AFRICA BULLETINOCTOBER 2019

NIGERIA

Nigeria Closes Land Borders to All Goods According to Nigeria’s customs agency, as part of an effort to curb the smuggling of goods, Nigeria has closed its land borders to the movement of all goods and has not given a definitive timeline for reopening them, effectively banning all trade – import and export – with countries with which it shares a land border: Benin, Cameroon and Niger. Nigeria had earlier launched a partial border closure in August as part of an effort to curb the smuggling of food items such as rice, sugar, tomatoes and poultry. Despite the fact that the Nigerian government’s move is aimed at strengthening its domestic agriculture to diversify the oil-dependent economy, the country still relies heavily on imports to feed its booming population of approximately 190 million.

The closure has no impact on Nigeria’s economically crucial oil exports, which are shipped out almost entirely via the nation’s seaports and offshore oil platforms.

SIGNIFICANCEWhile Nigerian customs officials reckon the blockade and extension is necessary to achieve the government’s strategic objectives as gains have been made on the security and economic front, the Lagos Chamber of Commerce acknowledges that it has had a ripple effect across West Africa, with factories and traders struggling to import key raw materials and having to use alternative routes for their exports. In addition, the unilateral border closure has been considered by some to go against all commercial and freedom of movement treaties signed under the Economic Community of West African States raising concerns about the prospects of regional integration in Africa and the implementation of the African Continental Free Trade Area which recently came into force.

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TABLE OF CONTENTSALGERIA 3

Proposed Hydrocarbons Bill Aims to Increase Foreign Investment

EGYPT 3

Sale of Stakes in Egypt’s State Companies on Course

ETHIOPIA 4

Safaricom Considers Expansion into Ethiopia

GUINEA 4

Nimba Iron Ore Project Gets Green Light to Export via Liberia

KENYA 5

Lamu Port Set to Upset Regional Transshipment Business

MAURITIUS 5

China Signs Free Trade Agreement with Mauritius

MOROCCO 6

Morocco Strikes Deal with Russian Development Bank to Build Oil Refinery

MOZAMBIQUE 6

Exxon to Make USD 500 Million Initial Investment in Rovuma LNG Project

RWANDA 7

Rwanda Approves Nuclear Plant Construction Deal with Russia

SOUTH AFRICA 7

New E-Visa System to Ease Entry and Attract Investors, Tourists

TANZANIA 8

Barrick Strikes Deal to Restart Gold Mining in Tanzania

UGANDA 8

Uganda Rethinks Infrastructure Push as Public Debt Nears Ceiling

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ALGERIA

Proposed Hydrocarbons Bill Aims to Increase Foreign InvestmentAfter years of reduced foreign investment, Algeria recently introduced a controversial new hydrocarbons law bill aimed at boosting the attractiveness of its oil and gas sector. According to industry experts, the new bill reintroduces production sharing agreements (PSAs) and risk service agreements (RSAs) which are similar to the pre-2005 PSA/RSA framework. The new law seeks to reduce tax provisions for foreign partners and provides flexibility on contractual levels. The law still requires approval by the National Assembly by the end of the year.

The reduction in oil prices in 2014 has had a significant impact on Algeria’s hydrocarbon production requiring the country to focus on boosting its production on a long-term basis to support its economy. According to Hydrocarbon Engineering, this year, the country will produce 1.15 million bpd of oil (declining trend) and 9.46 billion ft3/d of gas. A number of new projects may increase gas production between 2019 and 2022; however, there will still be a declining trend.

SIGNIFICANCEAlgeria is still overly dependent on hydrocarbons, which represent 40 percent of government revenues and 95.6 percent of exports. The law has been tailored to boost investments in the sector. According to the Council of Ministers, offshore exploitation operations will be extended to partners with experience, financial resources and the necessary technologies, which is a first for Algeria. In addition, Sonatrach currently assumes the risks related to prospecting operations. The new law would allow the company to share these risks with partners while the company focuses on renewing its reserves and relaunching production activities.

EGYPT

Sale of Stakes in Egypt’s State Companies on CourseThe Egyptian Government intends to conclude its programme to sell minority stakes in state companies which has been held up by a number of issues that it has been addressing such as weak markets, legal hurdles, readiness of each company’s financial documentation and for some companies a downturn in the business cycle. Last year, Egypt released a list of 23 state-controlled companies to be brought to market as an initial batch in sectors such as petrochemicals, oil, finance and real estate. After the 4.5 per cent stake sale in Eastern Company, the tobacco monopoly, Abu Qir Fertilisers and Chemicals Industries and Alexandria Container and Cargo Handling, both trading on the Egyptian Exchange, are lined up for sale. The government seeks to offer stakes ranging from 15 to 30 percent. NI Capital, the Government’s investment bank and adviser on the sales, indicated that EFG-Hermes Holding, and Citigroup are managing Alexandria Container & Cargo’s offering while CI Capital & Renaissance Capital are managing Abu Qir Fertilizers.

