AFRICA BULLETIN OCTOBER 2018
NIGERIA
Nigeria Set to Build World’s Largest Refinery Nigerian billionaire, Aliko Dangote, is undertaking a daring project of building a USD 12 billion oil refinery on 6,180 acres of swampland. If successful, this refinery could transform Nigeria’s underperforming petroleum industry. Planned as the world’s largest refinery, Dangote’s project is set in a free-trade zone between the Atlantic Ocean and the Lekki Lagoon, an hour outside the city center. The site employs thousands, and upon completion should process 650,000 barrels of crude oil daily. That’s enough oil to supply gasoline and kerosene to all 190 million Nigerians and still have plenty to export. By the end of the first year of operation, the facility is expected to churn out 3 million tons of fertilizer. The production of diesel, aviation fuel and plastics will then follow.
SIGNIFICANCE The construction of the refinery has led employment creation. In addition, Dangote has had to build support structures and systems to accommodate this project, including a port, jetty and roads, along with new energy plants to power it all, thus greatly contributing to the improvement and development of infrastructure. In addition, the construction of the refinery an hour away from Lagos as well as the undersea pipelines will greatly contribute to the decongestion of the city and significantly reduce the disruption of transportation of crude oil compared to conventional above-ground systems. 2
OCTOBER 2018 AFRICA BULLETIN
TABLE OF CONTENTS
ALGERIA 3 RWANDA 8 Africa’s Largest Pharmaceutical Complex Bank of Kigali Group to Cross-List on Region’s Opens in Algeria Biggest Bourse
BOTSWANA 3 SOUTH AFRICA 8 IMF Lowers Botswana’s 2019 Growth Forecast Proposal to Cap Petrol Prices a Welcome Respite for South Africans ETHIOPIA 4 Ethiopia Takes Free Movement in Africa Dream SUDAN 9 One Step Further Construction of Sudan’s Biggest Airport to Begin Next Year GUINEA 4 China’s Chalco Starts Work at Guinea Bauxite TANZANIA 9 Mine Tanzania Awards USD 3.6 Billion Dam Project to Egyptian Contractor KENYA 5 US Dollar Dominates Kenya’s Debt Basket UGANDA 10 Uganda’s Rural Electrification Programme Gets MADAGASCAR 5 USD 212 Million Boost Lemur Holdings Steams Ahead on Madagascar Coal IPP ZAMBIA 10 Nuclear Reactor Construction in Zambia to MALAWI 6 Commence Next Year Tobacco Industry Gets High on Revenue
MAURITIUS 6 MCB Gets USD 150 Million Backing for Infrastructure Projects
MOROCCO 7 Morocco’s Largest Insurer Sells Stake for USD 1 Billion
MOZAMBIQUE 7 Mozambique’s LNG Project Gets USD 800 Million in Equity Investment 3
OCTOBER 2018 AFRICA BULLETIN
ALGERIA Africa’s Largest Pharmaceutical Complex Opens in Algeria French pharmaceutical giant, Sanofi, recently inaugurated its third plant in Algeria. It will be the largest industrial complex of pharmaceutical production and distribution in Africa, representing an investment of approximately USD 96.6 million in Algeria. Located in Sidi Abdallah, the more than six hectares site will includes a production unit designed to manufacture a hundred pharmaceutical products in different therapeutic areas, including diabetes, cardiology and neurology, as well as a storage site and distribution center to support its activities.
The logistics platform has been running for six months, while the production section is in the technical testing phase. The production unit is planned to reach full capacity by 2020, producing more than 100 million units a year. This will bring Sanofi’s local production up to 85 percent of its products sold in Algeria against the current 65 percent.
SIGNIFICANCE With a growing population of 40 million, Algeria is the first market for Sanofi in Africa, which is estimated to be worth USD 3.8 billion according to the Algerian Ministry of Health. The pharmaceutical giant’s investment in Algeria serves as beacon to the increasing attention from international investors looking to do business in Africa’s emerging markets. The set up of the complex is anticipated to create more jobs, improve on the country’s export revenues whilst providing an avenue for the transfer of skills and knowledge in the pharmaceutical sector.
BOTSWANA IMF Lowers Botswana’s 2019 Growth Forecast The International Monetary Fund (IMF) expects Botswana’s economy to grow by 3.6 percent next year, a significant reduction from its initial projection of 4.5 percent in April 2018. IMF researchers, however, have maintained their forecast for 2018 growth at 4.6 percent.
The latest revisions are contained in the IMF’s World Economic Outlook (WEO) released in October. While the WEO is silent on the reasons behind the downward revision, the IMF reaches its forecasts based primarily on information gathered through consultations with member countries.
