AFRICA BULLETINJANUARY 2020

ETHIOPIA

Ethiopia Plans to Build Africa’s Largest Airport at USD 5 BillionEthiopia plans to start building Africa’s largest airport worth USD 5 billion to be located at Bishofu, a town southeast of the capital, Addis Ababa, as its rapidly growing national carrier outgrows capacity at its current hub Bole Airport. The new airport, which will cover an area of 35 square kilometres, will have the capacity to handle as many as 100 million passengers yearly. That would place Ethiopia into a global league, with capacity greater than London Heathrow, Europe’s busiest airport, and Dubai International, currently the world’s leader for international flights.

The plans are part of a 15-year expansion strategy of Ethiopia’s aviation industry, which has also seen it either sign up joint ventures or start subsidiaries in other African countries, including Malawi, Chad, Zambia and Mozambique. The carrier is also in talks to start airlines in Ghana and Nigeria.

SIGNIFICANCEEthiopian Airlines recently reported a 25 percent increase in profits to USD 260 million in 2018-2019 as it carried more passengers and cargo, according to a report on the carrier’s website. Revenue of almost USD 4 billion could continue to climb as the airline nears its goal of 22 million passengers by 2025. While Bole Airport has recently been expanded with additional capacity, it is projected to be overwhelmed in three to four years should Ethiopia Airlines grow as predicted. The new airport is expected to be part of a strategy to contain this growth.

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TABLE OF CONTENTSALGERIA 3

Algeria, Turkey in Talks to Boost Trade Volume up to USD 5 Billion

EGYPT 3

Saudi Telecom Makes Call to Acquire Vodafone Egypt Stake for USD 2.4 Billion

GUINEA 4

Guinea, Britain Sign Agreement to Promote Investment

KENYA 4

Britain Courts Kenya with 1.7 Billion worth of Deals

MAURITIUS 5

Mauritius Second Fastest Growing Wealth Market Worldwide

MADAGASCAR 5

AfDB guarantees USD 100 Million for Sahofika Hydro-Power Project

MOROCCO 6

Morocco to Review Trade Relations with Turkey

MOZAMBIQUE 6

Economy to Grow up to 4.2 Percent in 2020 After Cyclone Impact

NIGERIA 7

New Finance Law Set to Boost Small Businesses

RWANDA 7

Rwanda Bets on Franc Bond to Boost Economic Growth

SOUTH AFRICA 8

Business Owners to Complete Mandatory Checklist to Ensure Compliance with Companies Act

TANZANIA 8

Tanzania Reviews Law on Mediation for Investors

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ALGERIA

Algeria, Turkey in Talks to Boost Trade Volume up to USD 5 BillionAlgeria’s Minister for Energy, Mohammed Arkab, recently announced that Algeria and Turkey are seeking to forge closer business ties with a plan to boost bilateral trade volume to USD 5 billion while agreeing to jointly build a petrochemicals plant in the Turkish province of Adana on the Mediterranean coast. Turkey’s Rönesans Holding and Algeria’s state-owned energy company Sonatrach will take part in the project. The petrochemical facility is estimated to cost approximately USD 1.4 billion, according to the Algerian minister, who also added that the stakes of Rönesans Holding in Sonatrach in the project will be 66 percent and 34 percent, respectively.

The construction of the plant will be completed in two years and the facility is expected to become operational in July 2022. Sonatarch will supply the planned plant with 450 tons of propane which will be used to produce polypropylene.

SIGNIFICANCEAlgeria is considered as one of Turkey’s most important gateways to the Maghreb and North Africa. The talks to boost bilateral trade volume underlines the need for a free trade agreement between Turkey and Algeria towards further deepening both countries’ economic relations for possible cooperation in the fields of economy, trade, defense and tourism. The latest data from the Turkish Statistics Institute show that Turkey shipped USD 1.74 billion worth of goods to Algeria from January to November 2019.

EGYPT

Saudi Telecom Makes Call to Acquire Vodafone Egypt Stake for USD 2.4 BillionSaudi Telecom Company (STC) has signed an initial agreement to acquire Vodafone’s 55 percent stake in Vodafone Egypt for USD 2.4 billion. The sale of the Vodafone Egypt stake, which follows the disposal of its Qatari business in 2018, means Vodafone will be split between its European operations and its sub-Saharan African arm under the Vodacom banner. The prospective deal, which values Vodafone Egypt at USD 4.4 billion, comes as STC seeks to expand regionally.

The state-controlled telecoms group, which is 70 percent owned by the government’s Public Investment Fund (PIF) and is listed on Riyadh’s Tadawul exchange, has previously said it could play a key role in reducing the kingdom’s dependence on oil by driving digital revenue growth. Vodafone Egypt is the largest telecoms operator in Egypt by market share and the British telecoms company was the country’s largest foreign investor.

