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54 country reports

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the africa report

Africa in

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at KENYA50 KENYA AT 50 is a supplement to THE AFRICA REPORT N°56

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HISTORY | PEOPLE | POLITICS | ECONOMY | CULTURE

The promise of a New East

28-PAGE SPECIAL

• Can Jonathan command Nigeria beyond the Delta?

• Gwede Mantashe plots ANC victory in South Africa

• Key business deals,

political forecasts and strategic analysis

monthly • n° 56 • december 2013 - january 2014

GROUPE JEUNE AFRIQUE INTERNATIONAL EDITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € • Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 9,000 • South Africa 30 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 6,500 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

The investment potential in Africa is as vast as the landscape

No other bank knows the territory better.

Ecobank – voted World’s Best Frontier Markets Bank 2013

by Global Finance Magazine.

The future is pan-African

ecobank.com

54 country reports

30 people to watch in politics, business & culture

2014 w w w.t heaf ric arep or t.com

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Africa in

CONTENTS

Double issue

at KENYA50 KENYA AT 50 is a supplement to THE AFRICA REPORT N°56

Not to be sold separately

HISTORY | PEOPLE | POLITICS | ECONOMY | CULTURE

The promise of a New East

28-PAGE SPECIAL

at 0 KENYA5 a supplement KENYA AT 50 is N°56 to THE AFRICA REPORT

• Can Jonathan command Nigeria

Not to be sold separately

beyond the Delta?

• Gwede Mantashe plots ANC victory in South Africa

• Key business deals,

political forecasts and strategic analysis

| CULTURE | POLITICS | ECONOMY HISTORY | PEOPLE

GROUPE JEUNE AFRIQUE INTERNATIONAL EDITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € • Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 9,000 • South Africa 30 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 6,500 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

The promise

of a New East

the Indian Ocean its region and across Nairobi looks to

THE AFRICA REPORT # 56 | DECEMBER 2013-JANUARY 2014 FREE with this issue: a special KENYA at 50 supplement.

Not to be sold separately

COVER CREDITS: FOTOLIA; A. BORGEAUD FOR JA; D. LEVENSON/GETTY; J.MINCHILLO/AP/SIPA; R. NOROUZI; V. FOURNIER/JA; G. WILLIAMS/REA; S. VALERY/CORBIS; WORLD BANK; PANORAMIC; HICHEM; M.BRABO/AP/SIPA; M. ASAEL/CORBIS

4 EDITORIAL Smile, the beloved continent 6 LETTERS

YEAR IN REVIEW 8 2013 IN IMAGES 16 FIVE STORIES THAT MADE US LAUGH 18 QUIZ OF THE YEAR

FRONTLINE 21 WHAT TO WATCH IN 2014 34 Calendar

POLITICS 36 42 44 48 50

21

The critical issues facing the continent in the year to come, from ever-shifting DRC negotiations and the diplomatic ballet with China and Iran to development debates

Nigeria Jonathan starts running in the Delta Opinion Stephen Chan: Africa in 2064 South Africa On the road with the ANC Political Islam O Brothers, where art thou?

Anansi Fighting for peace

COUNTRY FOCUS 55 ANGOLA Luanda’s policy lessons from Brazil; New oil potential uncovered; industry legislation boosts banks

BUSINESS 72 80 82 84 88

2014 Africa in

Prosperity You can’t eat GDP growth Opinion Dev Kar on illicit financial flows Investment Project pipeline 2014 Interview PTA Bank CEO, Admassu Tadesse Hannibal Approaching payback time

NIGERIA HAIL TO THE CHIEF

PROSPERITY YOU CAN’T EAT GDP GROWTH

DOSSIER MINING 90 Golden days are gone; Zambia’s legacy of nationalisation; Mining code shifts to watch; De Beers’ new sales hub in Gaborone

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ART & LIFE 100 Football The teams to watch in Brazil 104 Guide 2014 Art, books, theatre, music, film, restaurants 108 Reviews Highlights of 2013

54 COUNTRY PROFILES Your guide to the 54 countries of the continent, with political and economic forecasts for the year ahead, key data and projections 202 Last Word by Tope Folarin THE AFRICA REPORT

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President Jonathan is enjoying his Delta chieftancy, even as his amnesty for militants starts to unravel. But he will need to rally his base ahead of the coming elections if the PDP is to overcome a united opposition

110 115 135 155 169 191

Introduction Southern Africa East Africa Central Africa West Africa North Africa

For the millions left out of the ‘Africa Rising’ narrative, help may be on the way as policymakers start to realise that improving the lives of their people may just be the best investment they will ever make - in infrastructure, health and education

110

This issue carries two inserts ts between pages 98-99 and 130-131 for selected countries

3

4

EDITORIAL

BY PATRICK SMITH

Smile, the beloved continent

W

hen three international polling companies report that Africa is the most optimistic continent, it is tempting to suspect some kind of marketing stunt. Are these the same companies that concluded just over a decade ago that African economies were forecast to bounce along the bottom interrupted by sporadic civil conflicts? Now the economies are up, and the conflicts are down.

Nevertheless, the poll results merit scrutiny, with all their talk of margins of error and sampling bias. Most polling companies are a wing of the marketing industry, and in Africa’s case that could be a good sign. A decade ago, few companies would bother to ask what the African market thought. Now, retail companies are tripping over each other to find out what is happening in Africa’s 1.1 billion-strong market.

The United States-based Gallup pollsters reported that a global survey that asked respondents to rate their future lives against their current lives found 14 of the 15 most optimistic countries in the world were in Africa.

Incidentally, seven of the 15 most pessimistic countries were in Europe. Is it strange that people in the wealthiest countries in the West are more worried about their future and that of their children than those living in African countries where the average income is less than a thirtieth of their European counterparts? It is not very surprising when you consider climatic conditions, psychological predisposition and an intuitive sense of the historical moment.

Sceptics might suggest all this is a victory for the ‘Africa rising’ industry, which has done such a good job in persuading impressionistic investors to snap up equity in new oil companies wielding exploration rights bought cheaply in war zones. That is part of the rich tapestry.

But, as with Africa’s economic turnaround, there are several different factors at play: Asian capital flows, global commodity prices, demography, political change and Africa’s resilience and entrepreneurial zest.

Of course, Gallup may have made its own mistakes. Last year, it recorded opinions about African leaders and concluded the three most popular leaders were Burundi’s Pierre Nkurunziza (89% approval rating), Benin’s Thomas Boni Yayi (87%) and Mali’s Amadou Toumani Touré

(86%). Certainly when Touré was overthrown by the military, a few months after Gallup’s survey, few Malians protested or expressed sadness in any way. Other results from Gallup ring truer: again last year, it reported that 94% of Nigerians thought corruption was widespread in government.

The Pew Research Center’s take on the smiling continent is a little more broad-based that Gallup’s. It samples eight African countries as part of a 39-country survey. It reports, unsurprisingly, that many in Africa continue to struggle financially and are concerned about social inequality. Only Kenyans and South Africans thought There are several their economies were in good shape. factors at play: However, 50% of Africans believed their children would be better off; Asian capital in China, the figure was 82%. In flows, global Europe, 65% thought their children commodity would be worse off.

Perhaps the most remarkable findprices, ing of late was the World Economic demography, Forum’s (WEF) report that revealed Africa as the continent with the most political change optimism about the ability of governand Africa’s ment, business and the media to take resilience and on the challenges of unemployment, climate change and corruption. That entrepreneurial seems so at odds with most Africans’ zest healthy scepticism about government and big business that alarm bells start ringing. It was telling that when the WEF interviewed African Development Bank president Donald Kaberuka about the finding, he diplomatically responded: “It’s not my job to debate whether the glass is half full or half empty, it’s my job to fill it.”

But one less obvious area where there is solid optimism about Africa’s future is soft power.

South Korea’s President Park Geun-hye, whose country is now the eighth-largest economy in the world rising from being poorer than Ghana 50 years ago, visited London in November to find out the secret of Britain’s cultural diplomacy. A South African journalist joked: “We should propose a swap. We tell them how we created Nelson Mandela and Archbishop Desmond Tutu, Fela Kuti and Nollywood and they tell us how they got so rich so fast.” ●

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ENJOY THE ENTIRE WORLD DEPARTING FROM AFRICA Thanks to the partnership between AIR FRANCE and KLM along with our SkyTeam partners, we offer one of the largest networks giving you access to over 1000 destinations.

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LETTERS For all your comments, suggestions and queries, please write to: The Editor, The Africa Report, 57bis Rue d’Auteuil - Paris 75016 - France. or editorial@theafricareport.com

BURNING THE CLUTCH OF PROGRESS

I

TELECOMS Gulf groups get serious

SOU SOUTH AFRICA CA Who’s who Wh in th the class war?

WESTGATE TERROR What pushed Kenya into Somalia

n October, Ghana’s President John Mahama told an exasperated nation that he was still in first gear, pleading for patience. According to figures released on 19 November, not a single Ghana one of his growth targets will be met this year.

Agriculture, electricity, construction, the financial President Mahama is running a race against sector, housing: all slumped. One area that saw time to reboot the economy significant growth was public sector debt, registering a $4.5bn add-on since December 2012.

3’:HIKSTI=UUY^UY:?k@k@f@f@a"; It is tempting to blame it all on the unsuccessful 8-month presidential election petition trial. But the record 11.9% fiscal deficit of 2012 preceded the 2013 court case that challenged the December 2012 polls. That reckless election-year spending is turning out to be the biggest suicide pact – with devastating collateral damage – ever signed by a ruling party in Ghana’s democracy.

Gabby Otchere-Darko, political consultant and publisher, London and Ghana w w w.t hea f r ic a repo r t .c om

N ° 5 5 • N O V E M B E R 2 013

Tick, tock

GROUPE JEUNE AFRIQUE

GHANA EDITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € • Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 9,000 • South Africa 30 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 6,500 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

AFRICAN SOAPS COULD TACKLE REAL ISSUES I’m excited about the developments in African soaps now that it is becoming de rigueur to produce soaps with story lines relevant to the community (‘Small screen rivals’, TAR 55 Nov 2013).

I remember seeing early episodes of Latino soaps in Africa and

M 08980 - 55 - F: 4,90 E - RD

wondering how and why people related to them so well. Having just watched a multitude of African movies at the Film Africa Festival, I see that there is no shortage of ideas, expertise and talent on both sides of the camera so it’s a good sign that more countries are beginning to make their own soaps with local stories.

Imagine soaps with issues like violence against women being

explored dramatically, in addition to usual stories of jealousy and intrigue.

These are the topical issues of the day and soaps could, with great impact, do something more than distract their audience from the banality and difficulties of day to day living.

Maggie Dodson, artist, London

STOP PERSECUTING REFUGEES I read with interest your editorial ‘Let the people go’ (TAR 55 Nov 2013).

I am living in exile since 1982 and have a French resident card but the French authorities always refuse to deliver me a travel document because I am not a recognised refugee by the French office in Paris. This is the fate of thousands of others in Europe.

It is proposed to create a special UN Travel Document to be given to the old asylum seekers lost in Europe who do not have a valid passport to circulate freely out of Europe in a legal manner. Your editorial may wake up the UNHCR who must work urgently on this matter.

Muhammad-Khalid Zaman, Esvres, France

HOW TO GET YOUR COPY OF On sale at your usual outlet. If you experience problems obtaining your copy, please contact your local distributor, as shown below.

GHANA: GREENWICH MAGAZINES & BOOKS, Mr Ernest Asare, +233 (0)208 142 374, greenmaghana@gmail.com – KENYA: NATION MEDIA GROUP, Mary Wangu Gicheche-Muriithi, +254 (0)20 32 88507, wmuriithi@ke.nationmedia.com – NIGERIA: NEWSSTAND AGENCIES LTD, Solomon Otinwa, +234 (0)709 8123 459, newsstand2008@gmail.com – SIERRA LEONE: RAI GERB ENTERPRISES, Mohammad Gerber, +232 (0)336 72 469, raigerbenterprise@gmail.com – SOUTHERN AFRICA: MCS CAXTON, Luisa Rebelo, +27 (0)11 602 9800 • luisar@magcservices.co.za – TANZANIA: MWANANCHI COMMUNICATIONS, Erasto Matasia, +255 (0)713 512 551, ematasia@tz.nationmedia.com – UGANDA: MONITOR PUBLICATIONS LTD, Stephen Eselu, +256 (0)702 178 198, seselu@ug.nationmedia.com – UNITED KINGDOM: COMAG, Mark Swan, +44 (0)1895 433791, Mark.Swan@ comag.co.uk – UNITED STATES & CANADA: LMPI, Sylvain Fournier, +1 514 355 5610, lmpi@lmpi.com – ZIMBABWE: MUNN MARKETING (PVT) LTD, Nick Ncube, +263 (0)4 662755, nickncube@munnmarketing.co.zw

For other regions go to www.theafricareport.com

ADVERTISERS’ INDEX ECOBANK ................................................. p 2 AIR FRANCE KLM ..................................... p 5 BANK OF AFRICA GROUP ......................... p 7 NESTLE CWA ................................... p 14-15 TOTAL .................................................... p 17 OLAM ..................................................... p 19 INTERPLAST ........................................... p 20 EDF ........................................................ p 27 MTN GROUP .......................................... p 31 JMG ....................................................... p 32

EXXONMOBIL CORP. .............................. p 33 BGFI HOLDING CORP. ............................. p 35 COMMERZBANK .................................... p 39 SUBSCRIPTION ...................................... p 41 SKYVISION ............................................. p 47 REP. OF COTE D’IVOIRE .................... p 51-54 STANDARD BANK ............................ p 58-59 ODEBRECHT ANGOLA ............................ p 61 BFA ........................................................ p 65 MOTA ENGIL .......................................... p 67

CBS - TVC News .................................... p 69 GMA ....................................................... p 71 MATRADE ............................................... p 75 SAHAM GROUP ...................................... p 77 WESTERN UNION ................................... p 79 AfDB ....................................................... p 81 ADEXEN ................................................. p 85 GPP ........................................................ p 85 THE AFRICA CEO FORUM ...................... p 87 FIORI GROUP .......................................... p 89

REGUS MAURITIUS ................................ p 89 LIEBHERR EXPORT ................................. p 93 HIMOINSA .............................................. p 95 COMPAGNIE INDUST. INT. ...................... p 97 KINCANNON REED ................................. p 97 METALGALANTE .................................... p 97 EKO HOTELS & SUITES ........................ p 103 MINING INDABA ................................... p 114 REP. OF DJIBOUTI ................................ p 134 CNN ..................................................... p 154

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ICI 2014 ............................................... p 168 DDP OUTDOOR .................................... p 190 ICNL ..................................................... p 190 AFRICAN MINERALS ............................ p 203 SONILS ................................................ p 204 KENYA @ 50: BAHATI RIDGE DEV.; ORYX ENERGIES; SGS; SUBSCRIPTION; SHELTER AFRIQUE; MINEPAT; COLLINS CONSULT. INT.; THE ECONOMIST GROUP; MINEPAT; BEST WESTERN; SAFARICOM

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GLEZ’S TAKE Five stories that made us laugh in 2013 From the irreverent to gallows humour, the year that was has thrown up its fair share of irony, excess and hilarity. Here are some choice cuts satirised by our cartoonist Glez

Chasing the dragon Obama finally made it to Africa in June, after giving the Chinese a substantial headstart in the race to leave a footprint on the continent.

