer ruin your suspension, since your car would essentially float above its tires. Goodyear said magnetic levitation would deliver a remarkably smooth and quiet ride for passengers.

The spherical tires also have the advantage of having way more surface area than cylindrical tires, so your treads won't wear out quite as quickly. And the tires could intelligently rotate themselves to provide even greater tread life.

Goodyear also envisions some new tricks embedded within the tires. For example, sensors inside the Eagle-360 tires could communicate weather conditions to the car's traction control systems. And the tires themselves could stiffen in dry conditions and soften like a sponge in wet weather, adding traction on slippery roads.

"By steadily reducing the driver interaction and intervention in self-driving vehicles, tires will play an even more important role as the primary link to the road," said Joseph Zekoski, Goodyear's chief technical officer, in a statement.

Goodyear acknowledged that the Eagle-360 tires are a far-off-in-the-future concept.

But self-driving cars are already being tested, and industry experts forecast that fully autonomous cars will go on sale by the end of the decade. Today's cars have intelligence built in, communicating with other cars to sense accidents before they happen.

That's why Goodyear has developed a near-term tire concept that it believes could become a fixture of cars in the next few years.

Like the Eagle-360, IntelliGrip tires would have some smarts built in. For example, they would be able to sense the weather and tread-wear and communicate that back to the car and other cars around it. But the IntelliGrip tires would look more like traditional tires, complete with axles, spokes and rims (and no magnets).

Goodyear presented its concept tires at last week's Geneva International Motor Show.

Source: CNN

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Use your tax refund to buy tax prep stocks?

Procrastinators rejoice! The deadline to file your taxes is Monday April 18 -- three days later than usual.

But is there still time to wait for the last minute types of investors to buy leading tax preparation stocks like H&R Block, Intuit and Liberty Tax? Perhaps.

H&R Block (HRB)and Liberty Tax (TAX)(which, despite having Liberty in its name, is not one of the gazillion tracking stocks set up by media mogul John Malone) have been the investing equivalent of a tax audit -- something you really don't want.

Shares of both are down about 25% this year. I hope H&R Block doesn't pay its bow tie wearing pitchman in stock! Ditto for new spokesman Anthony Davis of the NBA's New Orleans Pelicans -- although he's not exactly hard up for cash.

Intuit (INTU), on the other hand, is thriving. The owner of TurboTax is up 7% so far this year.

You don't have to love number crunching as much as an accountant or actuary to figure out why.

Intuit's earnings are expected to increase by nearly 35% this fiscal year and another 25% next year. That's much faster than the growth rate for H&R Block and Liberty Tax.

Related: Answers to tax questions you're too embarrassed to ask

As you might expect though, Intuit is a much pricier stock than its rivals.

It trades at about 24 times earnings forecasts for its next fiscal year -- more than twice the valuations for both H&R Block and Liberty Tax.

But Intuit may be worth the premium as more and more Americans look to do their own taxes instead of shelling out money to get someone to do it for them.

Gil Luria, an analyst with Wedbush Securities, said that Intuit started promoting its services (including free tax filings) more heavily earlier on this year -- and that hurt H&R Block.

Luria conceded that bargain hunters might find H&R Block more attractive than Intuit. It pays a dividend that yields more than 3.3% too, compared to Intuit's yield of just 1.2%.

But Intuit has all the momentum right now. So anybody looking to use their tax refund to buy stocks might be better off investing in Intuit over H&R Block and Liberty.

Source: CNN

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How to read your ridiculously confusing financial aid letter

Congrats on getting into college! Now, how much is it going to cost?

It can be maddeningly difficult to figure out, especially for high school seniors who have just a few weeks left to compare offers and decide where to enroll.

Instead of a straightforward bill, colleges send out what's known as financial aid award letters. The format varies by school, but the actual amount you have to pay often gets lost in the details about the various fees, scholarships and loans.