SIGNIFICANCEWith the sale, Vodafone will be exiting Egypt (as a telecom operator) as the rest of the 45 percent stake is owned by Telecom Egypt, which has said that it has no plans to sell its stake. Gulf states, especially Saudi Arabia and the United Arab Emirates, have been seeking to boost investment flows into Egypt. The Vodafone Egypt-STC deal confirms the telco’s eagerness to maintain a leadership position not only in Saudi Arabia, but also in the wider MENA region. The PIF is expected to become more active in local and global deals as it receives almost USD 30 billion from an initial public offering of oil group Saudi Aramco in December 2019.

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GUINEA

Guinea, Britain Sign Agreement to Promote InvestmentA Memorandum of Understanding (MoU) on investment was recently signed between the governments of Guinea and Britain on the sidelines of the United Kingdom-Africa summit in London. The MoU aims to create a collaborative framework for the promotion of investments by British companies in Guinea for sustainable development, including the British government’s support for bauxite mining company Anglo-African Minerals in the implementation of a project to develop a railway of approximately 270 kilometres, connecting the prefecture of Mamou at the port of Benty in the prefecture of Forécariah.

The MoU is further expected to support the construction of the largest oil terminal in West Africa in Benty, following the Minister of Hydrocarbons’ recent announcement granting oil company Benti Energie the authorisation to carry out feasibility studies.

SIGNIFICANCEThe MoU strengthens economic cooperation between the two countries and will support the sustainable economic development of Guinea. To ensure the effectiveness of the collaboration, an intergovernmental working group will be set up to study the opportunities for infrastructure development linked to mining in order to promote economic diversification. According to a representative at Benti Energie, the new oil terminal will be a key source of foreign income from petroleum products for the majority of countries in West African sub-region as it will compete with the ports of Rotterdam, Genoa in Italy.

KENYA

Britain Courts Kenya with 1.7 Billion worth of DealsAs the United Kingdom charts its post-Brexit economic ties, Kenya is set to benefit from GBP 1.3 billion (approx. USD 1.7 billion) worth of business opportunities which the British Prime Minister recently pitched to a Kenyan delegation led by President Uhuru Kenyatta at the inaugural UK-Africa Investment Summit held in London.

According to a statement by the British High Commission in Nairobi, the UK deals will cut across housing, finance, renewables, and entrepreneurship and they are poised to create a new lasting partnership that would deliver more investment, jobs and growth to Kenya. As part of the deals announced, Kenya is set to benefit from a EUR 30 million (approx. USD 33 million) investment in affordable energy-efficient housing, which will see the construction of 10,000 low-carbon homes for rent and sale.

SIGNIFICANCEKenya’s preference for countries in the Far East for business and development financing in the recent past has dislodged European power-houses including the UK from long-held positions as the leading sources of foreign direct investment (FDI). China has become Kenya’s leading source of FDI through investment in infrastructure, a move which has continually consolidated its new-found economic clout in the country. Post-Brexit, the UK has an opportunity to explore new and innovative ways of deepening the long-standing partnership with Kenya by using the country as a gateway to investing in Africa and a bridge to the emerging market of more than 1.2 billion people created by the African Continental Free Trade Area.

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MAURITIUS

Mauritius Second Fastest Growing Wealth Market WorldwideThe 2019 Africa Wealth Report by AfrAsia Bank and New World Wealth reveals that the total wealth held in Africa rose by 14 percent over the period 2008 to 2018, making Mauritius the second, fastest-growing wealth market worldwide after China. According to the report, the small island achieved a 124 percent wealth growth rate, boosted by a large number of wealthy individuals (HNWIs) who have moved there over the past decade, especially from Europe and Southern Africa. Mauritius is now home to around 4,400 HNWIs, compared to 1,800 HNWIs ten years ago.

Mauritius has been ranked 1st in Africa and 20th worldwide in the World Bank’s 2019 Doing Business Report.

SIGNIFICANCEWith a thriving and growing financial services sector, Mauritius has low taxes which encourage business formation and appeal to retirees. Notably, company and personal income tax rates are currently at 15 percent, with no inheritance or capital gains tax. In addition to secure ownership rights, which are strong in Mauritius, the island’s well-developed banking system and the stock exchange has further encouraged a large number of locally-based HNWIs to invest in property and businesses ensuring that economic growth filters through to wealth creation. The Bank of Mauritius reports that the country has strong FDI inflows from countries such as France, China, South Africa and the UAE which could be another strong reason contributing to the Island’s wealth market growth.

MADAGASCAR

AfDB guarantees USD 100 Million for Sahofika Hydro-Power ProjectThe African Development Bank (AfDB) has granted a USD 100 million guarantee to the New Hydroelectric Power Consortium of Onive for the hydroelectric project it is developing near Antananarivo, the capital of Madagascar.