SIGNIFICANCEThe sale of the minority stake could raise around USD 2.5 billion which is approx. 5 percent of the stock market’s current capitalisation estimated at USD 46.5 to USD 52.7 billion. This is part of Egypt’s privatisation drive aimed at boosting treasury funds. Based on the latest advice from the government’s investment banks, the Egyptian government has indicated that there might be a further delay due to the initial public offering of Saudi Arabia’s state oil company Aramco which is scheduled to officially launch before the end of the year.

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ETHIOPIA

Safaricom Considers Expansion into EthiopiaSafaricom intends to enter the Ethiopian market and has already expressed interest in buying a stake in State-owned company Ethio Telecom, or in setting up greenfield operations. Ethiopia issued a timetable for the auction of two new telecoms licences, which would acquire government’s permits by April 2020. The issuing of licences will open up the closed telecoms market in the country which currently has the second largest population in Africa.

A number of global telecom firms including Vodafone, MTN, Orange, Etisalat and Zain, have also expressed their interest in gaining access to Ethiopia’s fast-growing mobile market. Stakeholders have indicated that Ethiopia needs to create an enabling environment for the operators to thrive as well as ensure accessibility and affordability to its citizenry.

SIGNIFICANCESafaricom and other global telecom firms are attracted by the growth potential in the Ethiopian market, with a population of 100 million. Currently, state-owned Ethio Telcom has a subscriber base of 44 million which is the biggest single country customer base of any operator in Africa. An acquisition from Safaricom would provide an easier entry strategy as compared to setting up its own shop, which would involve buying land, setting up new infrastructure, hiring staff, recruiting subscribers and growing its market shares against a dominant player like Ethio Telecom. The entry into Ethiopia would also be an opportunity to launch the Mobile money platform M-Pesa, which could transform Ethiopia’s economy by allowing Ethiopians access to digital banking services.

GUINEA

Nimba Iron Ore Project Gets Green Light to Export via Liberia Guinea and Liberia recently signed a deal to allow Guinean mining companies to use Liberia’s railroad corridors to export through the Port of Buchanan via Nimba County. Companies that would currently be able to export through Liberia are US company High Power Exploration which recently acquired Nimba, a graphite project owned by SRG Mining and Zali Mining project. According to Guinea’s Ministry of Mining and Geology, the authorisation to export via Liberia applies to the first five million tonnes produced at the mines beyond which the government will evaluate the feasibility of exporting via a 650 kilometre railway to the Guinean coast. The railway is to be built by the eventual owner of the Simandou iron ore project, which according to the government, should export through a Guinean port.

SIGNIFICANCEThe logistics of moving bulk raw materials from mining sites to port in remote parts of Guinea has been a major hurdle for prospective developers and for the development of the sector due to lack of infrastructure. Signing of the deal will allow the developers to use Liberia to get to the West Coast which is a much shorter route, as opposed to using Guinea. A number of mining projects near the border with Liberia would experience a slump in their profits if they were to relay on exporting through Guinea’s coast.

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KENYA

Lamu Port Set to Upset Regional Transshipment BusinessKenya is banking on the first berth of the multi-billion shilling Lamu Port to shift the power balance along Eastern Africa’s coast and the larger horn of Africa. The KES 32 billion (approx. USD 320 million) Lamu Port, which is set be to be launched in November, is capable of accommodating huge maritime class vessels including Suezmax, Neo-Panamax and Chinamax. For Kenya, the docking of such size of ships capable of carrying more than 20,000 twenty foot equivalents will be a game changer, allowing them to easily have access to smaller ships to regional ports like Dar es Salaam, Mombasa, Beira and Durban. The Lamu Port will set Kenya up for a tug of war with the Port of Djibouti, which currently handles the largest cargo volumes in the region averaging three million tonnes annually with its two ports of Dolareh and the Port of Djibouti as well as the planned Bagamoyo harbour in Tanzania.

SIGNIFICANCEWith the unveiling of the Lamu port, Kenya can be expected to benefit from the global transshipment market as cargo volumes increase mostly because of lower costs associated with shipping to the same region. According to the Kenya Ports Authority, so far the transshipment traffic to Mombasa Port in 2019 has doubled to 1.3 million tonnes, from 624,000 tonnes in 2018, which shows the business opportunities that the Lamu port could bring to the country. The Lamu Port is set to attract the attention of regional neighbours including Uganda, Ethiopia, South Sudan and the Democratic Republic of Congo particularly with the completion of the access roads leading to the northern frontier.  