A fistful of votes President Museveni lured voters with a cash handout from a large sack in April.

pres_kenyatta123: offline Ex-premier Raila Odinga suggested President Uhuru Kenyatta run Kenya via Skype whilst on trial in The Hague.

Computer says no

Burger Queen

A Lagos commandant failed to remember his agency’s web address, evoking his “oga (boss) at the top” to save face.

The ANC’s Sylvia Lucas spent $5,000 on fast food on her official credit card in 10 weeks.

THE AFRICA REPORT

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QUIZ 13 Questions from 2013 How well have you been following the news from across Africa this year?

Test your knowledge in our quiz. The first five people to send in all the correct answers will receive a year’s free digital subscription to The Africa Report.

Please send your answers by email to quiz@theafricareport.com by 10 January 2014. You can also enter online at www.theafricareport.com. actor played Nelson Man1toWhich dela in the film Mandela: Long Walk Freedom released this year? a) Morgan Freeman b) Idris Elba c) Denzel Washington Which country withdrew from 2 the Commonwealth in October? a) The Gambia VONDERLAG/ICON SPORT

b) Botswana c) Zambia Which African author was nomin3 atedforthe2013ManBookerPrize? a) Tope Folarin b) JM Coetzee c) NoViolet Bulawayo

Which Ivorian footballer is threatWhich country announced plans 7 ening to boycott the 2018 World 10 to start exporting oil by 2016?

Cup in Russia? a) Kenya

4

Which country elected this man president in August and what is his name? a) Niger b) Mauritius c) Mali

GEORGES GOBET/AFP

a) Yaya Touré b) Kolo Touré c) Didier Drogba

5

Which African architect designed the new National Museum of African American History and Culture in Washington, DC? a) David Adjaye b) Diébédo Francis Kéré c) Pierre Goudiaby Atepa Thechairmanofwhichpan-African 6 bank stepped down after a scandal in 2013? a) United Bank for Africa b) Standard Bank c) Ecobank

b) Somalia c) Uganda

8

Which mining mogul is involved 11 in a long-running legal battle with GuineaanditsPresidentAlphaCondé?

9

Whichofthefollowingcountries 12 did not have its sovereign credit rating downgraded in 2013?

Which African leader was abducted by gunmen, and later freed in October? a) Ali Zeidan b) Mohamed Morsi c) Hailemariam Desalegn

What did both these South Africans launch this year? a) a wine club b) a political party c) a blog

a) Dan Gertler b) Beny Steinmetz c) Frank Timis

a) Ghana b) Tunisia c) Nigeria Which African 13 president will celebrate his 90th

SIPHIWE SIBEKO/REUTERS; STR/EPA/MAXPPP

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birthday in 2014? a) José Eduardo dos Santos b) Michael Sata c) Robert Mugabe  Julius Malema and Mamphela Ramphele THE AFRICA REPORT

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26 countries

in Africa where Olam operates

2.5 million tonnes of agricultural products sourced in Africa last year

2.8 million farmers and their communities supported in Olam’s African network

us$840 million

is Olam’s net investment in Africa to date, creating employment and capability building for the long-term

50 facilities

processing cashew, grain, sesame, cotton, rice, cocoa, palm oil, dairy and packaged foods

olamonline.com

Touching African Lives From our inception in Nigeria in 1989, we at Olam have touched people’s lives, from the farm, to the factory, to the shelf.

A global agricultural company supplying the needs of 13,600 customers for food and industrial raw materials. Our success in Africa is possible through continued collaboration with our employees, farmers and partners.

Nestlé’s Continuous Commitment in Africa

A

s one of the world’s largest nutrition, health and wellness companies, Nestlé has its eye on expanding in West Africa.

Established in Switzerland in 1866, the company has been present in Central and West Africa since the 1950s and set up its Central and West Africa Region (CWAR) division in 2005, which oversees its operations in 22 countries. It manages seven factories and employs around 5,300 people.

Tens of thousands of other people are also employed as suppliers, distributors and transporters, whilst 150 villages in the region are benefiting from Nestlé’s agriculture programmes.

Over the past five years the company has invested hundreds of millions dollars in CWAR, which includes a new MAGGI factory in Nigeria and an Infant Cereal plant in Ghana.

In Nigeria and Ghana, Nestlé is using 100% locally sourced grains for its products.

Nestlé is creating shared value in the areas of nutrition, water and rural development.

Under the nutrition axis, it implements the Nestlé Healthy Kids Global Programme, which enables the company to join in the efforts towards ameliorating the increasing burden of under-nutrition such as malnutrition and obesity. The programme is currently being run in Nigeria, Ghana and Cameroon in partnership with the ministries of education of the respective countries, benefiting more than 26,000 pupils.

Notably, the company also fortifies its products with essential micro-nutrients such as iron, iodine, vitamin A and zinc to deal with the micro-nutrient deficits in some parts of the continent, which

Nestlé is increasing access to markets and improving revenue opportunities for African farmers by helping them to sell grains and cereals with best quality. Around 50 000 farmers trained in Ghana.

Kais Marzouki, Head of Nestlé’s Central and West Africa region operations.

experts claim accounts for the high prevalence of infant mortality.

In November, the company launched CERELAC Millet in Ghana, a complementary food for infants 6-month onwards, that is fortified with iron and bifidus BL which will both prevent anaemia and boost the defences of infants against infections.

In line with its cocoa activities, Nestlé provides more than 100,000 people in cocoa-growing communities in Côte d’Ivoire with access to clean drinking water and sanitation facilities. The initiative is a partnership with Nestlé and the International Federation of Red Cross and Red Crescent societies (IFRC). In Nigeria, around 1000 pupils are being taught hygiene promotion.

When it comes to rural development through the company’s Grains Quality Improvement initiative it trains over 50,000 farmers in Ghana and Nigeria with skills to reduce mycotoxin levels in cereals, dried fruits and nuts used in its products.

Nestlé invests in social projects such as boreholes, sanitation facilities and schools in collaboration with the IFRC, enabling more people to have access to clean water (in Côte d’Ivoire, 100 000 people have access to safe water).

the Central and West Africa Region continues to experience a number of social, political, infrastructural challenges which naturally impact on how the company operates. Even so, Nestlé is committed to serving its consumers regardless of these challenges by taking measures that reduce the impact of these deficits on the business, like launching affordable pack sizes and optimising the flow of goods between countries as it takes advantage of trade and customs agreements.

Nestlé’s commitment to the Central and West Africa region is for the long term. In the last few years the company has invested hundreds of millions of dollars to consolidate its operations.

These investments help the company to continue to do well and in the hope that the communities in which it operates will thrive as Nestlé gains more successes.

In 2009, the company established a Nestlé Research and Development Centre for Africa in Abidjan, Côte d’Ivoire as part of a network of 26 research centres around the world. Through the Abidjan

R&D Centre, the company leverages natural raw materials and ingredients grown in Africa, combining bioscience and technology to develop innovative solutions to improve the nutritional benefits of the African staples such as maize, millet, and cassava.

Nestlé will continue to strengthen its business in Africa while serving nutritionally rich products - Good Food - to its consumers for a better life - Good Life. Nestlé has been present in this region since 1947 and its long-term success will continue with the support of its internal and external stakeholders. Nestlé is confident that the African markets will provide it with additional economic opportunities going forward as its business develops.

YOU WANT TO STAY CONNECTED? CONTACT US ON: http://www.nestle-cwa.com http://www.facebook.com/nestlecwar http://www.youtube.com/nestlecwar http://www.twitter.com/nestlecwar corporate.communications@gh.nestle.com csvforum-cwar.com

MESSAGE DIFCOM/DF - PHOTOS : DR.

Under its Nestlé Cocoa Plan initiative, which aims to support farmers for better chocolate, Nestlé has already distributed millions of high-yielding seedlings to cocoa farmers in Cote d’Ivoire to renew ageing cocoa farms.

It has also initiated the NESCAFÉ Plan under which it is going to hand over 20 million disease-tolerant high-yielding seedlings to the farmers over a 12 year period to revamp their farms.

Plus, to fight against child labour, the company is building schools to reach 40 schools by 2015 in Côte d’Ivoire.

Whilst expanding on the continent, head of the Central and West Africa region operations Kais Marzouki says that: “We are facing a number of challenges we have to take into account to nurture our ambition as the leader in Nutrition, Health and Wellness within the Central and West Africa Region.”

He adds: “To explain how we comply with regulations in sometimes unpredictable and diverse political, cultural, economic environment, we refer to our Corporate Business Principles.”

Mr. Marzouki says that the principles are at the basis of the company’s culture. Nestlé has built its business on the fundamental principle that to have long-term success for its shareholders.

The company not only has to comply with all applicable legal requirements and ensure that all its activities are sustain- able, but, additionally, it has to create significant value for society.

In doing so, Nestlé maintains a very long-term perspective on business development and welcomes dialogue with external stakeholders who are committed to principled behaviour and constructive engagement. This includes government and regulatory authorities, inter-governmental organisations, non-governmental organisations, academic and professional bodies, and local communities.

Mr Marzouki says Nestlé is committed to making sure that the entire company is managed according to these principles and require adherence to them from all its 5,300 employees in the Central and West Africa Region.

It is also committed to continuous improvement and is open to external engagement regarding any area of its corporate business principles.

The global economic downturn continues to have an impact on the region, like the rest of the world. Besides,

FRONTLINE What to watch in

2014 A guide to the year ahead as election season hits Africa’s four biggest economies, fears mount over further radicalisation from the Horn of Africa to the Sahel, African governments stand up to the Chinese and Cape Town is World Design Capital 2014.

The new year will also bring debates about the new global development agenda and how to attract more infrastructure investment for the continent.

By Ruby Audi, Elissa Jobson in Addis Ababa, Nicholas Norbrook, Crystal Orderson in Cape Town, Patrick Smith, Marshall Van Valen, Gemma Ware

21

FRONTLINE | WHAT TO WATCH IN 2014

ELECTIONS

Egypt Tight deadlines and military precision FEB. B. 2014 14

T

MA

20 Y 14

he military-backed transitional government stoked political tensions in late 2013 when ten General Abdel Fattah elGe Sisi said the military should Si have immunity under the ha new constitution. Early signs showed that the consi stitution, due to be voted on st in a referendum in December, would strengthen the

signs suggest el-Sisi will run. The government has arrested Muslim Brotherhood leaders and broken up their protests. It said that the Brotherhood could participate in the constitution vote and the parliamentary poll, but the party’s leaders have stressed that they would not take part in the referendum (see page 48). ●

military’s power and give it new powers to try civilians in military courts.

The transitional regime faces a series of close deadlines that will enable it to hand over power to an elected government in 2014.

Parliamentary polls are set for February or March, then the presidential election is planned for mid-2014. All

South Africa Born frees and battlegrounds

T

he ruling African National Congress (ANC) will face its toughest elections yet next year when South Africa celebrates 20 years of democracy and its fifth free election since the end of apartheid in 1994. The ANC fears voter apathy: the biggest threat would be to get a lower share of the vote with falling turn out, but it is near inconceivable that President Jacob Zuma could lose.

Although life has improved for millions of poor black South Africans, there are rising concerns of corruption and high unemployment. Those are the issues the opposition parties such as Julius Malema’s Economic Freedom Fighters and Mamphela Ramphele’s Agang SA are targeting. Malema is coming from the left and Ramphele from the right, trying to squeeze the ANC in the middle.

Political culture and history will save the ANC from really bad damage, but a poor performance would point to a gradual erosion of its base. “People and voters see the ANC as a delinquent child.

You don’t replace the ANC; you try to fix it. People don’t blame the ANC; they blame the leadership,” political analyst Susan Booysen tells The Africa Report.

Last year’s party in-fighting annoyed many supporters because it seemed to be more about personal ambition than political ideals.

Violent protests about service delivery and lengthening queues for jobs point to some of the ANC’s vulnerabilities. The provinces to watch are Gauteng, Western

STEPHANE DE SAKUTIN/AFP

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President Jacob Zuma is likely to win a second term in April elections

Provinces to watch

LIMPOPO

NORTH WEST

WESTERN CAPE

GAUTENG

Indian Ocean 300 km

Cape, North West and Limpopo: these are where the opposition parties are putting their biggest efforts.

Western Cape, governed by the Democratic Alliance (DA), is the only province the ANC has never won outright. The ANC won 33% of the votes there in 1994, dropping to 32% in 2009. ANC secretary general Gwede Mantashe told party activists: “The only outpost we must work on is the Western Cape. That’s the reality.”

The DA is mounting a huge effort to win the country’s economic heartland, Gauteng. Addressing party faithful in Johannesburg earlier this year, party leader Helen Zille said: “What seemed unimaginable a few years ago is now looking likely. The DA is marching towards victory in Gauteng.” Yet the ANC is equally confident it will maintain its stronghold.

The ANC is facing a real fight in its heartlands of North West and Limpopo, where the party has failed to unify battling factions at provincial conferences.