One of the most common trip-ups is not realizing a loan (money you have to borrow and pay back, with interest) is factored into your estimated cost. It's easy to be fooled. Award letters don't often make a distinction between loans and scholarships (money you don't have to pay back).

A college-bound senior recently received the letter below. It lumps together loans with a grant to get a "Total Estimated Financial Aid" figure, without pointing out that you'd have to pay back a majority of that aid (we did that for you).

Here's a quick guide.

1. Tuition and fees + room and board = ?

Hopefully it will be easy to find the part of the letter that explains how much the total cost is -- before taking any discounts like scholarships into consideration. Make sure it lists ALL costs including, tuition, room and board, any fees, and a meal plan. If it's unclear, call the financial aid office to ask.

2. Look for the words "scholarship" and "grant."

Your financial aid letter may be the first indication that you've been awarded a scholarship or grant from the college. These could be based on your financial need or merit-based, and determined by things like your high school GPA, SAT and ACT scores, or interest in a particular subject. You may also receive a Pell Grant from the federal government, which is based on your family's income.

3. Do you need to borrow money?

Maybe you've won additional scholarships that aren't listed on the financial aid letter. Subtract those from the amount you calculated in Step 2. If there's a remaining cost, this is what you or your parents may have to chip in -- or you might have to take out a loan.

Related: How would you do on the new SAT?

The amount your family can pay is actually calculated by the college, based on information like their income which you submitted on the FAFSA form. This might be noted on your financial aid letter and called something like your "Estimated Financial Contribution" and is used to help determine how much need-based financial aid you received. But it's not exactly what your family must pay.

4. What's the difference between subsidized, unsubsidized and Parent PLUS loans?

You could take out loans to cover the remaining cost. The amount you can borrow from the federal government, which usually comes with a lower interest rate than private loans, should be stated in your letter. There are three different types of federal loans you could qualify for:

A subsidized loan does not accrue interest while you're still in school, but an unsubsidized loan does. Parent PLUS loans are also from the federal government, but they carry a higher interest rate and it's your parent who's ultimately responsible for paying it back. Interest starts accruing right away, like an unsubsidized loan.

Related: Colleges with the best bang for your buck

But you don't actually have to borrow the full amount allocated in your financial aid package. The amount listed for each loan is a maximum set by the government.

Remember, in any case you'll still end up owing more than the loan amount you see listed after you graduate because of the interest.

5. Multiply by 4.

Keep in mind that this is just an estimate for one year of college and you'll likely be going for four years. Looking at the bigger, four-year cost may help you decide whether it's worth enrolling at a more expensive college.

And be sure to see if there's a note about whether your scholarships and grants are guaranteed for all four years -- or just call up the college's financial aid office and ask.




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Apple, IBM, Amazon rallies buck earnings trend

Technology investors have been buying shares of Apple and IBM with both fists during the last three months.

The stocks are up 13% and 14% during that time, almost double the gain of the Nasdaq Composite Index, as U.S. stock markets have come roaring back from steep losses earlier this year.

Yet the Apple (AAPL) and IBM (IBM) bulls have been stampeding right into the face of bearish earnings trends for both tech giants.

For the quarter ended in March, the Wall Street analysts who cover Apple stock expect the company to report earnings of $2 a share, according to Thomson Financial.

That's down significantly from $2.27 a share just 90 days ago, before the company released its last financial report.

The same trend holds for IBM, which reports results April 18. It's seen reporting $2.09 in per-share earnings for the first quarter, a huge drop from expectations of $2.90 three months ago.

Among the 30 most valuable tech firms, the only other company to see such a steep drop in profit estimates is Amazon (AMZN).

Analysts expect it to report earnings of 58 cents a share for the just-ended quarter, down from 88 cents in mid-January.

Unlike IBM and Apple, though, Amazon shares have trailed the broader market for tech stocks and are up 5% from 90 days ago.