MAURITIUS

China Signs Free Trade Agreement with MauritiusMauritius and China signed a free trade agreement (FTA) covering trade in goods, services and investment protection matters. The agreement will allow Mauritius access to a huge market of 1.4 billion people in addition to giving the country duty-free access to over 8,000 products, representing 96 percent of Chinese tariff lines. Mauritius service providers will have access to more than 40 service sectors, including financial services, telecommunications, ICT, professional services, construction, and health services. In addition, Mauritius nationals will also be able to establish businesses in China as wholly-owned entities and through joint partnerships with Chinese operators.

The agreement is the first of its kind signed between China and an African country. China and Mauritius pledged to eventually reach zero tariffs on 96.3 percent and 94.2 percent of traded items, respectively. China and Mauritius have had an excellent relationship and the FTA aims to take the strategic partnership of cooperation between China and Africa up to new heights. The agreement provides clear guidance on rules of origin, trade remedies, and technical barriers to trade and sanitary and phytosanitary issues.

SIGNIFICANCEThe agreement has been in the pipeline since 2017 and is envisioned to provide new opportunities to spur growth in key sectors in addition to increasing economic penetration into the Association of Southeast Asian Nations Countries. Mauritius has been ranked among the top 20 economies according to the World Bank Doing Business report 2020, stronger trade and business ties with China could accelerate the country’s progress in achieving the status of a developed economy by 2020.

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MOROCCO

Morocco Strikes Deal with Russian Development Bank to Build Oil RefineryMoroccan company Mya Energy recently signed a deal with the Russian state development bank, VEB, for the construction of a EUR 2 billion (approx. USD 2.2 billion) oil refinery in the North African country. The deal was agreed alongside a Russia-Africa summit taking place in Sochi, Russia, as Russia seeks to increase its influence in the continent. The refinery, to be located in northern Morocco, will have an initial refining capacity of 100,000 barrels per day (BPD), with an eventual target of 200,000 BPD.

Morocco’s only refinery, Samir, has been shut down since 2015 over unpaid taxes and heavy debt, leaving the country reliant on imported refined products. Unlike its North African neighbours, Morocco imports most of its energy needs. In 2018, the energy import bill surged to AED 82.3 billion (approx. USD 8.6 billion), up 18 percent compared to the previous year.

SIGNIFICANCEThe development of this new refinery is expected to accelerate Morocco’s economic development since it is set to revive the domestic industry of petroleum products and reduce the costs of importing the country’s energy needs. Its implementation together with Russia can be expected to further provide and enable the transfer of skills, expertise, technology, and equipment for the benefit of the energy sector, as well as open job opportunities to help reduce unemployment. The location of the refinery also plays a strategic role as it seeks to take advantage of the port facilities of Nador West Med.

MOZAMBIQUE

Exxon to Make USD 500 Million Initial Investment in Rovuma LNG Project Exxon Mobil plans to invest more than USD 500 million to develop its Rovuma LNG project in Mozambique, which is set to be the biggest-ever private investment in Africa. The USD 30 billion project, jointly operated with Italy’s Eni, has a capacity of more than 15 million tonnes a year (mtpa). The project output is higher than a similar project by Total SA in the same region with a capacity of 13 million tonnes. Rovuma LNG project will produce, liquefy and sell natural gas from three reservoirs located in the Area 4 block offshore Mozambique’s northern coast.

The construction of onshore facilities has been awarded to a consortium led by Japan’s JGC who will be joined by U.K firm TechnipFMC and U.S. Company Fluor Corp. Exon Mobile expects the final investment decisions to be made in 2020 while the plant is scheduled to start production in 2025. The Exxon project, along with Total’s USD 20 billion 13 mtpa facility and Eni’s USD 8 billion 3.4 mtpa floating plant, indicates that Mozambique will have the ability to export 31 mtpa of natural gas, which is about 10 percent of today’s global market.

SIGNIFICANCE The LNG project is expected to pump the much-needed cash into the country’s economy, create jobs and raise the standard of living for the country’s citizens. Industry experts predict that if these reserves are exploited effectively, Mozambique could become the world’s third largest LNG exporter, increasing Africa’s roughly 8 percent share of global gas exports.

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RWANDA

Rwanda Approves Nuclear Plant Construction Deal with RussiaThe Rwandan cabinet has approved an agreement with Russian state atomic company Rosatom to advance the peaceful use of nuclear energy, a move that is expected to bolster relations between the two countries and promote Russia’s interests in the region. In line with the agreement, a Centre for Nuclear Science and Technology and a Nuclear power plant in Rwanda will be built in Kigali, which will, in turn, facilitate scientific research and practical applications of nuclear technologies in the country. The centre will also have a research water-cooled reactor with up to 10 MW capacities. In the future, the deal would allow Rosatom to supply Rwanda with small modular reactors for power generation.

The approval of the nuclear deal came ahead of the recent first Russia-African Forum in the city of Sochi designed to strengthen relations between the Russian Federation and African nations, which President Paul Kagame attended accompanied by a delegation of senior government officials.