“South African voters are a cynical bunch. They may even carry a DA or Agang card but would still vote for the ANC. They will take the hand-out they can get but won’t necessarily see it as delivery,” adds Booysen.

The other factors to watch are the allegiances of the ‘born frees’, those born after democracy in 1994 who will vote for the first time. Some activists and politicians reckon the born frees could upset some of the ANC’s more complacent voter forecasts. ●

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WHAT TO WATCH IN 2014 | FRONTLINE

Algeria Succession worries loom

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he next president is to be inaugurated on 31 May 2015. According to the constitution, national elections must be held six months earlier, in November or December 2014. That schedule is likely to slip, but 2014 will see the big campaign spend and the big politics, with the ruling People’s Democratic Party (PDP) facing a serious national opposition, the All Progressives Congress (APC), for the first time in 14 years. Finance minister Ngozi Okonjo-Iweala has made the monetary trains run on time: the budget deficit is down to 2.3% of GDP; inflation is down to 8%; foreign reserves have risen to $46bn from $32.6bn over the past year; and her 2014 budget forecasts growth at 6.8%. All that could be at risk if party barons – the PDP in Abuja and the opposition APC in all the states it controls in southwestern Nigeria – raid government coffers for campaign funds. And central bank governor Lamido Sanusi, a strong ally for Okonjo-Iweala, is due to stand down in June 2014. If the government’s response to the Islamist insurgency fails to make progress, this will complicate electoral calculations in the north, an opposition stronghold. Renewed conflict and piracy in the Niger Delta, President Goodluck Jonathan’s home base and headquarters of the oil industry, presages fierce political battles there too (see page 36). This time, the opposition looks determined to get a toe-hold in the Delta. ● THE AFRICA REPORT

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EUTERS

Go slow for Goodluck

LARBI/R

Nigeria

LOUAFI

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ill he stay or will he go?

The endless game of cat and mouse that President Abdelaziz Bouteflika is playing with Algeria’s political and security elite suggests that even if he is not in the best of health, his mind is still sharp as ever. But all the signs suggest that the three-time president will not try to run for a fourth term in office in 2014.

Observersarewatchingthe moves of former ruling party secretary general Ali Benflis. As the nearest thing Algeria has to a consensus candidate, Benflis will look to stay onside of the military, as well as not appearing to threaten any of Bouteflika’s placemen. The fate of corruption trials linked to state oil company Sonatrach will be a key sign of the way the regime is leaning.

Whoever wins out will have to fix the economy.Flaggingoilproduction, an unrealistically high benchmarkforoilsetinthe budgetand one ofthe least diversified economies in the world have created a toxic cocktail for the next leadership.

A splurge on infrastructure has not yet kickstarted an industrial revolution.

Instead, the country still imports high levels of food and goods.

Algeria, still woundedfromadecade of civil war in the 1990s, did not follow the North African uprisings in 2011. It would be a mistake for the government to ignore disaffection among the youth. ●

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Maternal and child mortality are two targets of the MDGs

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African voices in the development debate structural economic transformation and inclusive growth; science, technology and innovation; people-centred development; environmental sustainability and natural disaster management; and financing and partnerships.

The AU appointed Liberia’s President Ellen Johnson Sirleaf as head of a 10-member committee to oversee the process. It must whittle down the list to one or two key issues before presenting its decision to leaders in January. Johnson Sirleaf has suggested that peace and security should take precedence. Carlos Lopes, the executive secretary of UNECA, argues there can be no development without economic transformation.

Employment creation and social protection are essential, according to Lazarous Kapambwe,specialadviserto the chair of the AU Commission. “There are no-brainers which are common to every country,” says Aida Opoku-Mensah, Lopes’s special adviser on the post-2015 agenda.

“But when it comes to certain areas like economic transformation, for instance, there is a mindset: those countries that are doing well, that have experienced economic growth, are bolder. Those that aren’t really doing so well are the ones that are holding back.” However, Opoku-

POST-2015 countries will take in the final post-MDG negotiations due to begin in earnest at the UN in early 2015. The adoption of the common position will be the culmination of more than two years of consultations led by the AU, the UN Economic Commission for Africa (UNECA), the African Development Bank and the UN Development Programme. Discussions are now centred around five priority areas:

in Ethiopian under-5 mortality rate between 1990 and 2015, which achieved MDG4 in September 2013

Mensah insists negotiators are building a consensus around the importance of inclusive economic growth (see page 72). This is mirrored at the international level, according to Arancha González, executive director of the International Trade Centre. She says two issues need further discussion: the role of trade – in particular value addition – and the role of smallandmedium-sizedenterprises.“We have to make sure that the [economic] growth dimension doesn’t come as an afterthought,” she says.

There is concern that the 2012 Rio+20 conference’s list of Sustainable Development Goals (SDGs) has complicated the post-2015 debate. Gunilla Carlsson, a member of UN secretary general Ban Kimoon’s high-level post-2015 panel, tells The Africa Report that there is a danger that the two tracks – the SDGs and the post-2015 development agenda – could harm each other. “We have to have an integrated agenda,” she stresses. ●

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FOTOLIA

O

ne of the chief criticisms of the Millennium Development Goals (MDGs) – the United Nations (UN) anti-poverty targets that include reducing child mortality by two-thirds and halving the proportion of people living on less than $1.25 per day by 2015 – was that they were drawn up without consulting African countries. As the 2015 deadlinefastapproachesanddiscussions have turned to the post-MDG agenda, African countries are working hard to ensure their voices are heard this time.

The January 2014 African Union (AU) summit should allow leaders to reach an agreement on a common position, which will determine the stance African

reduction

WHAT TO WATCH IN 2014 | FRONTLINE

Threat of jihadism from West Africa to the Horn

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reviously safe spots in West Africa could become vulnerable to radicalisation as emboldened Islamic extremist movements seek tocapitalise on socioeconomic factors. Poverty, poor education, ethnic tensions and the uneven distribution of wealth are feeding fears of homegrown jihadism.

“The African state is weak and does not operate any kind

Provinces to watch Islamist militias attacking civilians and state security forces

Algeria

Mauritania

Mali

Niger

Senegal Togo

Chad

Nigeria Cameroon

Côte d’Ivoire Ghana

Benin

RADICALISATION of social policy,” says Bakary Sambe,aresearcherattheObservatoire des Radicalismes et Conflits Religieux en Afrique.

“But above all, the state has withdrawn too much from the education system, leaving the field to non-state organisations. This gives rise to a parallel education system with an ideology that comes

from abroad and over which the state has absolutely no control,” he explains. Sambe says this is a threat that extends from northern Nigeria, across the Sahel and on to Eritrea, Somalia and Ethiopia.

Mauritania, which has very high poverty levels, is of particular concern to many security experts due to the pro-

Islamist militias building strength for future attacks Islamist radicals stepping up recruitment

liferationofcriminal and Al Qaeda activity. In Ghana, some political observers are concerned that discrepancies in wealth, education, and infrastructure investment, as well as a higher concentration of Muslims in the north, are the ingredients that contributed to Islamist extremism in Nigeria. Mean per capita income in Ghana’s Upper West and Upper East regions was around $270, well behind the nationwide aver-

age of $540, according to a 2008 living standards survey.

In a rare show of coordination, UN secretary general Ban Ki-moon, African Union chair Nkosazana DlaminiZuma, World Bank president Jim Yong Kim and African Development Bank (AfDB) president Donald Kaberuka met with Mali’s President Ibrahim Boubacar Keïta in November to sound alarm bells over imminent security threats that persist due to the Sahel’s humanitarian challenges.

“Fighting fires in the Sahel remains crucial, but we also need to clear away problems that ignite conflict and instability,” said Ban. The World Bank pledged $1.5bn for infrastructure and social programmes in the Sahel over the next two years. The AfDB promised $2bn for projects and $950m for regional infrastructure, alongside $6.8bn from the European Union over the next seven years. ●

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any refugees across Africa hope to begin their journeys home in 2014. A tripartite agreement signed in November 2013 between the United Nations High Commissioner for Refugees (UNHCR) and the Kenyan and Somali governments has set in place a plan to help voluntarily repatriate some of the registered 474,483 Somali refugees living in Kenya. Tensions heightened after the September attack on Nairobi’s Westgate shopping centre carried out by members of the Somalian Al-Shabaab rebel group. Many Somalis are reluctant to return because of concerns about basic service provision and continuing instability. “It’s a whole different challenge to create the conditions for them to go home,” says Fatoumata Lejeune-Kaba, communications officer at UNHCR. She says current funding is earmarked for refugees in camps and in urban environments. Elsewhere, refugees from the conflicts in Mali and Democratic Republic of Congo should start trickling back. UNHCR’s budget is already overstretched going into 2014, particularly because of the ongoing crisis in Syria. ●

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REFUGEES

Return flows grow in 2014

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FRONTLINE | WHAT TO WATCH IN 2014

WWW.DANIENEL.CO.ZA/INDIGI DESIGN

African innovation on the global stage

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s the first African city to be named a World Design Capital, Cape Town will be showcasing its talent in 2014.

The slogan behind Cape Town’s bid was to “make the city a better place to live” by finding design solutions to a metropolis characterised by socioeconomic divides.

While complete social regeneration is a tall order, the organisers and city authorities, led by mayor Patricia de Lille, have put together a nine-month programme of activity. It starts with a New Year’s Eve of Design bash, followed by solar sculpturing, the annual South African Innovation Summit in September and food festivals.Anotherbig event on the calendar will be the annual Design Indaba Expo in late February, which has featured South Africa’s own Indigi Designs (see photo) and architect David Adjaye.

It has helped to propel South Africa to design hub status. ●

DESIGN

The many stages of African unity

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mall but concrete steps towards opening national borders in Central Africa in early 2014willbefollowedbytrickiernegotiations on more substantial reforms.

According to the United Nations, intra-African trade only accounts for 10-12% of the continent’s total, and structural reforms are needed to boost it. East Africa has made Africa’s fastest progress towards economic integration. In late 2013, Kenya, Uganda, South Sudan and Rwanda launched a much-delayed single customs territory. But discontent in Tanzania about the pace of integration and an angry outburst by PresidentJakayaKikweteaboutbeing left out of meetings could complicate discussions. Despite enthusiasm for monetary union at the institutional level, in private, bank governors and finance ministers are sceptical. ●

FOTOLIA

INTEGRATION

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Clear progress Tricky talks

Plans stalled

From January 2014, citizens of the Communauté Économique des États de l’Afrique Centrale (CEEAC) will enjoy freedom of movement for 90 days without applying for visas.

Also from January, there will be a $100 single joint tourist visa available for Kenya, Uganda and Rwanda.

A single currency in East Africa – first planned for 2016 and now for 2023 – and another in West Africa – first planned for 2015 and delayed until 2020 – look to be low priorities in the regions.

The African Union is discussing a continental free trade area that would be implemented by 2017 at the earliest.

There are plans for a customs union in 2015 for members of the Economic Community of West African States (ECOWAS).

Plans for an African Standby Force have morphed into an interim African Capacity for Immediate Response to Crises and will be high on the agenda in 2014.

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EDF, a limited company with a capital of €930,004,234 – 552 081 317 RCS PARIS – 22-30, avenue de Wagram, 75008 Paris – Photo: Rob Payne – 3D: Illusion

EDF IS INVESTING IN A NEW LINE OF INDUSTRY EDF has installed 27 wind turbines off the coast of Teesside in the UK. They generate enough electricity to power the equivalent of 40,000 homes a year. In France, our current offshore projects will lead to the creation of 7,000 jobs over the next few years. pulse.edf.com

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FRONTLINE | WHAT TO WATCH IN 2014

US-Iran reconciliation and its impact in Africa

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he recent brightening in relations between Washington and Tehran, in part ushered in by the election of Iran’s President Hassan Rouhani in June 2013, gives a lift to optimists who see Iran’s peaceful rise as a harbinger of better times in the Middle East. Nuclear negotiations between Iran and the West resumed in Geneva as The Africa Report went to press.

The potential failure of these talks gives cause for concern. The Iranian economy is in a bad way, with inflation above 40%. Should renewed sanctions cause the regime of Ayatollah Ali Khamenei to fall, the forces that could fill the vacuum are unsettling. Already, Iran is fighting off the drug cartels.

Hawkish elements within the military and clerical circles are also there on the margins. If the world is concerned about a proliferation of chemical weapons from Syria, how would it judge a collapsed Iran?

What would Israel’s response be?

The optimists are latching onto the Iran-United States (US) reconciliation as a way out of the nightmare scenarios that haunt the region. Beyond the obvious benefits of a world saved from another Gulf conflict, there are several ways in which Africa might be affected.

The first and most obvious is in Egypt. The former president Mohamed Morsi ruled the country with the Muslim Brotherhood for just a year before being overthrown by the military on 3 July 2013. The Saudi Arabian government, which dreams of regional leadership, is the sworn enemy of Iran. Iranian clerics have said that Saudi Kings are “too powerful on earth”, and the Shia government in Iraq makes Riyadh nervous.

The Saudis are also keen to be the strongest and most legitimate Sunni power, and therefore are not fans of the Muslim Brotherhood.

After Morsi was toppled, Saudi Arabia’s King Fahd immediately

promised extra aid for the new Egyptian leadership under General Abdul Fattah al-Sisi.

If the Saudis and the Egyptian military think the US will maintain its role as their defender, they may be mistaken. Rosemary Hollis, an expertatCityUniversityinLondon, thinks the Saudis are “behind the curve when it comes to actual US influence in the region.” She points to the way the US government first went along with the revolution and is now going along with the generals. Although Washington has made some cuts to its military aid budget to Egypt, Sisi’s saving grace is probably the Israelis, who prefer a controllable military regime in Egypt and are lobbying on its behalf in Washington.

There are other transmission lines into Africa. Qatar helped the 2011 North African uprisings on

MIDDLE EAST their way, and local politicians say it is funding Islamist movements in Egypt and Tunisia. But as antiQatar banners have appeared on the streets in Tunis, Qatari support for Islamist movements in North Africa is fading. Qatari influence may have hit its high-water mark – especially if the Iran-US deal sticks and Iran is resurgent. Tehran has made it clear that if it is attacked, it will retaliate against the Gulf allies of the US, and Qatar hosts the largest US base in the region.