Looking ahead, the global organisation has indicated that it was concerned about Botswana’s diamond-led development model and slows pace of reforms required to boost diversified growth. “Relying entirely on minerals and the state for development has downsides as the mining sector is capital-intensive, production is finite, and related revenues are volatile,” said the report.
SIGNIFICANCE As the report looks ahead, growth is expected to slightly be moderate on the back of the slower rate of capital accumulation in both the mining and non-mining sectors. That said, the successful execution of planned public investment projects, as well as reforms to improve the business climate and attract foreign capital, are expected to support sustained growth in the near to medium-term. Some of the proposed reforms include reducing the cost of doing business, eliminating government-induced distortions such as monopolies, liberalising the granting of visas and work permits, realigning education, technical and vocational policies based on a close dialogue with the private sector on the needed skills. 4
OCTOBER 2018 AFRICA BULLETIN
ETHIOPIA Ethiopia Takes Free Movement in Africa Dream One Step Further Africa’s second most populous nation will start a visa-on-arrival regime from 9 November 2018. The move follows the decision in June by new Prime Minister Abiy Ahmed to start issuing online visas for tourists and visitors coming from all over the world. Currently, all travelers, except those from Kenya and Djibouti, have to get a visa before departure or receive it on arrival.
Other African countries with visa-on-arrival policies include Ghana, Rwanda, and Kenya who have consequently seen an increase in visitors to their countries.
SIGNIFICANCE The visa-on-arrival initiative will likely be a bonus for Ethiopia’s hospitality and conference tourism sectors. The capital Addis Ababa is one of the world’s largest diplomatic hubs, hosting the seat of the African Union, the United Nations Economic Commission for Africa, and dozens of foreign embassies.
The announcement also has big political ramifications especially for Abiy, who has promised to open up the country and attract foreign investment. The move will also likely be a windfall for Ethiopian Airlines, the state carrier that has dominated Africa’s airspace. The airline has in recent years taken up a pan-African strategy, launching more connections, reviving defunct national airlines, and setting up more hubs across the continent.
GUINEA China’s Chalco Starts Work at Guinea Bauxite Mine China’s largest aluminium producer, Aluminum Corp of China (Chalco), has commenced the start of construction of its Boffa bauxite project in Guinea. The initial phase of the project will produce 12 million metric tons of bauxite ore per year, with production starting by end of 2019. The USD 164 million project sits atop an estimated 736 million metric tons of bauxite reserves.
Chalco says the project is merely a portion of the USD 706 million it expects to eventually invest at the site. Improvements slated for the mine include construction of a port and transport infrastructure facilities. Chalco is among China’s top aluminium refiners, having reported a company-wide refining capacity of 16.86 million metric tons in its 2017 year-end report.
SIGNIFICANCE Guinea has been a hotbed of activity in recent months and years, as major aluminium firms have been angling to carve out a piece of an estimated 7.4 billion metric tons of bauxite ore, which is approximately a quarter of the world’s total known resources. Though sitting on top of such a vast mountain of mineral wealth, Guinea has been unable to capitalise on it due to political and economic instability and a lack of infrastructure. Riots and political corruption have taken their toll on existing operations as well, with significant and expensive work stoppages happening as recently as this year. 5
OCTOBER 2018 AFRICA BULLETIN
KENYA US Dollar Dominates Kenya’s Debt Basket The Kenya government’s appetite for dollar-denominated loans has left the country with nearly three quarters of its total foreign debt in dollars, leaving it exposed should the US currency strengthen significantly against the shilling and other currencies. The Treasury’s 2018 annual public debt management report shows that USD 14.4 billion or 71.7 percent of Kenya’s external debt stock of USD 23.9 billion was in dollars by the end of June 2018.
Just five years ago in 2013, dollar-denominated loans accounted for 32.3 percent of total external debt, which at the time stood at USD 8.3 billion. The euro accounted for 33 percent or the largest component of the basket of currencies at the time but has since come down to 15 percent. Over the same period, the dollar picked 14 percent strength against the shilling, the exchange rate having moved from 86 to 100 Kenya shillings.
SIGNIFICANCE The increased borrowing from China - mostly in dollars - is likely the main driver of the increased concentration of dollar debt. Economists have pointed out that it would be prudent for the Treasury to look at rebalancing the currency mix by insisting on different currency loans when borrowing from bilateral partners. Notably, the International Monetary Fund has cautiously raised Kenya’s debt risk to moderate, citing the country’s increasing refinancing risks and tighter safety margins. Given the fact that the dollar is Kenya’s main medium of exchange in international trade, the Central Bank of Kenya is likely to still remain over reliant on the US currency to match the obligations of foreign debt servicing.