Still, the disconnect between falling profit expectations and rising stock prices for all three firms is notable.


It suggests investors have been diving into the big-cap tech names with little discrimination since market sentiment turned in mid-February.

As reported before in this column, earnings-estimate revisions can be a more-timely indicator of Wall Street sentiment on a company than changes in the standard stock ratings of buy, sell and hold.

That's because analysts are slow to change their ratings even in the face of deteriorating fundamentals.

Even while they've been quietly cutting their estimates, no Apple or IBM analysts, and just one Amazon analyst, have cut their recommendation on the companies' shares since their last earnings reports.

That's telling given that all three companies have also seen their full-year profit estimates cut, though not as significantly as expectations for the first quarter.

It's true the shares of all three companies have features apart from near-term profitability that attract investors.


IBM and Apple, for example, pay a dividend that appeals to income investors, while Amazon's year-over-year top-line growth above 20% is among the highest in the tech sector.

Apple, which reports April 25, also consistently beats earnings expectations.

Yet it also faces tougher year-over-year comparisons this year, with revenue seen falling 10% for the first quarter and 3% for the fiscal year ending in September.

Likewise for IBM, with sales seen dropping almost 7% in the first quarter and 4.6% for all of 2016.

Given their falling estimates, those weaker sales are expected to hurt their bottom lines more than Wall Street expected back in January.

So investors buying Apple, IBM and Amazon as part of the current bull run in tech stocks should do so knowing that their recent share-price gains are not supported by the trajectory of earnings expectations.



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Stocks droop, but post a winning week

Stocks dropped slightly Friday after a three-day rally.

It was a quiet end to a winning week as Wall Street digested quarterly data that show China's economy grew at its slowest pace since 2009.

After a three-day rally that saw the Dow Jones industrial average jump nearly 350 points, or 2%, the blue chip stock gauge ended down 0.2%. The broader Standard & Poor's 500 stock index slipped 0.1% and the technology-dominated Nasdaq composite finished down 0.2%.

Overnight, Beijing reported that first-quarter growth came in at 6.7%, which was inline with expectations but marked the world's second-largest economy's slowest pace of growth in seven years. Still, stocks in mainland China's Shanghai composite shrugged off the weaker growth, with shares falling just 0.13%. The major reason for the ho-hum response to more signs of softness in China is the fact that the numbers came in line with investor expectations and still fell between China's full-year estimate range of 6.5% to 7%.

The Dow is coming off a three-day winning streak, fueled in large part by major bank earnings that have come in less bad than expected. Up today is the first-quarter earnings report of Citigroup (C).

An old milestone is back in sight for the Dow, as it closed Thursday just 76 points shy of the 18,000 mark. The Dow last closed above 18,000 back in July.

Source: USA Today

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Oil price recovery will be short-lived, says IEA

A recent rise in oil prices is a "false dawn" and the oversupply of crude is set to worsen, according to the International Energy Agency (IEA).

The IEA expects oil stocks to grow by two million barrels a day in the first quarter and 1.5 million barrels a day in the following three months.

In January, Brent crude hit a 13-year low of $27.67. It recovered a bit, but on Tuesday was down 7.2% at $30.50.

But that is still a long way from the $112 level reached in June 2014.

The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day. It said: "If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term."

Meanwhile demand for oil is expected to weaken. The IEA forecasts that demand growth will fall to 1.2 million barrels a day this year, from the 1.6 million barrels a day seen in 2015, the IEA said.

The think tank also questioned whether the recent rise in prices was a "false dawn" and concluded that a number of conditions increased the risk of weak oil prices.

These included doubts that Opec, the oil cartel, was in talks with other oil producing nations to reduce supply.

It also quashed speculation that Opec nations would cut output this year, stating that output from Iraq reached a new record in January. Iran has increased production ahead of sanctions being removed and preliminary data suggested that Saudi Arabia's shipments had increased.