Negotiations in Syria will also play their part. “Doha would probably come around more quickly to a deal on Syria that leaves [President Bashar] al-Assad in place for the time being”, says Hollis.

This would shear Qatar’s influence over the Muslim Brotherhood in Syria and undercut their claims to be the new power broker for the movement elsewhere. ●

President Hassan Rouhani is leading reconciliation talks

The beginning of the end for OCTOBER 2013 MARKED the 40th anniversary of the oil embargo launched by the Organisation of the Petroleum Exporting Countries (OPEC) after the Yom Kippur War. Just as the event sent shockwaves through the world economy in

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1973, the rise of shale gas and tight oil in the US and elsewhere is now creating an impact of similar magnitude in the oil world.

Regimes across the Middle East and elsewhere have used their oil supplies as political tools. With the

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WHAT TO WATCH IN 2014 | FRONTLINE

CHINA-AFRICA The power of “No”

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BERNO MOHAMMAD ALI/SIPA

ver since Central Bank of Nigeria governor Lamido Sanusi made critical comments about China-Africa relations in March 2013, African governments have been adopting a stronger approach to negotiating with Chinese companies. When it comes to labour, some African governments are now insistent about the level of job creation that projects must bring. In November, Namibia Port Authority chief executive Bisey Uirab said: “We don’t expect a non-Namibian to be pushing wheelbarrows”, referring to China Harbour Engineering Company’s upgrading of the port at Walvis Bay. Other African governments are cancelling Chinese contracts that do not always represent the public interest. In mid-2013, the transitional government in Mali cancelled a series of deals that it deemed wasteful. The Ethiopian parliament is investigating a case of corruption linked to illegal equipment imports from telecommunications manufacturer Huawei, which tried to use the name of the state telecommunications company in order to avoid import taxes.

The Zambian government has been the most aggressive about keeping Chinese companies in check. It revoked the licence of the Collum coal mine from its Chinese owners in February 2013 over safety concerns and conflicts between workers and management, and cancelled two Chinese telecoms contracts within the space of a couple of weeks in September over irregularities.

In 2014, China watchers will be looking at two projects in Gabon to see which way the winds are blowing. A dispute between the government and Sinopec-owned Addax Petroleum is now under arbitration. The Gabonese government also cancelled its joint venture with China Machinery Engineering Corporation for the Belinga iron ore mine in December 2011 and will soon be restarting negotiations to find a company to develop the mine. With the backing of state-run banks, Chinese companies have been making major advances in Africa since the downturn in 2008, so developments in Gabon in 2014 will be carefully watched for signs of whether the strength of Chinese miners is waning. ●

shale gas revolution, this approach is growing weaker.

The growth in global demand is such that a price collapse is unlikely, according to the International Energy Agency, so OPEC governments from Saudi Arabia to Algeria THE AFRICA REPORT

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will not have the rug pulled out from under them. But with their diplomatic muscle reduced, the power games in the region will change. Like at the end of the Cold War in Africa, it is hard to predict what will happen next. ● •

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PETTERIK WIGGERS/PANOS-REA

r the OPEC bloc

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FRONTLINE | WHAT TO WATCH IN 2014

Will Kinshasa win the peace?

FIB/FARDC northern front

Butusanda Kiwanja Rutshuru

UGANDA

FARDC western front Rumangabo D.R.C.

Kanyamahoro Sake

FIB/FARDC southern front

RWANDA

Major battles Last area held by M23 rebels

10 km

GOMA

FARDC line advance

M23 surrenders, but rebel groups still roam the region Although the Mouvement du 23 Mars surrendered in November, breakaway factions still operate. Other remaining rebel groups include the Forces Démocratiques de Libération du Rwanda, the Allied Democratic Forces-National Army for the Liberation of Uganda and the Forces de Résistance Patriotique de l’Ituri/Front Populaire pour la Justice au Congo.

J

ubilation at the defeat of the Mouvement du 23 Mars (M23) rebels by a combination of the Congolese government, United Nations (UN) and African forces will be brief, given the long list of pressing political and military tasks in eastern Democratic Republic of Congo (DRC). President Joseph Kabila’s government has broken a pattern of instability haunting the DRC for a decade and a half: it has pushed back a rebellion that it insists is backed by Rwanda and Uganda. In about 18 months, the M23 had raped and murdered its way across the Kivus, driving 800,000 people from their homes. That explains the rejoicing in the valleys of Kivu at the M23’s surrender.

The military campaigns are not yet over. The Forces Armées de la République Démocratique du Congo (FARDC), the DRC’s army, has plenty more militia groups and factions to take on. Splinter factions of the M23 are still operating, as are many other groups such as the Forces Démocratiques de Libération du Rwanda (FDLR), the Allied Democratic Forces-National Army for the Liberation of Uganda and the Forces de Résistance

Patriotique de l’Ituri/Front Populaire pour la Justice au Congo.

There is no question that the FARDC got the upper hand in the last round of fighting against the M23 rebels and did so without the usual claims of massive human rights abuses and pillaging. The M23 surrendered on 5 November, renounced the armed struggle and said it wanted to negotiate a political settlement in Kampala. But there are signs they have left enough fighters on the ground in the Kivus to cause more chaos as the negotiations continue.

The backing from the Force Intervention Brigade (FIB), composed of troops from Tanzania, South Africa and latterly Malawi – and reinforced with South African attack helicopters – helped concentrate the minds of the Congolese soldiers: a decisive defeat of the M23 rebels suddenly looked possible.

Strongly backing a more assertive campaign against M23 was Martin Kobler, the political head of the Mission de l’Organisation des Nations Unies

SOURCE: AFRICAN DEFENCE REVIEW, THE AFRICA REPORT

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pour la Stabilisation en République Démocratique du Congo, known as MONUSCO. The other key ingredient was the new commander of UN peacekeeping forces, Brazil’s General Carlos Alberto dos Santos Cruz. The UN and the African Union had concluded in February 2013 that the status quo – 20,000 UN troops and a dysfunctional national army failing to protect civilians – was no longer tenable.

The political track will run in Kampala for the early part of 2014, at least.

It is a way for Rwanda and Uganda to save face as they are called to account for their serial, deadly and greedy meddling in the DRC. The priority is now to stop Kampala and Kigali building up another proxy group in eastern DRC. The most powerful deterrent seems to be that any such rebel grouping would meet with serious military opposition.

Add to that the possibility of Kampala and Kigali’s role being exposed by drone surveillance, and the risks for presidents Yoweri Museveni and Paul Kagame become far more tangible.

“The rebels are citizens of the country [DRC]. There is awareness that there is a grievance of the Tutsis and that there are issues to be addressed,” according to Mary Robinson, the UN secretary general’s representative in DRC. Outside the diplomatic niceties, the deal in Kampala is that Kabila will do more to consolidate the state and security in eastern DRC and respond more to the grievances of the local Tutsi people.

Kabila’s other promise is to track down the FDLR, which has ties to the forces behind the 1994 genocide in Rwanda.

According to Robinson: “The most important issue for security purposes is that it be clear that the FDLR will be addressed. Either it will have to surrender or there will be a concerted action against it.”

So the new year in DRC will start with an emboldened military force, backed by allies from Africa and the UN, ready to take on a disparate array of rebel forces in the country’s eastern reaches.

Against history, that is progress after the defeat of the M23 but it will also require more reform of Congo’s security forces and its own political systems if the recent advances are to be sustained.

But for once in Congo, there is a clear victory to build on. ●

DRC

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On Lake Victoria you can’t depend on the weather.

MetropolitanRepublic/13084/E

But you can depend on MTN.

With New World innovations like MTN mFishing, we are leading the use of mobile digital technology to change lives. By providing fishermen with daily weather updates and alerts, mFishing technology could prove invaluable to the 3.5 million people that depend on Africa’s largest inland fishing industry. We’ve welcomed over 200 million citizens of the world to our growing network. And we’re just getting started. Log on to mtn.com for more.

Welcome to the New World.

FOTOLIA

Lupta cupte verum dolorem queFugianit, que

INFRASTRUCTURE Funders from near and far rally around Africa

A

frican governments are turning to new local sources to complement more funds promised by the Chinese government. Ending Africa’s infrastructure deficit requires spending of about $75bn a year, according to the World Bank.

But where to find the cash? Several countries have hit the capital markets, but that window may not be open for long (see Hannibal, page 88).

“We are looking to use our pension funds to plug the gap”, says Tas Anvaripour, division manager for infrastructure finance at the AfricanDevelopmentBank(AfDB).

She has spent the past 24 months convincingNigeria’spensionfunds to create a domestic infrastructure fund rather than place money in low-yield treasury bills.

The AfDB is launching the Africa50 Infrastructure Fund to bring together capital lying dormant in African pension funds and national reserves, and use it to attract global capital in a co-investment that will look to cut the delivery time for African infrastructure from seven to three years. Given that intra-African investment accounted for 32.5% of new foreign THE AFRICA REPORT

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investment from 2003-2011, according to Ernst & Young, whereas intra-European investment is 80%, there is some way to go.

European and Asian investors are also looking at ways to place long-term money on the continent. Some are looking to mitigate the risk by investing in safe intermediaries. An Italian pension fund, for example, is investing in PTA Bank, active in regional infrastructure and trade finance (see page 84). Others, like Meridiam, a European investor and infrastructure operator that both raises capital and manages projects, are contemplating an entrance into African markets.

TheChinesegovernmentismore comfortable with the risk. Though there is always a large slice of ‘announcement effect’, officials from China Export-Import Bank promisedinlate2013thatChinesebanks and companies will provide $1trn of investment by 2025. This will include soft and hard loans, much of it directed at infrastructure. One of the last major infrastructure deals of 2013 was a $319m loan from China Exim Bank to the Zimbabwean government for the expansion of the Kariba Dam. ● N° 56

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An Africa free of malaria is an Africa full of possibilities.

As one of the largest foreign investors in Africa, we know firsthand about the health and economic impact that malaria can have on a community and its workforce.

That’s one of the reasons ExxonMobil is so committed to the fight against malaria. Huge progress has been made – malaria deaths have decreased by 25 percent over the last decade – but there’s a lot more to do. And ExxonMobil is committed to doing our part.

So whether it’s exploring for or producing new energy supplies, delivering innovative petroleum products or investing in communities, ExxonMobil is developing more than oil and gas – we are helping to support Africa’s future.

To learn more about our initiatives across Africa, please visit exxonmobil.com

FRONTLINE | WHAT TO WATCH IN 2014

CALENDAR 2014

INVESTIR EN CÔTE D’IVOIRE 29 Jan – 1 Feb ABIDJAN | CÔTE D’IVOIRE ici2014.com

MINING INDABA 3-6 February CAPE TOWN | SOUTH AFRICA See page 90 for our mining dossier. miningindaba.com

ICC TRIAL OF KENYAN PRESIDENT UHURU KENYATTA 5 February THE HAGUE | NETHERLANDS icc-cpi.int

ALGERIAN ELECTIONS April

DAK’ART BIENNIALE 9 May – 8 June DAKAR | SENEGAL biennaledakar.org

20TH ANNIVERSARY OF RWANDAN GENOCIDE 7 April AFRICA HEALTH FORUM 15-17 April GENEVA | SWITZERLAND globalhealthforum.net

20TH ANNIVERSARY OF NELSON MANDELA’S ELECTION IN SOUTH AFRICA 27 April

AFRICA CEO FORUM 17-19 March

WORLD ECONOMIC FORUM ON AFRICA 7-9 May

GENEVA | SWITZERLAND theafricaceoforum.com

ABUJA | NIGERIA weforum.org

AFDB ANNUAL MEETING 19-23 May KIGALI | RWANDA afdb.org

EGYPT PRESIDENTAL AND PARLIAMENTARY ELECTIONS To Be Confirmed FOOTBALL WORLD CUP 12 June – 13 July BRAZIL See a round-up of African teams on page 100. fifa.com

DURBAN FILM FESTIVAL 18 – 28 July DURBAN | SOUTH AFRICA durbanfilmfest.co.za

GRANT LEE NEUENBURG/REUTERS

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WORLD BANK/ IMF FALL MEETINGS 10-12 October WASHINGTON | UNITED STATES worldbank.org

SOUTHERN AFRICA GOES TO THE POLLS April, May, October, November

21ST AFRICA OIL WEEK 3-7 November

2014 is a bumper year for Southern Africa: between April and November, two-thirds of the countries in the region will hold general elections. The biggest stakes are in South Africa, where President Jacob Zuma looks sure to win a second term in April.

Malawi’s Joyce Banda is pinning high hopes on being re-elected in May, as is Botswana’s President Ian Khama in October. Namibia’s Hage Geingob will run in his first presidential campaign in November, while in Mozambique, President Armando Guebuza is not expected to run for a third term in October. The August 2014 summit of the Southern African Development Community will be an interesting one, with a handful of its leaders either newly elected or in full campaign mode.

THE AFRICA REPORT

CAPE TOWN | SOUTH AFRICA petro21.com

AFRICA COM 13-14 November CAPE TOWN | SOUTH AFRICA africa.comworldseries.com

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ANANSI Fighting for peace

T

he ultimate contradiction in terms it may be, but there is a growing belief that ‘fighting for peace’ rather than apparently fruitless negotiations is the way to resolve some of Africa’s long-standing conflicts.

Proselytisers of ‘muscular peacekeeping’ at the United Nations (UN) and the African Union (AU) are now claiming successes in Somalia, the Democratic Republic of Congo (DRC) and Mali. A tougher military stance suits those in the AU who want to take the lead in peacekeeping operations in Africa.

Western countries, chary of sending their own troops, also back a tougher approach.

Yet advocates of mediation worry that this new militarism will derail difficult peace talks and do no more than contain the problems that cause the conflict in the first place. Not so, the militarists fire back: a credible threat of the use of force can create a space for serious negotiations and can encourage warring factions to respect the terms of a peace deal.

Successive waves of militias, backed by Rwanda and Uganda, stormed through eastern DRC, but neither the UN nor the DRC’s army could restrain them, let alone protect civilians. The Mouvement du 23 Mars (M23) seizure of Goma in November 2012 prompted South Africa and Tanzania to put together an intervention brigade.