MADAGASCAR Lemur Holdings Steams Ahead on Madagascar Coal IPP Electrification in Madagascar is far behind its peers and one of the least electrified nations on the continent with a rate of just 15 percent. Lemur Holdings, a subsidiary of South Africa born and London-listed Bushveld Minerals, is looking to change that and it plans to provide coal-fired power to the southwest of the country by 2021. The power station will be positioned in the southwestern Toliara Province. This area is particularly underdeveloped and has no electricity infrastructure after a small hydro plant there was decommissioned.
Final touches are being applied to a bank feasibility study, which was prepared by Lemur’s co-developer Sinhydro, a subsidiary of Chinese state-owned entity PowerChina. Discussions with various African development financiers are also under way, as is an environmental impact assessment for the project. The price tag is estimated at USD 160 million to USD 180 million, according to the prefeasibility study.
SIGNIFICANCE Of great significance is that Lemur will need to build more than 250 KM in transmission lines along the national road, which links the south of the country to the northeast, essentially creating a backbone in electricity infrastructure in the country, which has no interconnected power grid. The installed capacity of the power station is planned to be 60MW and will supply electricity directly to other mining projects in the area to develop resources of graphite, limestone and vanadium. 6
OCTOBER 2018 AFRICA BULLETIN
MALAWI Tobacco Industry Gets High on Revenue The Tobacco Control Commission says this year’s green gold marketing season has been a success with the country realising enough forex compared to 2017. Revenue from Malawi’s major export crop, tobacco, jumped 60 percent in the 2018 season according to recent industry figures. Tobacco is Malawi’s major export commodity and hard currency earner, accounting for over 50 percent of all foreign currency receipts, according to official figures.
In a joint report released at the close of the 2018 season, auctioneer Auction Holdings Limited and the Tobacco Control Commission said revenues for 2018 reached USD 337.5 million, up from USD 212.4 million in 2017. Volumes totalled 202 million kilogrammes, up nearly 90 percent from 2017, but the revenue reaped was hampered by a 16.5 percent fall in prices.
More than 80 percent of all tobacco is produced and sold directly under contract to international tobacco firms.
SIGNIFICANCE Malawi is one of the world’s most heavily tobacco-dependent economies. The growth in export revenue translates to more output from the tobacco farms, which has a knock on effect on improving the average earning and livelihood of the cash crop farmer. The 2018 tobacco season has also helped boost the value of the local currency to the dollar and it can also be hoped that the country’s current account deficit has reduced with the improved export performance.
MAURITIUS MCB Gets USD 150 Million Backing for Infrastructure Projects Proparco and DEG have signed a USD 150 million credit facility to the Mauritius Commercial Bank (MCB) to finance long-term corporate and infrastructure projects in Mauritius and sub-Saharan Africa. For this operation, Proparco granted a USD 100 million loan and catalysed a further USD 50 million from Germany’s development finance institution, DEG.
This is the second joint transaction by Proparco and DEG with the bank, after an initial USD 85 million facility allocated in 2011, towards supporting the development of the Mauritian bank and to help strengthen its commitment and impact in terms of sustainable development. The credit facility has been touted as a testament to the creditworthiness of MCB and its active role as a donor of sustainable and high-impact projects in sub-Saharan Africa and the Indian Ocean region
SIGNIFICANCE Long-term partnerships between banks and development finance institutions are crucial to development in Africa. This credit facility testifies to a stronger and more ambitious partnership, which holds significant impact on supporting economic growth and job creation in Mauritius by helping MCB to further expand its lending to corporate and infrastructure projects in the country and sub- Saharan Africa. 7
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MOROCCO Morocco’s Largest Insurer Sells Stake for USD 1 Billion After several months of waiting and much speculation about whether the Moroccan authorities would allow the acquisition of their largest insurer, Saham Finances, it can be revealed that South Africa’s biggest insurer Sanlam has finally concluded its acquisition. The South African insurer says it had fulfilled all conditions needed for the transaction to be finalised and a USD 1 billion price tag had been paid to the Moroccan insurer’s parent company, the Saham Group, after regulators approved the deal. Sanlam now holds a 90 percent stake, with its short-term insurance arm, Santam, getting the remaining 10 percent. The conclusion of the deal cements its presence in North Africa.
SIGNIFICANCE Saham Finances has expanded rapidly since its establishment in Morocco in 1995 as a subsidiary of Saham Group, which also owns health, food and distribution interests, having consolidated net assets worth USD 850 million and earnings of USD 77.4 million for the year by the end of 2017. The deal will help Saham transform into a Pan-African investment fund with the ambition of strengthening its position as a strategic continental economic player, with over 14,000 employees and several sectors in its portfolio.