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China's currency reserves plunged in January

China's foreign currency reserves plunged by $99.5bn in January, the People's Bank of China reported.

China has been running down its vast foreign currency reserves in an attempt to boost the value of its own currency and stem a flow of funds overseas.

At $3.23 trillion, China still has the world's biggest reserve of foreign currency holdings.

But that has declined by $420bn over six months and stands at the lowest level since May 2012.

"While the remaining reserves still represent a substantial war chest, the mathematics around this rapid pace of depletion in recent months is simply unsustainable for any length of time," said Rajiv Biswas, Asia Pacific Chief Economist, IHS Global Insight.

Investor fear

The Chinese authorities fear a rapid devaluation of their currency, as it could destabilise the economy.

Many Chinese businesses hold debt in dollars and managing those debts with a severely weakened yuan could cause problems and some companies to fail.

So China has been trying to engineer an ordered devaluation of the yuan, but that is proving hard to deliver.

Investors have been trying to pull funds out of investments priced in yuan and speculators have been betting on further falls in the currency.

To stabilise the situation China has been selling dollars and buying yuan.

And it has been using other tactics, including curbing currency speculation and ordering offshore banks to retain their reserves of yuan.

Commenting on the decline, veteran economist, George Magnus noted that there is "confusion" over China's foreign currency policy.

"Clearly this can't go on for long," he tweeted, referring to the fall in currency reserves.


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HSBC pays $470m for mortgage misconduct

HSBC has reached a $470m (£325m) settlement with the US government and states related to dubious mortgage lending and foreclosure practices that contributed to the financial crisis.

The agreement includes a $100m fine and $370m in consumer relief to borrowers.

Investigations began in 2010 after HSBC was found to be signing off foreclosure documents without proper review.

In a statement, the bank's chief executive Kathy Madison called the agreement a "positive result."

The consumer relief will require the bank to cut the loan amount on mortgages for homeowners close to default. HBSC will also be required to change internal practices like foreclosing on homeowners who are being considered for a loan modification.

"The agreement is part of our ongoing effort to address root causes of the financial crisis," said the head of the Justice Department's Civil Division Benjamin Mizer.

The deal settles claims with 49 states, the District of Columbia and the federal government.

HSBC's agreement is similar to deals that were given to US banks including JP Morgan and Bank of America in 2012.


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Aids in Zimbabwe: Making decent burials affordable

The atmosphere in John Mutau's coffin-making workshop feels sombre.

Coffins ready for the market are lined up across the room, leaving little space for his workbench.

But even in this environment, the young coffin-maker still affords an infectious smile.

Based in the city of Mutare, in eastern Zimbabwe, he is quick to say that coffin-makers are not as heartless as many people in the country think they are.

Instead, he says, with an air of importance in his voice: "We actually want to make decent burials affordable."

The 28-year-old is one of a number of young Zimbabwean entrepreneurs who in recent years have gone into coffin-making, after recognising that it remains a lucrative industry because of Zimbabwe's continuing high rate of Aids-related deaths.

While this may seem exploitative to some people, the new entrants say they are simply helping to meet a need, especially - they add - because their coffin prices are usually much cheaper than the country's established big funeral parlours.

Discarded wood

Despite Aids-related deaths having fallen by more than two thirds in Zimbabwe since 2001, as a result of education campaigns and the increased availability of free antiretroviral drugs, more than 60,000 people a year still die because of the virus, according to the country's National Aids Council.

Meanwhile, the United Nations says that Zimbabwe has the fifth highest prevalence of HIV in sub-Saharan Africa, with an infection rate of 15%. This equates to 1.4 million people, and 15% of adults.

Currently only 618,000 of these infected Zimbabweans - less than one third - have access to the antiretroviral treatments.

To keep his costs down, Mr Mutau makes his coffins predominantly from wood discarded by local timber companies.

This means that his coffins can cost as little as $40, compared with between $200 and $2,000 at the large, decades-old funeral director businesses.

