Financial services and what you don`t know

Africa money africa beer sales surge despite church and mosque

´╗┐JOHANNESBURG/LAGOS Aug 31 Beer sales in Africa are surging because of economic and population growth, a trend rubbing against the grain of another demographic factor defining the region: intense religiosity. By almost any measure, Africa is an exceptionally devout place and the major growth area for Christianity and Islam. This should have implications for investors, especially in the fast-growing retail and beer sectors: they must navigate sacred sensitivities in areas such as marketing and factor the faithful into forecasts and demographic profiles for the continent's population of just over a billion. Brewing executives have said they tone down their advertising campaigns in Africa, and these do tend to be conservative. In Nigeria for example, scantily-clad women tend not to feature on billboards promoting beer brands. Instead, a man in a suit is portrayed sipping a refreshing cold lager, or more often than not the ad shows just a giant bottle and glass. According to a 2010 report by the Pew Forum on Religion & Public Life, the number of Muslims living in Sub-Saharan Africa rose 20-fold from 1900 to 234 million. Christianity has grown at an even more blistering pace, with numbers soaring almost 70-fold over the same period of time to 470 million from just 7 million. And in the case of Christianity, much of this growth has been concentrated in Pentecostal churches and other evangelical denominations which, like Islam, tend to frown on alcohol. The Pew survey also questioned people in 19 African countries about their views on alcohol consumption and found that majorities in all but 3 countries - Cameroon, Chad and Democratic Republic of Congo - found it morally objectionable.

"Views on this issue are related to how religious a person is," said Neha Sahgal, a Pew research associate."What we found is that in most of the countries those who pray several times a day are more likely to find drinking alcohol morally objectionable than those who pray less," she told Reuters in a phone interview. RELIGIOUS AND THIRSTY Against this backdrop of piety, the conservative approach to advertising seems to be working.

Home to some of the world's fastest growing economies, Africa's thirst for beer and spirits is surging: analysts estimate beer volumes rose around 7 percent last year. Excluding the mature South African market, growth reached more than 10 percent. Drinks companies want to maintain the momentum. SABMiller is investing up to $2.5 billion over the next five years to build and renovate breweries on the continent. African sales of rival Diageo, the maker of Guinness, have risen by an average 15 percent in each of the last five years, accounting for 14 percent of the group's total. Nigeria's 160 million people are now the world's second biggest consumer of Guinness, after Britain, and analysts expect it to take the number one slot within a couple of years. Cameroon, with a much smaller population of around 20 million, is the fifth biggest.

In Nigeria, Africa's most populous country, which is evenly divided between Islam and Christianity, church and mosque numbers are exploding alongside beer consumption. Beer turnover in Nigeria is growing faster than its economy."At the moment, beer consumption is about 19.5 million hectoliters in 2012 and growing at about 8-9 percent per annum," said Esili Eigbe, an analyst at Stanbic IBTC, who covers the brewery sector. A number of factors could explain this. Africa's population is young and many of the region's converts find their religious zeal only as they grow a little older. In any case, most people's drinking peaks in their 20s. And a lot of Africans, like a lot of people on other continents, are both religious and thirsty."People's sense of morality sometimes doesn't correspond with their behaviour. This is not unique to Africa," said Sahgal, an expert on polling on religious issues. Some Africans are perfectly comfortable with this fact."Islam advises against alcohol but does not force you. I drink to help me relax after a hard day's work," said Wasiu Abudu, a 42-year-old auto mechanic who lives in Lagos.

Australia business conditions jump in dec survey

´╗┐SYDNEY Jan 28 A measure of Australian business conditions jumped to its highest in more than 2-1/2 years in December as sales and profitability improved markedly, while confidence held steady at long-run average levels, a survey found on Tuesday. National Australia Bank's survey of more than 400 firms found the surprising turn in conditions was underpinned by a low interest rate environment, higher asset prices and a softer Australian dollar. The report's index of business conditions rose 7 points to +4 in December, with its measure of sales and profitability both surging 10 points. The employment measure also improved but still implied a flat labour market. Its main measure of business confidence was steady at +6, consistent with its long-run average.

"Most industries recorded improved conditions for December - especially transport, wholesale and the services industries more generally - but, manufacturing and construction were both notable exceptions," said NAB's chief economist, Alan Oster. Oster said the sustainability of the jump may be questionable given subdued forward orders, a run-down in inventory and still-low capacity utilisation. He also said employment conditions remained soft.

Still, the jump in business conditions should be welcome news to the Reserve Bank of Australia (RBA) which has been counting on a revival in business investment to offset the drag from a cooling mining boom. The central bank cut interest rates to a record low of 2.5 percent back in August and has been holding steady since amid signs the stimulus was slowly working through the economy.

Oster still believes that rising unemployment will lead the RBA to cut rates again, albeit not until late 2014."The combination of near-term better business conditions and especially the unexpectedly strong Q4 underlying inflation print has caused us to move our next rate cut call from May to November," he said. He noted there was little sign of inflationary pressure in the NAB survey, with labour and purchase costs holding steady.

Breakingviews us money market funds cant have it both ways

´╗┐(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)U.S. money market funds can't have it both ways. Lobbyists are trying to stifle reforms in the $2.7 trillion money market industry, while Bill Dudley, the president of the New York Federal Reserve, is throwing his support behind changes Mary Schapiro, the Securities and Exchange Commission chairman, wants proposed.

For years, money market funds have been hawked as safe but higher-yielding alternatives to traditional bank accounts. Yet the run that began when the Reserve Primary Fund "broke the buck" - meaning it marked down its net asset value from the traditional $1 a share - in September 2008 proved that there were incremental risks, and prompted an industry-wide government rescue. Schapiro wants to make the industry capable of saving itself. The simplest, most transparent way would be to force funds to quote a floating NAV based on the worth of their investments rather than a flat $1 per share. That's logical, but the fund industry is dead against it.

The other regulatory option would let money market funds peg their NAVs, but would require them to build in cushions to ensure they can actually afford to let investors redeem shares at that price. The first layer of protection might be a small capital buffer so there's no question of a fund manager's ability to top up the fund in the event of small losses. In an article for Bloomberg, Dudley also suggests that big investors - those with more than $50,000 in a fund, in his example - could only be allowed to withdraw 95 percent of their cash immediately, with the rest available a month later but subject to losses if the fund loses money on its holdings.

Money market fund folk bristle at the extra costs such rules could bring, but Dudley's financial stability concern is warranted. Money market funds provide nearly $200 billion to the financial sector in short-term loans and about $600 billion to the tri-party repo market, where banks, institutional investors and others go to fund short-term trades, according to Dudley. A run on money markets could, therefore, infect the broader financial system. The SEC mulled proposing reforms by the end of this month, according to news reports. However, several of Schapiro's four SEC commissioner colleagues seem to be skeptical. Dudley's support just might help. Money market funds can't go on claiming ultra low risk while having no obligation to hold a buffer. Something needs to give.