MOZAMBIQUE Mozambique’s LNG Project Gets USD 800 Million in Equity Investment State-run Bharat Petroleum Corporation will invest as much as USD 800 million as equity in a liquefied natural gas (LNG) project in Mozambique where it holds a 10 percent stake, as the project moves closer to the final investment decision stage. This will be BPCL’s largest investment in an upstream project overseas.
The Maharatna enterprise paid USD 703 million (USD 800 million being over and above this) to buy the 10 percent participating interest in the Rovuma Offshore Area 1 concession in the Cabo Delgado province in northern Mozambique where about 75 trillion cubic feet of natural gas was discovered, positioning it as a strategic global LNG supplier. Anadarko Petroleum Corporation, USA is the main operator of the gas field with a 26.5 percent participating interest. The Area 1 consortium is developing an initial onshore LNG project consisting of two LNG trains with total capacity of 12.88 million tonnes per annum. The partnership has concluded the legal and contractual framework with the signing of the marine concession agreements with the Mozambique government.
SIGNIFICANCE Mozambique is thought to have enough gas to become the world’s fourth-largest exporter of the fuel. The capital injection by Bharat Petroleum Corporation is an indicator that the long term LNG sale and purchase agreement is in advanced negotiations to facilitate funding for the project as it inches closer to the final investment decision stage which is hoped to happen early next year. The USD 20 billion project raises the country’s hopes to providing the much-needed revenue for a government that has been in default on its commercial external debt. 8
OCTOBER 2018 AFRICA BULLETIN
RWANDA Bank of Kigali Group to Cross-List on Region’s Biggest Bourse Bank of Kigali Group officially launched its long-awaited rights issue and reiterated plans to trade shares on the Nairobi Stock Exchange (NSE) from 30 November. Both moves are expected to increase the interest of foreign and domestic investors into the operations of Rwanda’s biggest lender. Trading on the NSE – the biggest in the region – could see Bank of Kigali Group have greater access to investors from the international market.
The bank has started the process of selling 222.2 million new shares to its existing shareholders as it seeks to raise RWF f60 billion (approx. USD 67.6 million) to finance its expansion strategy.
SIGNIFICANCE This new listing will play a role in fostering progress towards the development of the East African Community’s single market in financial services. Additionally, the cross-listing will particularly facilitate cross-border investments, further strengthening the agreement entered into between capital markets regulators in Kenya, Uganda, Tanzania, Rwanda and Burundi. Additionally, the listing will address challenges BK Group faces in Rwanda, due to the small size of the capital markets, by unlocking liquidity constraints and providing access to a wider pool of investors who often face compliance issues as there are no international custodians as is the case with the NSE, while further presenting the advantage of custodians such as Barclays and HSBC, allowing international investors to trade local shares.
SOUTH AFRICA Proposal to Cap Petrol Prices a Welcome Respite for South Africans South Africa’s Minister for Energy, Jeff Radebe, recently revealed that a proposal to cap the price of 93 octane petrol would be finalised by the end of January. The government is looking to introduce measures to boost competition in setting the price of 93 octane petrol that could result in lower prices and shift higher numbers of consumers into using it rather than higher-octane 95. The proposal has been circulated to the fuel wholesalers and retailers‚ who have been asked to comment on it.
2018 has been one of the most tumultuous years in history for South African fuel users, and the economy is still fragile and easily spooked. In the interim, November is expected to provide a slight relief for owners of petrol vehicles, while the price of diesel is expected to see another large increase.
SIGNIFICANCE The petrol price cap proposal is a cause for optimism, as it would go a long way in alleviating pressure on consumers and business owners who have been hard hit by seven successive months of rising fuel prices. While the government intervened in setting prices in September for the first time since the early 2000s, consumers still faced a record-high fuel increase in October, compounded by the fact that fuel prices have been difficult to predict as the price of oil and the trajectory of the rand against the dollar — both of which are uncertain — are the two primary factors that influence the price monthly. 9
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SUDAN Construction of Sudan’s Biggest Airport to Begin Next Year Construction of the USD 1.15 billion Khartoum International Airport in Sudan by Turkish construction company Summa is set to commence at the beginning of the coming year. According to Selim Bora, the construction firm’s chairman, the Airport’s foundation will be laid in the first quarter of 2019 to be completed in less than 36 months. The three-level project will begin with the construction of a terminal with a 6 million-person annual capacity along with all infrastructure services, runways, and airport aprons. The Chairman further added that the airport’s annual capacity is expected to reach 9 million in the second phase and 12 million in the third phase.
