African Markets Managing Natural Resources a Report from the Economist Intelligence Unit
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African Markets Managing natural resources A report from The Economist Intelligence Unit Chad Commissioned by: March 2013 African Capacity Building Foundation www.eiu.com African Markets Managing natural resources Country Profile: Chad Politics and institutions Chad has a presidential system of government, based on the French system, with the president having the power to appoint the prime minister. Although the country is currently mostly at peace, it has lived through decades of civil war and internal conflict since it became independent from France in 1960. The current president, Idris Deby, himself came to power in a violent coup and struggle in 1990. Since then he has concentrated power in his hands and has successfully ensured his own re-election as president every five years since 1996. In 2006 and 2008 Chadian rebels attacked the capital, N’djamena, and on the latter occasion came close to toppling the government. With a population of around 11.8m, Chad is the fifth-largest country in Africa, with more than one- half of its 1,284,000 sq km area lying in the Saharan and Sahelian zone, while the southern part of the country is tropical. The northern half of the country is very sparsely populated. Poverty and under- development affect most of the country and population: in a UN index of human development in 2011, Chad was ranked 183rd out of 187 countries. The country has not yet suffered from the kind of inter- religious violence that has plagued northern Nigeria. There are, however, acute ethnic and regional divisions, most notably between “northern” Muslims and “southern” Christians. Indeed, the picture is complex. Divisions run along many lines, between nomadic, semi-nomadic and sedentary groups; between cattle herders, traders and agriculturists; and between Saharans, Sahelians and southerners. Muslims represent just over 50% of the population. Notwithstanding, religious difference—between Christians and Muslims—is sometimes a focus of resentment. Furthermore, in recent years concern has grown that militant groups—such as Nigeria’s Boko Haram—may spread into northern Cameroon and neighbouring parts of Chad, or that their example may encourage copycat violence in Chad. Political parties Under Mr Deby, the ruling party, the Mouvement patriotique du salut (MPS), has dominated politics and government in Chad since the early 1990s. The secretary-general of the party, Haroun Kabadi, is also the leader of the National Assembly. Opposition parties include the Fédération action pour la République (FAR), the Rassemblement national pour la démocratie au Tchad (RNDT)—le Réveil, the Rassemblement pour la démocratie et le progrès (RDP), Action pour le renouveau et la démocratie (ARD), the Union pour la démocratie et la République (UDR), the Parti pour la liberté et le développement (PLD) and the Alliance tchadienne pour la démocratie et le développement (ATD). The MPS has a well-developed network of bureaux and organisations across the country, and a large membership. At the last parliamentary elections, in 2011, the party made alliances and shared candidate lists with 103 of the roughly 130 opposition parties that notionally exist in Chad. The government has used co-option and sometimes force to weaken opposition. After a rebel attack on N’djamena in 2008, security forces arrested and detained a number of opposition figures. The most prominent of these, Ibni Oumar Mahamat Saleh, the leader of the PLD, has never been seen again. © The Economist Intelligence Unit Limited 2013 1 African Markets Managing natural resources Institutions Chad’s present constitution was introduced in 1996 and was amended in 2005, in order to remove the presidential term limit, thereby enabling Mr Deby to run for president again. The next presidential election is due in 2016, and Mr Deby has shown no sign of wanting to give up his position. Elections for the 188-member National Assembly are meant to take place every five years, on the same cycle as the presidential election. In January 2013 the National Assembly approved a set of proposed amendments to the constitution which, among other things, stand to strengthen the government’s powers over the judiciary. The proposed changes prompted a walkout by nearly 20 opposition members of the Assembly and were described by some Chadian human rights and civil society organisations as an attempt to set up a dictatorship. In the absence of an effective opposition, one of the few powerful institutions outside government is the Union des syndicats du Tchad (UST, Chad’s main public sector workers’ union), which has taken a firm position in negotiations with the government over public-sector pay. Natural resources Chad has significant natural resources and, with its relatively small population, ought to be richer and more developed than it is. The fact that it is