The consortium consists of the French company Eiffage, the Moroccan company Themis and Eranove, a Franco-African group. The AfDB guarantee will help mitigate risks for both the consortium and the project’s lenders. It will also support the payment obligations of the state-owned power company, JIRAMA. The consortium will also build the transmission lines and the entire infrastructure required for the construction of the dam and its operation. The project will require a total investment of USD 870 million.

SIGNIFICANCEThe AfDB’s support to JIRAMA through a guarantee will help improve credit, which is much needed as the power company continues to build a reputation as a bankable power provider which in turn will mobilise investments in Madagascar’s energy sector. This will enable the country to achieve its strategic goals in terms of increased energy access, a more diversified energy mix and least cost generation. According to the AfDB, the Sahofika hydro-power project will inject 205MW of renewable energy generation capacity to the national grid. It is further expected to reduce the share of thermal power generation in the country’s energy mix and significantly reduce electricity tariffs. The displacement of thermal power generation will also enable JIRAMA to considerably reduce its fuel purchase and decrease subsidies from the government to sustain its operations.

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MOROCCO

Morocco to Review Trade Relations with TurkeyMorocco’s government intends to review its free trade agreement with Turkey, saying the Moroccan economy has lost USD 2 billion a year since the signing of the deal in 2004. The Moroccan minister had recently told parliament that the free trade accord should be terminated if no deal to amend it is reached.

According to Morocco’s trade minister, both parties have agreed to rebalance their trade through encouraging more Turkish investment in Morocco’s industrial sector and promoting more Moroccan exports to Turkey.

A key reason contributing to Morocco’s recent threats to walk out of its agreement was, according to reports, that Turkish products have massively entered into Moroccan markets while Turkey-bound Moroccan products are submitted to rigid customs obstacles.

SIGNIFICANCEOfficial figures indicate that Morocco’s overall trade deficit widened by 2.3 percent in 2019 compared to 2018 which translates to AED 191.8 billion (approx. USD 20 billion). It can be hoped that the two parties will agree on amendments to the trade accord in a bid to avert losses in the Moroccan job market. According to the Turkish-Moroccan Business Council, Turkey has so far invested approximately USD 1 billion in Morocco, providing jobs for nearly 8,000 Moroccans.

MOZAMBIQUE

Economy to Grow up to 4.2 Percent in 2020 After Cyclone ImpactMozambique’s economic growth is expected to accelerate to 4.2 percent in 2020, after it was limited to 1 percent in growth 2019 due to the impact of cyclones Idai and Kenneth, which caused significant human and material damage in the north and centre of the country, according to the latest report on the country by the Economist Intelligence Unit (EIU).

The EIU report further indicates that Mozambique is expected to have improved access to capital markets after the Euro-bond holders of Mozambican Tuna Company (Ematum) agreed on a second restructuring process. Financial Sector Deepening Moçambique will further receive approximately GBP 15 million (approx. USD 20 million) from the United Kingdom to begin a new phase of development of the financial sector in Mozambique. The country’s large natural gas reserves have also been cited by the EIU report as a contributing factor to its economic growth since it had attracted a large amount of foreign direct investment, particularly from Russia, China and the United States.

SIGNIFICANCEThe economic growth expected to be recorded this year can be attributed to the reconstruction work from the damage caused by the two cyclones and the start of the investment in the exploration of natural gas deposits in the Rovuma basin, in the north of the country. According to the EIU, this investment will allow the economy to grow at an average rate of 7.8 percent per year in the 2021-2024 period.

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NIGERIA

New Finance Law Set to Boost Small BusinessesNigerian President Muhammadu Buhari has signed into law a new finance bill, which among other objectives, seeks to increase government revenue while supporting struggling small businesses in Africa’s largest economy. The legislation, passed by both chambers of the national assembly last year, raises the country’s value added tax rate from 5 percent to 7.5 percent, a modest but important step for oil-dependent Nigeria which has one of the world’s lowest tax-to-gross domestic product ratios.

The new law states that small businesses with a turnover of less than NGN 25 million (approx. USD 69,000) are to be exempted from Companies Income Tax, while it lowers the tax rate for companies making up to NGN 100 million (approx. USD 275,000) from 30 to 20 percent.

SIGNIFICANCENigeria’s Small and Medium Enterprises (SMEs) are starved of capital as poor access to finance constitutes a major constraint for businesses. The proposed modifications by the new law to the fiscal rules around taxation are expected to create an enabling business environment as well as alleviate the tax burden for small and medium enterprises. This is expected to encourage growth and investment in this sector of the economy. The finance law also provides incentives for investment in Nigeria’s capital markets while including a provision that will ease the burden on insurance, banking and oil industries.