It worked with the DRC’s army to force M23 to surrender and start negotiations in Kampala in November 2013.

When Mali’s crisis started with a coup in March 2012, there was no appetite in the UN or AU for a military intervention. Lethargic political negotiations led by Burkina Faso’s Blaise Compaoré were heading nowhere.

The Economic Community of West African States was slowly preparing an intervention but would have needed heavy backing from the UN. But the southward march of the jihadist forces after they took over the three biggest cities in the north in January concentrated minds. Mali’s President Dioncounda Traoré endorsed a plan from France’s President François Hollande for an intervention force of 5,000 soldiers to push the jihadists out of northern Mali.

France retook the north but neither the UN nor the AU was keen to send in more

combat support. The resulting compromise is that France will keep a counter-terrorism force in Mali – now likely to be three times the 1,000 soldiers originally planned – while a UN stabilisation force of mainly African troops consolidates government control over the north. Its success depends on what the political representatives can do to bring the fractious northern communities together, to break up criminal networks and to restart the provision of state services.

In Somalia, the emergence of a new government with international backing under President Hassan Sheikh Mohamud was mainly due to the AU-backed force of troops The new from Uganda, Burundi and, more recently, Kenya. Without it, the militarism Islamist Al-Shabaab militia would faces its still control Mogadishu and the sternest test main port, Kismayo.

The AU force has taken serious in the Central casualties and countless civilians African have died in the crossfire. The component forces of the AU misRepublic, sion are pursuing their own politwhere the ical agendas, along with Ethiopia, stage is set whose troops remain outside the AU command. Most of all, Alfor another Shabaab shows every capacity tough military to continue with an insurgency, at least in south-central Somalia. operation The international sponsors of a new Somalia – from Qatar and Turkey to Britain and the United States (US) – are struggling to agree on a common agenda. Political negotiations come a poor second to the campaign to take the fight to Al-Shabaab.

The new militarism faces its sternest test in the Central African Republic. As France and the US warn of genocide there and the AU calls for robust action, the stage is set for another tough military operation. So desperate is interim leader Michel Djotodia to preempt that intervention – which could push him from power – that he is offering to hand over Lord’s Resistance Army leader Joseph Kony to Uganda as his final negotiating card. Intervention seems inevitable but it is equally leaving everyone to ask: where is the political plan? ●

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AN EMERGING COUNTRY BY 2020

CÔTE D’IVOIRE

INFRASTRUCTURE

To live well and work better

Côte d’Ivoire, West Africa’s economic powerhouse, is RÉPUBLIQUE DE

CÔTE D’IVOIRE

updating its roads, railways, ports and airports. The goal: modern, much more efficient connections at the service of commerce, industry and people.

AN EMERGING COUNTRY BY 2020 CÔTE D’IVOIRE IS ENTERING A NEW INDUSTRIAL AND COMMERCIAL ERA

RÉPUBLIQUE DE

CÔTE D’IVOIRE

II ADVERTORIAL

Abidjan shifts into high gear Traffic from the airport to the city centre is heavy even long after nightfall; roadwork at the intersections of Boulevard Valéry Giscard d’Estaing (Boulevard VGE, as it is called here) makes matters worse. The 370m Houphouët-Boigny Bridge leads to the Plateau, the business district, long nicknamed «the Manhattan of the Tropics». Many skyscrapers around 100m tall have sprung up on a wide strip of land bordering a lagoon. Of course the quarter looks a bit ragged around the edges: the country is emerging from a long socio-political crisis that nearly sparked a civil war in 2011, but it has visibly gone back to work.

© Olivier pour JA

If passengers landing in Abidjan today have any doubt they have arrived in a booming country, all they have to do is look around at the bustle of official cars, taxis and hotel shuttle buses entering and leaving Félix Houphouët-Boigny International Airport, which can already accommodate Air France’s double-decker A380 aircraft and is undergoing an accelerated modernisation programme. Two specialised terminals (freight and pilgrimages) have been built to ease the flow of travellers. Opposite, the first buildings of the future 3,700hectare airport city, which will house new industrial and commercial activities, are rising. As for international traffic, Abidjan’s airport is gradually becoming a regional hub that will become a key player after receiving – in early 2014 at the latest – American certification, which will allow flights originating in Côte d’Ivoire to land in the United States.

Office buildings are undergoing refurbishment and modernisation. New housing, hotels and shopping complexes are rising.

Many road projects are also under way. A year from now the Plateau will be more modern and efficient than ever. A third bridge over the lagoon is being built to serve this strategic quarter better. It will open in late 2014 and help ease congestion on the other two spans, which carry some 200,000 vehicles every day. The future Henri Konan Bédié Bridge will be 1.5km long but the construction site stretches out over 6.7km to build north and south interchanges with present roads. The first of the $350-million span’s 62 piers were sunk in June; earthmoving work for the access ramps is 80% completed. As with all the country’s infrastructure projects, this one is financed by the State and private partners.

CÔTE D’IVOIRE

Twenty kilometres a day

Massive public investment

That is also the case for the modernisation of the Port autonome d’Abidjan (PAA), Côte d’Ivoire’s economic dynamo, accounting for 90% of its trade, 70% of its industrial activities and 40,000 direct and indirect jobs. West Africa’s busiest port and sub-Saharan Africa’s second-leading port after Durban, South Africa, it handles 70% of the neighbouring landlocked countries’trade (Burkina Faso, Mali and Niger) but is overextended. The port’s already heavy traffic — over 11 million tonnes of freight and 1.5 million containers a year — has reached the saturation point. So the PAA is being expanded at a cost of over $500 million in order to make it the only port and industrial complex of its kind in West Africa.

Infrastructure is essential for the economic growth of Côte d’Ivoire, which aims to join the emerging nations’ranks by 2020. To reach that goal, in late 2011 the government launched a sweeping $20-billion National Development Plan (PND) for the 2012-2015 period. The PND’s dynamics and achievements have already attained the expected outcome: Côte d’Ivoire’s economy grew by 9.8% in 2012. Everything

Connecting the country to the rest of Africa and the world The biggest infrastructure projects, which involve every sector, aim to improve Côte d’Ivoire’s economic ties with its neighbours and the rest of the world.

- Roads: sthe south-north axis connecting Abidjan, Yamoussoukro, Bouaké and Korhogo to the border with Burkina Faso; two highways from Abidjan and the country’s centre-east to the west and the border with Ghana; the south-north axis linking San Pedro to Man and Mali; and the coastal road from Abidjan to San Pedro (towards the border with Liberia).

The whole country is a building site. Roads are being built and updated everywhere. In two years, 6,000km have been rehabilitated, an average of 20km a day.

Much of the road network has long been considered a model in Africa. Its size and efficiency helped spur the «Ivorian miracle» of the 1960s and 1970s, when the country’s economy grew by nearly 10% a year.

Lack of investment between 2000 and 2011 slowed down development of transport infrastructure, now the country’s priority. As soon as possible, Côte d’Ivoire wants to have roads, ports and airports that will enhance its citizens’quality of life while ushering in a new era of strong, sustainable growth.

- Railways: rehabilitation of the 1,156km AbidjanOuagadougou line, the planned connection to Bamako, and the mineral railway from San Pedro to Man. Côte d’Ivoire is set to play a key role in the future West African rail network connecting Benin, Niger and Burkina Faso.

- Ports: modernisation and expansion of the ports of Abidjan and San Pedro, the main outlet for the export of agricultural products, including cocoa. Mineral wealth in the west, especially the Man region, will spur San Pedro’s swift expansion.

ADVERTORIAL III

CÔTE D’IVOIRE

AN EMERGING COUNTRY BY 2020 TRADE HUB FOR A REGION WITH 300 MILLION PEOPLE

RÉPUBLIQUE DE

CÔTE D’IVOIRE

IV ADVERTORIAL

© DR

off the coast or passing through Abidjan on the way to San Pedro, the port for western Côte d’Ivoire’s considerable mineral wealth, most of which lies untapped. The economic capital of the world’s leading cocoa exporter, Abidjan is entering a new industrial and commercial era and gearing up to win back its place as West Africa’s excellence cluster.

September 2013, President Alassane Ouattara launches work on the Abobo-Anyama expressway.

Many private partners

At the service of the population

Côte d’Ivoire’s development partners (France, Japan, Germany, China, India, Arab countries, etc.) and multilateral financial institutions (the World Bank, IMF and the African and West African Development Banks) back Côte d’Ivoire’s growth goals, a sign of confidence in its future. In December 2012 they loaned Alassane Ouattara’s country a total of $8.6 billion for the 2013-2015 period. «To succeed, Côte d’Ivoire will not be alone,» said the World Bank’s Vice-President for Africa. Many companies have put their money on Côte d’Ivoire, confirming his prediction.

Anybody visiting Abidjan comes across Chinese, Portuguese, Russians, Moroccans, Americans, French, etc. at hotels or conference centres. Some work for construction companies. Others are looking for oil

Côte d’Ivoire plans to invest $4 billion in transport infrastructure and services between now and 2015. Many projects aim to make trade more efficient and support the creation of new manufacturing and service activities, but the National Development Plan also includes building roads to improve everyday life. An example is the Abobo-Anyama expressway, which will allow the two million people living in those towns north of Abidjan to travel from one to the other in just five minutes instead of the half-hour it takes now and to more easily reach the hospital and railway station. Work on the new 4.6km bypass has been under way since early September.

DIFCOM/Creapub - PHOTOS : OLIVIER POUR JA / FOTOLIA SAUF MENTION.

suggests that the figure will reach or surpass 10% in 2013 and the following years and that the target of doubling national revenue by 2020 will be achieved.

The goal for transport infrastructure and services is even closer. The PND aims to equip Côte d’Ivoire with basic facilities worthy of an emerging country by 2015. That is why corresponding projects account for nearly 40% of the PND’s investments — nearly $8 billion in four years. Across the country, building sites are popping up with the aim of more efficiently connecting the country’s big cities to each other, production centres to ports and airports, and Côte d’Ivoire to neighbouring nations in order to again become West Africa’s trade hub, the international crossroads of a region with 300 million people – almost as many as the United States.

KEN GERHARDT/GETTYIMAGES

COUNTRY FOCUS Angola

Luanda’s skyline is just one side of Angola’s story

Lessons from Brazil Luanda, with its palm-fringed corniche and glitzy beach bars, is Rio de Janeiro writ small: an explosive mix of commercial and cultural dynamism, crass inequities and seething frustration. Beyond the obvious parallels, Brazil’s experience has much to teach Angola’s policymakers

By Zoé Eisenstein and Patrick Smith

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he old colonial capital of Luanda is being reborn.

Work is well advanced on the new multibillion-dollar international airport. Rows of luxury skyscrapers are under construction: for private apartments with astronomic rents to vie with Tokyo’s as the world’s highest, or for air-conditioned offices housing the latest multinational corporation taking its chance in one of Africa’s fastest-rising economies. Scores of multi-starred hotels have opened. Yet many Angolans are asking how their Lusophone cousins in Brazil

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COUNTRY FOCUS | ANGOL A

– plagued by the colonial legacy, living in the shadow of United States power in Latin America, together with decades of corrupt and oppressive military rule – broke their own vicious cycle.

Over the past three decades, Brazil has established an independent and productive economic direction. Former president Luiz Inácio Lula da Silva made progress in fighting the deep inequalities, which were among the most extreme in the world. His weapons were mass employment, training schemes and social protection measures for the poorest.

DEMOCRATIC REPUBLIC OF CONGO

CABINDA

200 Km

LUANDA

Atlantic Ocean

Lobito Huambo ZAMBIA NAMIBIA

SHARE OF GDP GROWTH (%)

CLOSED CIRCLE

10 8 6 4 2 0 -2 -4

2010

2009 Agriculture Construction Other

2011

Petroleum Commerce

2012 Manufacturing Services GDP Growth

INFLATION (2006-2012) Angola Ghana Nigeria Zambia Botswana Swaziland Namibia Lesotho South Africa Eq. Guinea Mauritius Chad Rep. Congo Cape Verde Cameroon Gabon Côte d’Ivoire Senegal 0

2

4

6

8

10

12

14

REAL GDP GROWTH (%) 10

2011

2012

2013

8 6 4 2 0

Nigeria Angola SSA oil exp.

SSA

Dev oil World exp.

SOURCE: ANGOLAN AUTHORITIES AND WORLD BANK STAFF ESTIMATES

56

To emulate that, Angola will have to switch from its current path as a state dependent on oil to one committed to production and investment, opening up decision-making to more than the select few. A Luanda-based businessman who used to live in Brazil explained the differences: “In Angola, it’s run by a much smaller community of politicians, a very closed circle, the same circle for a long time. And that circle is much closer because of the war. You still have the same big men around – generals who are deciding policies but also involved in the economy.”

Across the Atlantic, the politics is more dynamic, he says: “In Brazil, the people directly elect the president. They like someone who talks about basic things like food, schools and jobs. That’s why Lula was very popular. In Angola, the president wasn’t really elected by the people, so the speech doesn’t need to be so populist.”

Angola’s own tortured history – centuries of Portuguese rule followed by a devastating 27-year civil war – weighs heavily on its politics, to the frustration of a new generation of Angolans. They cannot see why a country of 20 million people and one of the richest resource endowments in the developing world should not be at the leading edge of Africa’s development, let alone unable to provide decent schools, homes and jobs for its people. Social media sites such as Twitter and Facebook resound with younger Angolans’ critiques and jibes against the ruling class.

But even Angolan officials say more could have been done since the war.

“We should by now have a productive non-oil sector, whether agriculture or industry. A number of basic steps need to be taken before investors can actually seriously invest in Angola,” a senior of-

With oil accounting for 95% of Angola’s export revenue, diversification is an imperative

ficial working on economic policy told The Africa Report. “Roads, infrastructure, energy and water, most of these things are still hard to get outside of Luanda, which makes it hard because you’re not going to put a factory or big industrial project within Luanda. Also, you need raw materials, and a lot of these are still imported,” he continued.