not, is a result of decades of neglect, misgovernance and conflict—exemplified by successive bouts of civil war from the 1960s through to 1990 and crises in the 2000s. Landlocked and surrounded by the hinterland of mostly poor neighbouring countries, Chad has been poorly positioned for attracting investment in natural resources. Agriculture Agriculture in Chad mostly consists of small-scale or subsistence farming, rather than large mechanised farms. Harvest levels fluctuate significantly, owing mainly to fluctuations in rainfall, but also sometimes because of locusts or crop diseases, or insecurity and violence affecting rural populations. Even in good harvest years, Chad is a net importer of staple grains. A combination of factors stand in the way of increasing agricultural output, including poor transport infrastructure, the small number of Chadian agricultural companies and the difficult business environment for foreign investment. Food insecurity (meaning inadequate and unreliable food supply) is therefore a persistent problem in Chad. In 2012 the UN estimated that around 1.6m Chadians were affected by food insecurity and needed assistance. In 2013 the World Food Programme (WFP) plans to provide nearly 118,000 tonnes of grain to address the food deficit. Scarcity of water and grazing land is sometimes an issue in arid parts of the country, and the country is vulnerable to both droughts and flooding. That it does not cope better with these perennial problems is a reflection of how little the government has done to reduce the impact of natural disasters. Changes in weather patterns caused by climate change may lead to more frequent or more severe crises affecting agriculture. The only agricultural sector that has attracted significant investment recently is sugar cane. In mid-2012 a French company, JL Vilgrain, announced plans to spend €320m (US$413m) building a new sugar factory in southern Chad, to be operated by the Compagnie Sucrière du Tchad (CST), the Chadian 2 © The Economist Intelligence Unit Limited 2013 African Markets Managing natural resources subsidiary of SOMDIAA, an agro-industrial firm owned by JL Vilgrain. CST’s existing sugar factory in Banda, south-eastern Chad, has a production capacity of 40,000 tonnes/year. Oil Since 2003 Chad has been producing oil from the Doba oil fields in the south-west of the country. In 2011 average output from seven fields in Doba was 115,000 barrels/day (b/d), down from an average of 122,500 b/d in 2010. Most of the oil is exported via the 1,070 km Chad-Cameroon underground pipeline, which has a capacity of 225,000 b/d. A US oil company, ExxonMobil, holds a 40% share in the consortium operating the Doba fields, while Petronas (Malaysia) has a 35% share and Chevron (US) a 25% share. Output from the Doba oil fields is expected to decline further over the coming years. However, the decline is likely to be exceeded by production from new oil fields. The China National Petroleum Corporation (CNPC) is exploring the Ronier field in the Bongor basin, north of Doba, and has forecast that this will produce 60,000 b/d when output comes fully on stream. Oil output ('000 b/d) 200 200 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(a) (a) Economist Intelligence Unit estimate. Sources: US Energy Information Administration; The Economist Intelligence Unit. Three small oil companies are exploring other prospects. Griffiths Energy, a Canadian company, is developing the DOB Mangara and DOI Badila blocks, which it has forecast will produce around 10,000 b/d between them. Griffiths plans to build a 120 km pipeline connecting the DOB and DOI fields to the Chad-Cameroon export pipeline. The company also has exploration rights in the Borogop and Doseo blocks in southern Chad. In December 2012 a Swiss headquartered commodities company, Glencore, announced that it would invest US$300m in Griffiths’ venture in Chad. Another company, Simba Energy of Canada, has the rights to three blocks, Chari Sud I and II in the south (on the border with the Central African Republic) and Erdis III, in the far north-east. A third company, ERHC Energy (US), has exploration rights to Chari-Ouest III (north-west of Doba), BDS 2008 (north-east of Doba), and the Manga block in north-eastern Chad, on the border with Niger. In mid-2012 Niger agreed with the Chadian authorities to build an oil export pipeline from oil fields being developed in south-east © The Economist Intelligence Unit Limited 2013 3 African Markets Managing natural resources Chad concession blocks Niger through to Chad. This pipeline would benefit the Manga block, if commercially viable Simba blocks United hydrocarbon quantities of oil are discovered there. Griffiths energy international Other ownership Other minerals Open blocks Despite considerable speculation, mining in Chad is still underdeveloped. The Ministry of NIGER Mines and Geology has tried to stir interest in the potential for mining gold, uranium and other precious metals.