RWANDA

Rwanda Bets on Franc Bond to Boost Economic GrowthRwanda is looking at an economic boost from its inaugural RWF 37 billion (approx. USD 40 million) bond, which was issued in London at the UK-Africa Investment Summit 2020. The Rwandan franc-denominated paper was issued by the World Bank to finance government projects in the 2019-2020 financial year budget. The bond offers investors an annual coupon of 9.25 percent and is set to mature on 20 January 2023.

Details of the specific investments that will benefit from the bond proceeds in the budget are yet to be made public. The government plans to increase spending by 11 percent in the 2019/2020 financial year from USD 2.9 billion to USD 3.2 billion. Donors will fund 14 percent of the budget while the rest will come from revenue and debt, according to Finance minister Uzziel Ndagijimana in a report parliament in June last year. Some of the priority areas in 2019/2020 include job creation, improving transportation, water and sanitation infrastructure as well as service sector in urban and rural areas.

SIGNIFICANCERwanda is positioned as a good destination for investment and the issuance of the Rwandan Franc bond is expected to boost confidence and help attract foreign private investment, which the country needs to improve liquidity as the government increases spending to accelerate growth. The bond is expected to build capacity in local capital markets, a critical component of international development finance. This transaction further highlights the potential to grow demand from international investors in these markets.

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SOUTH AFRICA

Business Owners to Complete Mandatory Checklist to Ensure Compliance with Companies ActThe Companies and Intellectual Property Commission (CIPC) has implemented a new comprehensive compliance checklist that all business owners registered with the commission in South Africa must complete to ensure compliance with the mandatory requirements of the Companies Act. As of 1 January 2019, CIPC requires that prior to submitting annual returns all companies must complete this checklist. Companies affected include private, non-profit, personal liability, public, and state-owned companies. Companies are prompted to indicate if they complied with a particular section during the previous calendar year. Failure to complete the checklist carries heavy penalties, including the possibility of up to 12 months in jail.

SIGNIFICANCEAccording to the CIPC, the checklist is a new and necessary process to monitor and regulate proper compliance with the Companies Act and if trends of non-compliance appear, to act accordingly. In addition, it is meant to serve as an educational tool for directors and company secretaries, in guiding them with regards to their responsibilities in terms of the act. A few industry stakeholders, including the South African Institute of Chartered Accountants, have pointed out that the checklist is onerous and vague since it does not allow respondents for an opportunity to explain their responses nor discussion around particular intricacies in the act’s subsections. There are more concerns about the potential increase in costs to be incurred by business owners, in addition to existing compliance red tape and over-regulation by the government.

TANZANIA

Tanzania Reviews Law on Mediation for InvestorsTanzania is set to review its contentious arbitration law, in which a key part of the draft Bill for the proposed 2020 Arbitration Act, tabled in parliament on 28 January, includes clauses allowing investors to access international arbitration. The draft Bill comes on the back of new arbitration announcements filed in December last year by several multinational mining companies over cancelled retention licences. Canadian firm Winshear Gold Corporation had recently served notice of intent to litigate, followed by Australian miner Indiana Resources. Both companies are claiming that Tanzania breached the 2013 Agreement for the Promotion and Reciprocal Protection of Investments—also known as the Bilateral Investment Treaty—along with various international laws and conventions. It also coincided with a new profit-sharing deal between Tanzania and Canadian mining giant Barrick Gold Corp for the three Barrick-owned gold mines in the country.

SIGNIFICANCEThe draft Bill proposes amendments covering sovereignty over Tanzania’s natural resources and public-private-partnership (PPP) ventures with foreign parties; domestic and international commercial arbitration, as well as enforcement of foreign arbitral awards and related matters. On PPPs, for example, the draft proposes changes that would allow dispute resolution by outside arbitration bodies provided that the proceedings are held in Tanzania. The amended law will also create a Tanzania Arbitration Centre to host all mediation and deal with arbitrator accreditations.

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The information contained in this Bulletin is accredited to the named sources and does not necessarily represent the views of ALN. ALN accepts no responsibility whatsoever for any loss, direct, indirect or consequential, arising from information made available and actions resulting therefrom.

SOURCES

https://www.hurriyetdailynews.com

https://www.bloomberg.com

https://www.arabnews.com

https://www.businesslive.co.za

https://www.guineenews.org

https://www.businessdailyafrica.com

https://www.internationalinvestment.net

https://www.afdb.org

https://af.reuters.com

https://www.moroccoworldnews.com

https://macauhub.com.mo

http://venturesafrica.com

https://www.theeastafrican.co.ke

https://www.businessinsider.co.za

https://businesstech.co.za

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