Since the civil war, Angola recorded world-beating growth rates as it rebuilt its devastated roads, bridges, ports and power stations. More state-funded grands projets are in the works; even new cities are planned, although the older cities are in dire need of renovation. Yet the new cityscapes, added office and apartment blocks and freshly built highways take on the appearance of a Hollywood film set. For beyond the marble-floored hotels hosting epic parties is the stultifying reality in which most Angolans live.

These political and social realities are far from frozen, however. There is no

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ANGOL A | COUNTRY FOCUS

sionals, mostly in the applied sciences, within five years.

Lack of capacity at the municipal level is cited as a problem, as well as a reason why decentralisation has stalled. But activists say party hacks and bureaucrats fear losing control. Officials admit that although development is not skewed towards Luanda, decision-making is.

For example, the governor of Benguela Province can propose a project to the environment minister in Luanda. The minister can accept the plan, get it approved in the national budget and then implement it in a different province.

Public works and centralised payments are also a problem, the official adds: “What happens when you have a great company doing great work in Moxico Province if they don’t get paid by the central government? There is nothing local government can do about it.”

JOHN WARDEN/GETTYIMAGES

COMPANIES CONSTRAINED

shortage of well-argued policy planning documents such as Visão 2025 (Vision 2025). Its main aim is to spur job creation by diversifying the economy away from oil. According to the International Monetary Fund’s latest report in June: “With oil alone accounting for over 95% of its exportrevenue,Angolaistheleastexportdiverse country in Africa, and rivals Iraq for least export-diverse worldwide.”

Well-educated Angolans are returning home in droves. Those who get the top jobs buy – or more often rent – new apartments and try to get their children places at the international schools.

PORTUGUESE JOB-SEEKERS

But there is still a chronic shortage of middle managers across the economy.

Here, the economic travails of southern Europe are helping. Reversing the pattern of the war years, an orderly queue of visa-seeking Portuguese workers snakes around the corner from Angola’s embassy on Lisbon’s Avenida República.

These days business is less brisk at the Portuguese consulate in Luanda. Angola’s elite may be buying up banks THE AFRICA REPORT

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Shortcomings in institutional capacity and in physical infrastructure are limiting companies and pushing up their costs, according to João Cândido Fonseca, executive director of Banco Angolano de Investimentos (BAI). He justifies conservative lending policies: “Companies say the banks are too bureaucratic, but we need information and solid, well-run companies to provide financing.” BAI, says Fonseca, looks both at a company’s assets and the quality of its management: “Companies here usually have very low equity. And if it is too low, this is also a constraint for them to access financing. Banks don’t just look for guarantees, they also look at the repayment capacity.”

Outside the oil industry, private companiesremaindependentonstatespending: “If the government doesn’t keep a

and insurance companies in Europe, but the preferred holiday destinations are Rio and Cape Town.

This migration of Portuguese workers reflects both Europe’s financial woes and the continuing crisis in Angola’s growing number of schools and universities. “We have an issue of quality, not quantity,” says a senior official in the government who has worked overseas, and who explains that the government is reviewing the national curriculum.

Businesspeople complain “There is a long list of people who have got degrees from of a knowledge gap and say oil private universities in Ancompanies scoop up any talent gola that are not accredited.

These were diploma mills. regular payment flow to its suppliers,” People would pay a few hundred dollars says Fonseca, “those companies will a month, and whether or not they perface difficulties including defaulting on formed they would get a degree at the loans. It is important that government end of a few years,” he explains.

Most of these people end up working keeps regular payments to its suppliers, in the civil service. The better educated especially small and medium-sized comare too precious to the private sector, espanies that have less access to finance.” pecially the oil industry. But this is chanFor banks and other financial instiging, the official claims. The government tutions, supervision and regulation are has set up a training programme with becoming more pressing as the volume of business grows in line with the ● ● ● the goal of educating 80,000 profes-

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57

STANDARD BANK ANGOLA:

The only bank as a subsidiary of an investment-grade bank

As the biggest pan-African bank, we have seen a new wave of large investors interested in coming to Angola. However, smaller foreign entrepreneurs have struggled due to the new law (2011 increasing min investment from 100k-1 Million USD) as they plan to start the business with small amounts of capital to invest. I believe this class of entrepreneurs is also useful to the country as they bring certain expertise to the country and are willing to take investment risks. Therefore, the law should be adjusted to this reality and depending on the project, exceptions should be accepted.

The different Angolan regulatory entities have been making a strong effort to align Angola to the best international practices regarding transparency and accountability. However, this will take some time to be implemented as the target audience needs to be prepared to comply with the rules. On the subject of equitable distribution it is internationally proven this is associated with the level of education. Therefore, independent of different measures being taken, the increased skill set workers is key to create a middle income class and reduce inequalities.

In order to diversify its economy, Angola has to provide a friendly business environment to attract investors namely through reliable and cheap energy sources, good transportation and telecommunications infrastructure as well as tax incentives. Moreover, the investment in human capital is crucial to have qualified professionals to work in these new industries.

ADVERTORIAL

The next growing market will result from the diversification of the companies that are already providing services to the Oil & Gas sector and will start providing services to manufacture goods in Angola that can be used in other industries as well. The mining sector and the agribusiness will also see a strong potential growth for the country. Angola needs cheap and reliable supply of energy. Energy is one of the major obstacles to be able to produce in Angola. Heavy industries like cement loose competitiveness if they have very high energy costs. The solution is to finance their own energy supply. Cement does not travel well. Therefore, we expect Angola to be self-sufficient in cement from the moment we have enough factories near the consumption centers.

Future investment opportunities in Angola: Creating food security therefore less imports namely food and beverages. There have already been examples in the beverage industry to replace imports of final cans, bottles, packages and to replace the final product. China is already in the pharmaceutical manufacturing sector in Angola, and spent 70 Million USD on a plant, in the central Angolan province of Kwanza Sul Province; I believe this a good example of replacement industries. As long as there are skilled labour, infrastructure and tax incentives to promote these types of investments, the market is definitely open for business.

Pedro Pinto Coelho Chief Executive, Standard Bank de Angola S.A. Belas Business Park - Av. Talatona S/N, EdifĂ­cio Cuando Cubango, 8Âş andar, Talatona, Luanda, Angola: pedro.coelho@standardbank.co.ao www.standardbank.co.ao Tel +244 923 190 888

Standard Bank

> Corporate and Investment Banking

ANGOLA´S MOST AWARDED BANK IN RECENT YEARS. Global Banking & Finance Review - Most Innovative Bank in Angola 2013 Global Finance - Best Investment Bank in Angola 2013 Capital Finance - Best Universal Bank in Angola 2012 Emeafinance - Best Investment Bank in Angola 2012 Commerzbank - STP Award 2012 for excellent quality Global Banking & Finance Review - Best Bank in Angola 2012 Global Trade Review - Best Deal in Renminbi Angola 2011

They call it Africa. We call it home. www.standardbank.co.ao/cib

Standard Bank

COUNTRY FOCUS | ANGOL A

wider economy. “There is a real gap in knowledge,” says Fonseca, “even more with the new foreign exchange regime because oil companies that operate in Angola are used to an international environment.” Like other businesspeople in Luanda, Fonseca laments that “when we do have good people, oil companies hire them.” Despite the difficulties, the banking and service sector is growing, broadening the base of the economy.

The barons of the ruling Movimento Popular de Libertação de Angola (MPLA) ●●●

see this ambivalently. The burgeoning middle classes may have resources and time to articulate the grievances of the poor, and its activists have the daring to expose malfeasance.

For now, the political system looks robust with the main opposition União Nacional para a Independência Total de Angola apparently co-opted into the system. President José Eduardo dos Santos, in power since 1979, sporadically announces without enthusiasm that he plans to step down, but there are no signs this is imminent. The overwhelming

power of the presidency at Futungo de Belas and its extensive network of family and political ties mean that change at the top could have seismic effects.

The MPLA, a disciplined party in a growing economy, may have the chance to plan and manage the succession.

Much depends on the timing and context. A sharp deterioration in economic conditions caused by a global slump in oil prices could cause difficulties.

Some oil experts predict the doubling of oil production if new pre-salt finds are deemed commercially viable (see page 66). Others question this: “I don’t believe that – even if Angola has the capacity to double production. If you continue to produce 2-2.3m barrels per day (bpd) instead of 4m bpd, you allow your country to produce oil for 60 more years,” says one oil company executive based in Luanda. Instead, he sees more modest increases in production in the medium term.

OILING THE SUCCESSION

ROBIN HAMMOND/PANOS PICTURES

60

LIFE IN LUANDA IS TOUGH, EVEN FOR THE MIDDLE CLASSES THERE IS A HUMAN RESOURCES MANAGER living in Camama, south-east of Luanda, who we will call Eduardo. He told The Africa Report about the realities of living and working in Luanda, the world’s most expensive capital city for expatriates according to a 2013 survey by human resources firm Mercer.

Eduardo hired local workers to build his house, which has two bedrooms, and they are currently adding a third. It took them two years to build the house, which has

so far cost $23,000.

He has access to the state water system and electricity grid.

The locale is described as musseque (slum), but Eduardo says it is “a wellorganised one that has real roads, although it’s not asphalted.” With some relief, he says the area is part of the government’s urban plan, which means it will not be bulldozed.

A soldier who fought for the MPLA in Bie, Eduardo earned a degree in management at the Universidade Católica de Angola.

He still struggles to

make ends meet on $2,000 a month and is trying to get health insurance for his family.

“With my salary, I pay for one daughter’s school and the university education of the other one. I help out the children of my brother who are orphans. But my salary doesn’t cover the responsibilities I have.

My wife, she finished her degree in social services this year. She is working in a state hospital as a nurse.

She earns AKZ91,000 ($910) a month. We get by but we don’t have enough.” ● Z.E.

Oil remains critical, which helps explain why the former chief of Sonangol and current vice-president Manuel Vicente is being groomed to take over from Dos Santos. Some politicians are uneasy about the ascendancy of a mainly technocratic figure. Others ask how they could benefit as national capitalists from a diversified economy. It would mean moving towards productive investment and restricting the businesspeople who make their money from trading oil, overpriced procurement contracts and as monopoly suppliers to the state.

Businessmen remain sceptical about radical policy shifts: “I’m not expecting to see big increases in local and value-added production, mainly because of the cost of labour, land, energy and the rental of space – but also in terms of corruption and the indirect costs that you have to battle with,” a foreign business executive in Luanda explains.

With oil production and prices staying strong and revenue boosted by new liquefied natural gas exports, Angola’s rulers may think they can postpone some hard decisions. But with changing global economics trends and the shale gas revolution, Angola could lose its oil advantage while local economic troubles build up. Add that to the widespread anger about social conditions and the country’s post-war compact could start facing real political pressure from the frustrated younger generation. ●

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POLITICS

All aboard the Luanda express Leaders never miss an opportunity to remind us of the positive changes since the end of the civil war in 2002.

Take a ride on the train to hear Angolans’ differing views

F

or a country that has been wracked by war for more than four decades – first the nationalist campaign against the colonial rulers and then a civil war fuelled by the geopolitics of the Cold War – the coming of peace has indeed changed our reality. Our people travel around the country without difficulty. And to help them, there are three main railway lines. The most important of these lines is the Caminho de Ferro de Benguela, which is being restored with Chinese investment and labour.

Oncecompleted,theBenguelalinewill link Angola to the mineral-rich Katanga Province in southeastern Democratic Republic of Congo and the Copperbelt of Zambia. This long-awaited railway line should symbolise a new era of economic and political cooperation.

But our shiny new trains have also come to symbolise a wider predicament.

Angola itself is like an express train – but on a far longer journey than any of us could have imagined. Our national train’s destination was described by the leaders who led the struggle against the colonialists.

Agostinho Neto, Jonas Savimbi and Holden Roberto – in spite of

how they led their troops and political cadres – all spoke of a country that would be wealthy, democratic and with a firm commitment to social and economic justice. Our political leaders often repeat these ideals as if we all need reminding of where we are meant to be travelling.

And, as the train clatters down the tracks, it seems that we are travelling in very different conditions.

THE SELECT FEW

There is the first-class carriage where President José Eduardo dos Santos, who has been in power since 1979, remains at the centre of a powerful network of patronage. Dos Santos believes that Angola should have an indigenous entrepreneurial class that is able to compete on a global scale.

A select few travel in the luxuriously appointed first-class compartments, where Cristal champagne and dainty smoked-salmonhors d’oeuvresareserved up on starched white tablecloths. The passengers stay close to the ruling Movimento Popular de Libertação de Angola (MPLA); they seize the opportunity to make serious fortunes. The business and political elite belong to the same club.

Then as we walk down the corridor, it gets rowdier and the compartments are more crowded. We come to standard class, where we find the middle classes and professionals in an increasingly critical mood. Their arguments are fuelled by grilledfish,asmatteringofspicygindungo and bottles of cold beer.

Holding court in one well-used standard compartment we find the opposition parties. Their top officials are middleclass and middle-aged. They are led by the biggest pretender to power, the União Nacional para a Independência Total de Angola (UNITA). Since Savimbi’s death in 2002, UNITA has been plagued by internal divisions – resulting in the defection of Abel Chivukuvuku.

Chivukuvuku, a charismatic orator, led the Convergência Ampla de Salvação de Angola-Coligação Eleitoral in last year’s parliamentary elections and got eight deputies elected to parliament. UNITA doubled its take to 32 deputies.

UNITA and other historic parties have tried to challenge the government in the courts. They have won the odd victory.

In the last elections, they forced electoral commission president Suzana Inglês to resign after they demonstrated the legal flaws in her appointment.

A few carriages down, still in standard class, the political arguments get louder and more determined. Here we

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ANGOL A | COUNTRY FOCUS

find impatient young activists who vent their frustration through street protests.

That unsettles the first-class carriage.

From there, the presidency has ordered a clampdown on such demonstrations.

VIRTUAL FREE SPEECH

eaten with beans stewed in palm oil, washed down with a soda. This is where the vast majority of Angolans are.

The Voice of America has a popular phone-in programme. Unusually for a programme in Angola, you hear the grievances of people in the interior as well as those in the cities. People complain about pensions that have not been paid for years, corrupt officials in hospitals and underpaid teachers.