SIGNIFICANCEThe trade and political relationship between Rwanda and Russia has steadily grown over the years as the Eurasian country seeks to compete with the US, China and Western Europe for trade and political influence in Africa. The expanded ties to Russia would mean more exposure for Rwanda and other African states in search of international collaboration and trade partnerships. With the application of atomic energy, the nuclear power deal is set to modernise vital sectors such as agriculture, electricity generation, health, geology and mining amongst others in Rwanda.

SOUTH AFRICA

New E-Visa System to Ease Entry and Attract Investors, TouristsSouth Africa has unveiled its new e-visa system which will be piloted in November. According to the Department of Home Affairs, the electronic visa will be piloted for Kenyan citizens travelling to OR Tambo and Lanseria airports before the system is expanded to other countries. The entire online application process is estimated to take 20 minutes, provided the applicant has all of the necessary supporting documents ready for submission.

The Minister of Home Affairs Aaron Motsoaledi has said that his department is also lowering turnaround times for critical work skills visas, which are now issued within four weeks in 88.5 percent of applications. By comparison, he also mentioned that business and general work visas are issued within eight weeks in 98 percent of applications. In addition, visa requirements have been simplified for countries such as China and India, which are key markets for tourism to South Africa. South Africa recently waived visas for travelers from Saudi Arabia, United Arab Emirates, Qatar, New Zealand, Cuba, Ghana and São Tomé and Príncipe.

SIGNIFICANCEThe new South Africa e-visa is expected to significantly cut turnaround times for the issuing of travel documentation while ensuring the information of applicants is secure. According to the Department of Home Affairs, the e-visa is aimed at attracting tourists, investors and people with skills that are critical to building the economy. This new system is further expected to increase the number of visitors to South Africa. In 2017, 16 million tourists went to South Africa and this figure is expected to reach 19.5 million by 2022.

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TANZANIA

Barrick Strikes Deal to Restart Gold Mining in TanzaniaBarrick Gold Corp is poised to restart gold mining in Tanzania after it recently reached a deal to settle all disputes with the government concerning the mining companies formerly operated by Acacia Mining but now managed by Barrick. The tax deal includes the payment of USD 300 million to settle outstanding tax and other disputes, the lifting of a concentrate export ban, and the sharing of future economic benefits from mines on a 50-50 basis.

According to a statement by Barrick, a new operating company named Twiga Minerals will be formed to manage the Bulyanhulu, North Mara and Buzwagi mines after a review by Tanzania’s attorney general. An Africa-focused international dispute resolution framework will also be established as part of the agreement.

SIGNIFICANCEUnder the new agreement, the Tanzanian government will acquire a 16 percent shareholding in each of the three mines. Twiga will also share half of the mine’s royalties, cash distributions and other economic benefits with the country. The gold mining sector is already looking up, as latest Bank of Tanzania Monthly Economic Review indicates that in August 2019 gold exports rose by 25.1 percent to USD 1,915.3 million, driven by volume, and accounted for more than half of non-traditional exports. It can be expected that Twiga’s mining operations will have a significant impact on the volume and growth of gold exports revenue.

UGANDA

Uganda Rethinks Infrastructure Push as Public Debt Nears CeilingUganda is rethinking its infrastructure development as public debt escalates. Over the past five years, the country has been pushing for rapid transport and energy infrastructure development to fast track its economic development. According to figures from the Bank of Uganda, public debt has risen sharply since financial year 2009/10, with a nominal debt to GDP ratio increasing from 19.2 percent to 42.2 percent in 2018/19.The Bank projects that the public debt will increase further to around 45.7 percent of GDP this financial year 2019/20 mainly due to current commitments on infrastructure projects.

Recently, the President stopped the borrowing of funds for the construction of the Jinja-Kampala Expressway opting for a public private partnership to build the road. This is after he issued a directive which states that the country should only borrow funds for railway construction, electricity generation, irrigation schemes, strategic roads’, for education and for the health sector.

SIGNIFICANCEThe Bank of Uganda is facing challenges to accumulate foreign exchange reserves to service external debt. Some industry experts indicate that there are risks attributed to the rapidly rising public debt, especially the external debt that has risen on an annual basis at an average of about 18 percent in the previous four financial years. The country should prioritise on key infrastructure projects and avoid quick investments, which could lead to capacity constraints that could surge public investment costs.

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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.hydropower-dams.com

https://www.hydrocarbonengineering.com

https://www.reuters.com

https://www.busiweek.com

http://www.xinhuanet.com

https://www.theeastafrican.co.ke

https://www.moroccoworldnews.com

https://www.voanews.com

https://www.tanzaniainvest.com

https://constructionreviewonline.com

https://www.southafricavisa.com

https://www.moneyweb.co.za

https://www.tanzaniainvest.com

https://www.nation.co.ke

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