Still, Mr Mutau admits that he, and the other new entrants, have their critics.

Many people think we celebrate death but we don't," he says.

"We are here to provide cheap coffins to the bereaved families."

Mr Mutau ventured into coffin making in 2005, but he admits that it was his business of last resort.

"I never dreamed of becoming a coffin-maker, but I need to feed my family," he says.

"There are no jobs out there. I get up to $500 per month selling coffins."

While Mr Mutau mostly works alone, if business is busy he brings in extra workers.

Another coffin-maker plying his trade in Mutare is 30-year-old Gift Olesi.

He went into the industry back in 2005 after he lost his job at a local timber company that was scaling down its operations due to falling sales.

Despite complaints from some people that he charges too much, Mr Olesi says he made a conscious decision to target the middle class, and so only makes coffins for more than $250.

"I get at least $900 a month, and I am able to feed my family," he says.

'Good nutrition'

While the new breed of coffin-makers is assisting the bereaved families of people who have died from Aids, other businesses are trying to help people with HIV or early stage Aids while they are still alive.

Green World Zimbabwe, a Harare-based company that manufactures herbal medicines and nutrition supplements, helps people with HIV start their own businesses selling its products.

It also markets its supplements to people with HIV.

Osmond Tafadzwa Chakauya, the company's senior consultant, says: "Yes some people living with HIV are getting antiretroviral drugs, but for the drugs to work they need good nutrition. Hence we provide such supplements."

So far the business has helped train up to 3,000 independent sales people, of which 1,000 have HIV.

Yet Phyllis Muloyi, who has been living with HIV for 18 years thanks to her antiretroviral drugs, cautions that such business support schemes mean little if people with HIV cannot get funding from a bank, something she says can be very difficult indeed.

Jephias Mundondo, an independent HIV/Aids campaigner, says that due to the increased availability of the drugs, banks should only be looking at the likely strength of someone's business, and his or her ability to run and grow it, not the fact that they have the virus.


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Yahoo to cut its workforce by 15%

Yahoo is cutting 15% of its workforce as the company pursues an "aggressive strategic plan" to return to profitability.

The job cuts will reduce the number of its employees to about 9,000 by the end of 2016.

The announcement came as Yahoo reported a $4.3bn (£3bn) loss for the year.

In a statement, chief executive Marissa Mayer said: "This is a strong plan calling for bold shifts in products and in resources."

She added that it would "dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers, and partners."

The head-count reduction is the latest part of Ms Mayer's attempt to turn around the troubled internet company, which is struggling to compete against the likes of Facebook and Google.

Marissa Mayer

Marissa Mayer has been chief executive at Yahoo since 2012


In December, the company announced it was reversing a plan to sell its stake in the Chinese e-commerce site Alibaba, and would instead look to spin off its core internet business.

Ms Mayer was forced to change course on the Alibaba sale following pressure from several activist investors.

The focus on cutting costs and raising profits is being seen as the latest sign that the company is becoming more serious about selling its core internet business.

But some analysts are sceptical.

"They can slim down to improve profitability, but they are in an industry that is growing and they're not," said Martin Pyykkonen, managing director at Rosenblatt Securities.

"If the core business was really a valuable asset someone would have come and tried to buy it already," he added.

Under pressure

As well as shedding much of its workforce, Yahoo plans to sell of some of its product lines - such as Yahoo TV and Yahoo Games - so that it can focus on its search business, email and Tumblr blogging site.

It is also closing offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan.

That should lead to "modest and accelerating growth in 2017 and 2018," the company said.

Yahoo has estimated the cutting back of its product line alone could generate $1bn.

Ms Mayer has been under pressure from investors to step down as chief executive.

"We would like to see a higher stock price, and we think Marissa and her current management team have become a hindrance to that," said Eric Jackson, managing director of SpringOwl.

Yahoo's shares fell 1.4% in after hours trading.


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