From Cabinda, the northern oilproducing enclave, you hear complaints

Itcannotshutdownthedissidents.Young Angolans talk freely on social media, questioning why their reality is often at odds with the ideals proclaimed by the politicians. Seventeen-year-old activist Nito Alves has become a cause célèbre afterthepolicedetainedhim The first-class passengers in September for trying to print T-shirts with slogans must devolve some of their critical of Dos Santos. power to the rest of the train Our standard-class activists, however, are confined about marginalisation. People in the to the large cities. The interior is firmly diamond-rich Lund provinces are askunder the control of the provincial governors,appointedbyDosSantos.According where the money is going, and the ing to the constitution, there should be government cracks down hard on any local elections, but officials tell us the talk of secession. If those political and business leaders do not pay attention to conditions are not right.

And finally we come to the third class the rest of the passengers, we will again compartments, where the noise is inbe late to our destination. Perhaps we tense. There is no water in the taps, and will not get there at all. the electricity flashes on and off. The Angola has to modernise and divermenu is that great Angolan staple, funje, sify its economy. The first-class passen-

gers must devolve some of their power to the rest of train. We should have an open conversation about politics and the economy. The ownership of key private companies is still shrouded in secrecy.

Activist Rafael Marques de Morais, one of the bolder voices in standard class, has exposed all kinds of conflicts of interest.

Discussion, debate and protest on the train are lively. People from different carriages come together to celebrate our proud culture. Our differing musical traditions blare out from the compartments.

We join each other in this mobile melée to dance, laugh and even cry.

Some of us dwell on the dreams of the nationalists of the 1950s and 1960s.

In October, the Brazilian authorities issued an arrest warrant for General Bento dos Santos, who is accused of trafficking prostitutes. One of our respected columnists, Gustavo Costa, lamented that such a character could belong the MPLA, which had been started by such refined intellectuals as Mario Pinto de Andrade and Viriato da Cruz. Come and take a journey on our Angolan train, you will at least find that the ideals of these intellectuals are very much alive. ● Sousa Jamba in Luanda

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COUNTRY FOCUS | ANGOL A

GIANLUIGI GUERCIA/AFP

Huambo: adorned but not revived by the MPLA

HUAMBO The lost powerhouse of the Planalto Huambo used to be a centre for large-scale agriculture and manufacturing projects, but it has not recovered from the impact of the long civil war

T

he Jardim da Cultura (Garden of Culture) looks a little faded.

When President José Eduardo dos Santos opened it on the eve of the 2008 elections, the newly renovated park in Huambo’s uptown district of Cidade Alta seemed like a magical cartoon world.

Security staff ensured that children used the swings only at the permitted times.

Music emanated from brightly coloured plastic toadstools and squirrels.

Today, the fountains are still illuminated at night and couples pose for photos in front of the flowering trees, but the swings no longer work and the toadstools and squirrels are silent. The rehabilitation of the park was meant to mark the renaissance of a city that had been at the centre of Angola’s history and its civil war.

The death of UNITA leader Jonas Savimbi effectively ended the war in 2002.

The2008electioncampaignconfirmed the MPLA’s political as well as its military victory. This time it was raining largesse, not bombs, on Huambo. Television news praised the newly asphalted roads linking Huambo to Luanda and the illuminated fountains in the Jardim da Cultura. It gave primetime coverage to the mass rally that greeted Dos Santos, whom the MPLA styled “the architect of peace”.

The money spent on beautifying the city might have been better directed to reviving those factories on the outskirts of Huambo. Although peace has made it easier for farmers to sell their produce, there is a lack of investment in the Planalto’s agriculture. It is not creating many jobs or vastly higher incomes, let alone driving the country’s economic development by providing raw materials for processing and manufacturing.

SILENT FACTORIES

Huambo is the main city of the Planalto (Central Highlands), once Angola’s granary and the base for industrial development. In the middle of the 20th century, Portuguese colonialists referred to Huambo as Nova Lisboa (New Lisbon): it was at the heart of their efforts to exploit the economic potential of the interior.

The roads leading to Huambo are still lined with the cast-concrete factories of that era, now mostly roofless shells.

For almost three decades after the end of colonial rule in 1975, Huambo was a focus of the struggle between the Movimento Popular de Libertação de Angola (MPLA) and the União Nacional para a Independência Total de Angola (UNITA).

areas with suspected landmines in Huambo Province

SOURCE: THE HALO TRUST

64

Years it will take to clear them

Food processing, a key industry under colonial rule but destroyed by the war, shows little sign of revival. Angola’s showcase agricultural project is in neighbouring Kwanza Sul, a province with a similar climate and easier access to the big consumer market, Luanda. Walter Basilio, the national supervisor of agricultural statistics, announced in September that the government will conduct a census of farmland and livestock in Huambo Province as part of the national economic planning system.

RELIANCE ON THE STATE

Until Huambo’s agricultural and manufacturing sectors can be revived, the province will remain dependent on support from the national government, itself reliant on oil revenue. “To do anything here you need to be in the state sector,” a university student says. “What can you do in the private sector? You’d just be working for foreigners.”

Opposition activists are calling for the promised local elections, even if Huambo sees few of the street protests that are becoming more common in Luanda. Angola’s administrative apparatus is managed and financed from Luanda, reinforcing the dominance of the ruling party. Political devolution could change this dynamic, although the MPLA is likely to retain its grip over the administrative system.

The maturing of a generation born into the post-war era will change Huambo, as will the revival of an independent ecowi nomic base driven by farming and industry. But for now it is difficult for people to see how the days ahead could break the pattern of the war-blighted past. ●

THE AFRICA REPORT

Honoré Banda in Huambo •

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ONE MILLION CUSTOMERS BFA was created 20 years ago. Over these two decades, the Bank has consolidated its support to the economic development of Angola, by creating highly innovative and competitive financial solutions.

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Twenty years on, we are proud to say that BFA already has more than one million Customers – a sign of the Angolan´s confidence in us.

It is good to see Angola grow and to know that we contribute to its development.

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STP Excellence Award

Best Commercial Bank in Angola

Brand of Excellence Award

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COUNTRY FOCUS | ANGOL A

OIL

The Brazilian connection could mean higher production

NI

SHARED EXPERTISE

ING

Shortly afterwards, Cobalt announced the success of its first well drilled in the Kwanza Basin, Cameia-1, which tested at 5,000bpd of high-quality oil. Cobalt says the well could producemorethan20,000bpd.

Brazilian and Angolan companies are also sharing their expertise. Petrobras has stakes in six Angolan blocks, and Brazilian bank BTG Pactual agreed to buy 50% of Petrobras’s African holdings in 2013. Sonangol bought Starfish Oil and Gas, which held the rights to three blocks in Brazil, in 2010.

As the oil industry keenly watches the results of more drilling in Angola, a key questionarisesaboutwhetherthesuccess of Brazil’s pre-salt oil play can be repeated in Angola. Would that mean that Angola can also double its oil production?

The answer lies in the geology. Petroleum geology is not precise because of the technology geologists use to search for oil and gas in ancient strata lying at depths of some 4-5km beneath the sea floor. The drilling targets are defined by seismic waves that must penetrate the thick salt layer and then be reflected back to the surface to be recorded as seismic lines.

As with all oil and gas exploration in little-explored sedimentary basins, much risk is involved. Yet by the end of 2014, the answers to questions on Angola’s future production will be much clearer. ● KON

LA

UA

KO

SALT BASIN

DO MU he implications of the shared RIO geological history E N F I C BO RE between Angola GA E O P I NG – currently producing RG CO SE VO L A A 1.8m barrels per day SU NZ NC WA CO AHIA K E A R (bpd) – and Brazil B D LA UE MA AL NG – 2.1m bpd – is excitOS BE E P M B SOUTH AMERICA ing petroleum geoloCA MI NA gists and oil companies.

OS NT During the Lower CretaIS SA LV WA ceous period, some 125m years ago, Angola and Brazil were S TA GE part of the supercontinent of Pangea.

LO AN PE OR When continental drift started and Africa DO andSouthAmericabegantoseparatefrom LA SA DO each other, extensive rift valleys formed RA LO O C similar to the East Africa rift system.

These valleys contained large lakes full of plant and animal material that would eventually form source rocks capable of generating oil and gas. With continued The rift that made oil continental separation, the sea flooded the rift valleys and, owing to the effects for Angola and Brazil of evaporation, thick layers of salt were The Tupi discovery – renamed Lula deposited. These salt layers are up to after Brazil’s President Luiz Inácio Lula 2km thick in parts of the Lower Cretaceous sedimentary basins of Angola and da Silva – opened up a fairway of pre-salt Brazil. These impervious salt layers act as oil and gas fields in the Santos and Cama seal above the porous sandstone and pos basins. Oil industry analysts such limestone reservoirs that contain the oil as Wood Mackenzie and IHS estimate and gas generated by the lake sediments.

Brazil’s pre-salt reserves to hold as much as 30bn barrels. Brazil’s current producBRAZIL’S TUPI DISCOVERY tion now includes more than 300,000bpd In 2007, the discovery of the giant Tupi from pre-salt fields. Petrobras says that field beneath the salt in the Santos Basin the pre-salt discoveries could double transformed Brazil’s oil industry. PetroBrazil’s production within 15 years. bras, Brazil’s state oil company, drilled Angola and Brazil face each other the Tupi-1 well in 2,100m of water to a across the Atlantic Ocean, some 7,000 depth of 5,200m below the sea floor. It km apart, but their common geological historysuggeststhatbothcountriescould cost almost $250m, but the reward was benefit from pre-salt deposits. Brazil’s a well capable of producing 20,000bpd and the discovery of a field with recoverTupi find prompted an enormous inable oil reserves of about 6.5bn barrels. terest from oil companies, leading to

: TA

T

AFRICA

RCE

United by cultural and trade ties as well as a common language, Angola and Brazil are close allies. Now their common geology could double their oil output

the examination of geological and geophysical data in Angola.

About two-thirds of Angola’s daily oil production now comes from its deep offshore blocks. In 2011, Angola’s state oil company Sonangol awarded 11 pre-salt blocks to companies including BP, Cobalt International Energy, Eni, Total, Repsol, ConocoPhillips and Statoil. A year later, Maersk Oil announced the results of its Azul-1 well in Block 23, drilled specifically to evaluate a pre-salt prospect.

Azul-1 produced 3,000bpd of oil and confirmed that there was an effective working petroleum system in the pre-salt sedimentsofthedeepwater Kwanza Basin.

SOU

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Tako Koning* in Luanda

*Tako Koning is a Canadian senior petroleum geologist living and working as a consultant in Luanda, Angola.

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Banco Nacional de Angola has taken measures to reduce dependence on the US dollar

Instead, the opposite happened: “More dollars [are] being sold to commercial banks, so that operators can buy kwanza to pay their suppliers. This means less of the dependence on the Banco Nacional de Angola to auction those dollars.” With fewer greenbacks on the streets, says Staines, the BNA could have more control over the kwanza.

DEBT SHOOTS UP

ISSOUF SANOGO/AFP

68

BANKING Financial institutions grow, but profits face pressure New oil legislation will give Angola’s currency and banks a boost, but for some, non-performing loans are spreading at an alarming rate

B

anks in Angola are growing and diversifying fast, pulled in the slipstream behind the oil and gas economy, although their profits have been hit by lower interest rates and higher levels of bad debt. In 1999, Angola had just six banks; now London-listed Standard Chartered hopes to become the 24th bank with a full operating licence.

Standard Chartered opened a representative office in Luanda in February 2013 in a joint venture with state-owned insurance provider Empresa Nacional de Seguros de Angola (ENSA).

Now it offers clients offshore services, trade financing, syndicated debt and foreign exchange services. A full licence will allow Standard Chartered to open a branch network. Standard Chartered Angola chief executive Miguel Bartolomeu Miguel says the initial targets are big corporate clients: “Our primary focus in Angola will be towards oil and gas companies,” he tells The Africa Report.

“After that [we’ll focus on] multinationals, and in the longer term we aim for large Angolan entities.”

Standard Chartered wants to capitalise on its extensive networks in Asia to facil-

itate trade links with Angola. “There is no other bank in Angola right now that can match our capabilities or experience,” says Miguel. Angola is already China’s largest African trading partner.

KWANZA IN DEMAND

Head of capital markets at Angola’s state oil company Sonangol until 2009, when he joined Standard Chartered, Miguel says: “We believe we are coming in at a very good time. Under new Angolan legislation oil companies are required to pay for their operations in local currency through local banks. This presents us with a big window of opportunity.” The new foreign exchange law first came into effect in July 2013 as part of a move by the central bank, the Banco Nacional de Angola (BNA), to strengthen the kwanza and reduce the economy’s dependence on United States (US) dollars.

Despite fears that the new system would delay payments and hit the financing of oil production, IMF representative in Angola Nick Staines says: “The initial view is positive and that things are working well. There was anxiety that there would be a shortage of US dollars.”

According to an October 2013 report from international accountants KPMG, Angola’s banks grew by 14% in 2012 but profitsdippedbymorethan30%.TheBNA announced in October that credit growth roseby26%in2012andbanks’assetsgrew by 14%. Non-performing loans shot up to 166.5bn kwanza ($1.7bn) – about 84% higher than in 2011 – partly because of a weakening real estate market and delays in payments for government contracts.

Standard Bank chief executive Pedro Pinto Coelho says that his bank, the first South African bank in Angola, was back in the black after two years of losses reflecting big initial investments: “We are swimming against the tide. Our credit book is new, so we don’t have a heap of historic debt like many banks. Interest rates were already coming down when we started out, so we didn’t have that free ride that others had.”

He sounds a note of caution: “There are too many operators in the financial system for an economy like Angola, and we will see some consolidations.” The KPMG report also said that the country’s top five banks control 78% of assets in the banking sector. Yet Coelho is confident that well-run and competitive banks would emerge stronger as Angola’s oildriven economy starts to diversify. ●

THE AFRICA REPORT

Louise Redvers In 2012 • branches were up by 10%, • assets up by 14% but • overall net profits were down by 31% • and non-performing loans rose by 83.5% •

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Financial Institutions

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COUNTRY FOCUS | ANGOL A

OPINION

The right to doubt Not all they say may be correct; not everyone may agree; but Angola’s young people have shown a social and political lucidity and their voices should be heard

I

t is with sadness that I see any Antide. What luck, what a source of pride, to have a country where the citizens, golan detained, threatened or harassed because he wanted to demonwhere the young people think, reflect strate…simply demonstrate: to show and arrive at their own conclusions.