SIGNIFICANCE Sudan hopes that the air passenger traffic in Cairo and Addis Ababa airports will shift to Khartoum International Airport, which enjoys geographical advantages. In addition, the airport’s annual capacity is expected to significantly increase with the upgrade of the airport which will translate to a wider economic impact for Sudan with the creation of job opportunities, improved infrastructure and broadening of trade opportunities with the rest of the continent and international markets.
TANZANIA Tanzania Awards USD 3.6 Billion Dam Project to Egyptian Contractor Tanzania and Egypt will forge ahead with the construction of a USD 3 billion hydroelectric dam over Tanzania’s Rufiji River, at Stiegler’s Gorge in Selous Game Reserve. The massive project will be undertaken by Cairo-based firm Arab Contractors who have emerged as victorious bidders to build East Africa’s largest hydropower plant. Arab Contractors Company will partner with El Sewedy Electric, an engineering services company in the project.
Despite facing criticism and opposition from environmentalists who are concerned about the imbalance in the ecosystem and dire effects to the tourism sector, the Tanzania government has assured the public that the project will spur the economic growth of the country by offering cheap and affordable electricity by adding 2,100MW to the national grid, bringing the total installed capacity to 3,651MW. The government has already allocated 40 percent of the country’s budget for the dam project, cementing its commitment and support.
SIGNIFICANCE The east African second largest economy is banking on the hydroelectric project to end its persistent power problem. It is expected to adequately sustain local manufacturing, production and service industries with a reliable and affordable supply of electricity which in turn will spur economic growth. The projects is also poised to be a substantial economic stimulus for Tanzania through job creation as well as engaging of local contractors and suppliers during the course of its construction and years of operation. 10
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UGANDA Uganda’s Rural Electrification Programme Gets USD 212 Million Boost Uganda has received a USD 212 million loan from the Chinese government to help increase access to electricity as part of the East African country’s Rural Electrification Programme. Through the programme, the government hopes to meet the country’s supply needs by increasing access by 51 percent by 2030 and achieve universal electrification by 2040.
Aimed at electrifying homes, schools, healthcare centres, government offices and commercial, industrial and agricultural establishments, the project seeks to help the government achieve its objective of meeting the rural electricity demand that currently stands at less than seven percent to 26 percent by 2022.
SIGNIFICANCE Uganda is one of the countries with the lowest electricity rate in Africa and the government has been seeking a USD 4.5 billion to invest in electricity transmission and distribution network over the next ten years in a bid to improve power supply in the country. The Chinese loan will go a long way to enable the government to accelerate access to reliable electricity. It will significantly improve the living standards of the rural population through the provision of better services at government offices, healthcare centres, and learning institutions as well as support industrial and agricultural establishments which in turn will impact Uganda’s economic growth.
ZAMBIA Nuclear Reactor Construction in Zambia to Commence Next Year The construction of a water-cooled nuclear reactor with a capacity of 10MW in Zambia with Russia’s assistance is expected to begin next year. A legal framework is being considered under the current sitting of parliament to come up with legislation that will pave way for actual works to start in 2019.The center is expected to include a laboratory complex, multipurpose irradiation center, and a cyclotron-based nuclear medicine center. So far a great deal of work has already been done, in particular, an engineering, procurement and construction agreement has been signed and the site for the construction of the reactor had been chosen.
SIGNIFICANCE In due course, nuclear could be an energy source for much of Africa, where only South Africa currently has a nuclear power plant. For industrialising countries like Zambia in need of a clean, reliable and cost-effective source of energy, nuclear is an attractive option. Should the project stick to its timelines and get into operation, the electricity produced by the new station will be injected into the national power grid improving power supply for the country’s commercial industries. The nuclear research reactor will enable the country to abandon isotopes imports from India and South Africa and will even permit the exports of Zambian isotopes to neighboring countries. 11
OCTOBER 2018 AFRICA BULLETIN
SOURCES https://www.africanbusinesscentral.com https://www.brecorder.com https://af.reuters.com http://www.maravipost.com https://aluminiuminsider.com https://clubofmozambique.com https://www.africaglobalfunds.com https://www.newtimes.co.rw https://www.lemonde.fr http://www.hurriyetdailynews.com https://businesstech.co.za https://www.exchange.co.tz https://www.businesslive.co.za https://constructionreviewonline.com https://www.iol.co.za https://africaoilandpower.com https://www.businessdailyafrica.com https://sputniknews.com http://www.theeastafrican.co.k
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.