These conclusions produce demands, others with respect that he does not complaints and debates. It seems to me agree with another civic or political that we would be on our way to the fugroup. To speak. Shout. Write on a ture, if that is really the future that we poster or a banner. want: democracy, exposition and deIn none of the demonstrations did bate – the right to conviction as much I see acts of violence by youth. In the majority of cases, they were prevented as the right to doubt. from demonstrating. Their voices were cut off and their signs torn. They were What wisdom would our elders detained or removed from a chosen have if they did not explore their own venue. At least once, they were removed doubts? I reserve myself the right to from the locale for “reasons of securdoubt, to question what I see writity” – their own security. ten or said on the news, to doubt the What name do we give to this strategy intentions of those who did not even of neutralisation of a demonstration that manage to express their intentions. I “almost did not happen”. What should reserve the right to doubt the wisdom of those elders that do not want to listen, we call this strategy of annulling what or even see, much less embrace those a group of young people has to say?

Ondjaki is an award-winning younger than they are.

And what if those who do not want Angolan writer. Born in Luanda, I reserve the right to doubt a counto listen gave themselves the task of he lives between Angola and Brazil try that doubts its own youth that it simply listening to them? And if they educated and that now think on their let them speak? own – even if dissonant, even if divergent, even if utopian.

And if all those who call them names – “thieves”, “idle I reserve the right to doubt those elders that do not want us youth”, “drug addicts”, “alienated young people” or “pupto worry about the majority and the conditions of the mapets” – decided to read or hear what these youth have to jority. All Angolans know perfectly in what conditions the say? And if a debate, a serious one, was born of the doubts “majority of the people” live and survive. that these youth have?

We need to stop acting like these young people ‘don’t know It is with sadness that, being only another young person what they are saying’. They know very well. It is easier for from my country, I have so many doubts in relation to this us to think that these are not their ideas, that they are from historic moment of our society. Instead of celebrating the some other external forces politically organised to manipsaid progress, we share a kind of fear. In place of a cry of ulate a group of young Angolans that do not know how to celebration, we have whispers. In place of distribution, we think for themselves. have accumulation. In place of an expansive dream, we have harassed thinking and well-trained self-censorship. I The great majority of these young people have shown a cannot but have sadness in my voice. social and political lucidity of great merit. It does not matter To contradict it – yes, it is my personal duty and that of if we agree or not, if ‘all’ they say is correct. No one, in any a citizen to search for a way other than sadness – I nurture part of the world, is correct in all they say, in all that they afhope each and every day. A simple hope, Angolan hope, firm politically, but these youth are being denied attention. that comes from far away. It comes, certainly, from other Time for us to hear what they have come to say. elders that I knew, in another time, with a different form What elders do we have, what elders are we and will we of education.

Each and every day, I nurture a hope – almost ridiculous, be, if we don’t know how to listen to those who are younger than we are? I have doubts that our society is acting correctly almost utopian – of a more just Angola. While I wait, I emif all we want is to ignore, to quiet and to silence these young brace those who, when they speak, are prepared to listen to people. These young people that have doubts to express and what the other has to say. Because the river has two banks. questions to inspire. Just as we all have the right to doubt, Because the future is made from the hand of the elder interlaced with the hand of the youth. It has been that way for we all have the right to express our convictions. a long time. It is or it was? ● We will be a better country when people can express and Translation by Marissa J. Moorman debate their convictions, even when they go against the MALBA/FUNDACIÓN COSTANTINI (BUENOS AIRES)

70

Ondjaki

THE AFRICA REPORT

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BUSINESS

You can’t eat Africa’s economies have been growing steadily over the past decade, but poverty has remained stubbornly high. The Africa Report examines the causes and the policies that governments are adopting to share the wealth and drive growth

COMPANIES & MARKETS

GDP growth

By Nicholas Norbrook in Washington DC, Crystal Orderson in Cape Town, Elissa Jobson in Addis Ababa and Gemma Ware

A

bout 40km from Cape Town’s main tourist attractions, down a winding and windswept road, is the Cape Flats township of Mitchell’s Plain, designed in the 1970s as a model dormitory suburb by the apartheid government.

Home to a million people, it has one of the highest unemployment rates in Cape Town.

It is Saturday morning in early November, and thousands of people have been queuing since the early hours of the morning at the main shopping hub. It is busy, chaotic and people struggle to walk on the streets. The reason for the bustle is ‘all-pay’ day: the moment in the month when the social grants that are keeping millions of South Africans out of poverty are doled out.

THE HAPPY, TOO FEW

NOOR KHAMIS/REUTERS

Social housing is a useful tool to help pull up the poorest in cities

No one can deny the extraordinary boom Africa has experienced over the past decade. Collectively, African gross domestic product (GDP) has averaged about 5% per yearfrom2003to2013.Butmuchof this has been on the back of Asian demand for African commodities.

Capital-intensive resource extraction has not delivered a promised ‘trickle-down’ effect.

“If you just take a look at straightforward increases in national pie, you have economic growth without development,” says Ghanaian economist George Ayittey. “In 2008, the rate of economic growth in Angola was almost 20.8%, but more people fell into poverty – 60% of Angolans are living under extreme poverty, making under $1 a day. You can say the same thing about Nigeria.”

Boniface Dulani, co-author of an October 2013 Afrobarometer reportthatexamines‘livedpoverty’,

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BUSINESS | COMPANIES & MARKETS

which remains stubborn, agrees: “The majority are not seeing the benefits of the growth,” despite clarion calls of Africa rising, new middle classes and consumer-rich cities. On top of that, the continent’s population growth quickly eats into headline economic growth. The World Bank and other international financial institutions also point out the cost of living has risen in African countries, especially those where the price of transportation, electricity and food are high due to weak supplies.

UNEQUAL = UNSTABLE

This is not an academic question, nor even necessarily a moral one – the uprisings that spread like brushfire through North Africa, upendingregimesinitswake,were stoked by immense disparities of wealth. Beyond the political tremors to be avoided, there is now a widespread understanding that shared development – pulling people out of poverty – boosts economic growth, as Brazil and China have spectacularly demonstrated.

In October, the World Bank’s acting chief Africa economist Francisco Ferreira said: “At this rate, even if countries in Africa continue to grow at the same rates as in the 2000s – a period when

the external environment was particularly benign, with rising commodity prices and abundant liquidity – poverty in 2030 would be in the 26%-30% range (assuming constant inequality). Somewherebetween60%and80%ofthe world’s poor would live in Africa.”

So what to do? The head of the United Nations Development Programme, New Zealand’s former Prime Minister Helen Clark, says: “Are the poor going to get some of the growth or a fair share of the growth? The latter will take some effort.” Some countries, like South Africa, have opted for a direct welfare model through transferring money to citizens. According to a South African Institute of Race Relations survey, in 2001, 8% of the

Zambian cash transfer systems are helping to cut rates of child poverty

% of pop. living on under $1.25/day 70 60

East Asia and Pacific Latin America/Carib.

Sub-Saharan Africa South Asia 56.5

59.4

58.1

58

55.7

50

52.3

MENA

49.2

48.5

40

31

30 20

12.5 5.5 2.4

10 0 1990

1993

1996

1999

2002

population benefited from social grants. It now stands at 31%, some 16.1 million people. For more than 22% of households, social grants are the main source of income.

In Mitchell’s Plain, thousands of single mothers, pensioners and disabled people receive grants to bring food to the table. It does not go far. “Things are more expensive, and it is a struggle to survive.

People are struggling and going to bed hungry,” says Florida Martin, one of the only female taxi drivers in the area. Business might be booming today because of ‘allpay’ day. Despite having a job, she says: “Even if you work, you still struggle. You go ask for loans to pay your debt. Electricity and petrol are the biggest budget killers.”

But there are arguments against these sorts of direct transfers.

South America has seen great success in levelling inequality through what are known as conditional cash transfers, like the Bolsa Família in Brazil. For Santiago Levy Algazi, vice-president of the Inter-American Development Bank, there is a danger that a country can get addicted to them, locking families into dependency. “There has been a stalling of growth in Latin America as a result. We started these programmes just as a temporary measure to buy time while the labour market reforms,” he explains.

KEEP THE CASH AT HOME

2005

2008

2010

THE AFRICA REPORT

SOURCE: POVCALNET

74

•

But because of a commodity price boom in the 2000s, politicians in many South American countries opted not to implement these difficult reforms. Instead, they relied on commodity revenue to take the fiscal and social strain rather than helping to train workers. “And now these transfers have gone far beyond a safety net and have become unsustainable,” warns Levy. The South African government sees lessons to learn in this story.

Other countries, where the tax take is far smaller than in South Africa, are finding it even harder to help the poorest. There are several related problems. The first is keeping money in the country. A report by the African Development Bank (AfDB) and Global Fin-

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COMPANIES & MARKETS | BUSINESS

The second is keeping the ‘national cake’ away from predatory elites. Anti-corruption efforts underway in many African countries have a chequered history. South Africa’s African National Congress government disbanded the Scorpions, a high-profile whitecollar crime fighting unit in 2009.

Prime Minister Hailemariam Desalegn’s government in Ethiopia has stepped up the fight against graft, arresting spy boss Woldeselassie Woldemichael on graft charges in August.

Sovereign wealth funds might be a way to keep some of Africa’s resource boom for future generations. They could also help to keep Nigeria’soilwealthoutofthehands of voracious state governors. Uche Orji, chief executive of the Nigeria Sovereign Investment Authority, diplomatically says: “The ● ● ●

Cost of a car Cost of average food basket Public secondary school fees per year

Cost of 1hr of phone credit

90 80

Mozambique

Ghana

South Africa

Tunisia

$20,000

$32,000

$9,000

$18,000

$29,000

$34

$38

$67

$46

$23

Free except final year

$900

$2,300

$4,000

but it can be much higher

$1.35

$1.72

$0.98

$1.30

$2.40

$6.88

$215

Fuel, price per litre

100

Kenya

$2.50

varies greatly

$0.96

$0.17

$0.11

‘LIVED POVERTY’ ACROSS 34 AFRICAN COUNTRIES, 2011-2013 (Respondents were asked how often they went without in the past year) Many times/always

70

Once or twice/several times

32%

60 50 40 30

33%

33%

28%

20%

17%

21%

Medical care

Food

Water

20 10 0

SOURCE: EBS/NUMBEO/TAR CORRESPONDENTS

ELITE AVARICE

THE COST OF LIVING IN FIVE COUNTRIES

28%

44%

13% Cooking fuel

Cash income

SOURCE: AFROBAROMETER

ancial Integrity published in May 2013 suggests that up to $1.4trn was taken out of the continent via illicit financial flows between 1980 and 2009.

“The majority of this is companies avoiding tax, not corrupt Africans,” says Donald Kaberuka, president of the AfDB. Another route – legal this time – by which money leaves is Africa’s huge import bills. Nigeria spent N630bn ($4bn) on food imports in 2012.

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BUSINESS | COMPANIES & MARKETS

● ● ● sovereign wealth fund is a tool of financial discipline.”

Finally, once governments have stemmed capital flight and fought off corrupt elites, what decisions can be taken to help spread the wealth? The governments in Mozambique and Zambia have focused on giving cash directly to families, following the South American and South African routes. Mozambique spent $13m in 2008 on social safety nets, increasing that to $57m in the 2013 budget, some 0.4% of GDP. The Maputo government will raise that to 0.8% of GDP in the medium term, targeting around a million citizens.

Zambia has been piloting a cash grant for poor families with children. Since 2010, the authorities have been giving the equivalent of $12 per month with no conditions attached to households with at least one child under five.

The latest results show that families have spent 75% of the money on food and that the provision of basic materials such as shoes and clothes has gone up by onethird. There has also been a 20% spike in the amount of livestock owned by recipients and a 50% jump in the value of agricultural commodities harvested.

Could it be that this is a sound investment by governments, stimulating economic growth at the grassroots level? “This echoes what we have seen elsewhere”, says the World Bank’s Ferreira.

“People who get cash grants invest it in their own microbusinesses – in Mexico, for example, where recipients of cash grants would buy chickens, improving their nutrition and also selling eggs.”

GLASS CEILING EFFECT

But there are other tracks to pursue. Investment from abroad brings in technology and financial muscle, but there are perhaps ways to harness it more constructively. “Foreign capital is managed by foreign managers, largely, with indigenous labour. It’s racial profiling that happens, and there’s a glass ceiling and labour is seen as a disposable commodity,” says James Brice, managing dir-

GDP PER CAPITA 2013 ($) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

B ranking (S&P)

144

% change in past decade

6,154 57

190

1,268

1,015

Cameroon

Cambodia

217 1,782 Ecuador

Ghana

250 724 Rwanda

B+ ranking (S&P) 119

158

127

640

1,046

Mozambique

Kenya

218

4,039

283

3,127

1,350 Albania

Zambia

SOURCE: STANDARD & POOR’S/IMF

76

Sri Lanka

How Africa ranks up

inclusive growth rates, in part due to their infrastructure outlay. “The location of the infrastructure is important here. So, for example, roads out in the rural areas are very important,” explains Punam Chuhan-Pole, lead economist for the Africa region at the World Bank. She says that investing in infrastructure that links the agribusiness chain in small and medium-sized towns is just as important as the flagship projects that governments like to favour. Nigeria is starting to move in this direction. The Kano River irrigation project is boosting tomato production, but the lack of packaging facilities and roads retards growth.

ROAD TO INDUSTRIALISATION

If you look at how African countries compare against global peers with the same sovereign rating from Standard & Poor’s, those in Latin America and Asia tend to have higher GDP per capita than their African peers, says the rating agency’s Christian Esters. While there has been huge growth over the past decade in countries like Ghana and Mozambique, it has come from a very low base.

ector of Environmental Business Strategies, a consultancy that advises on sustainable investment.

“There’s an absence of mechanisation, there is an absence of upskilling.Iremembercomingacross an operation in Malawi where the most highly skilled, longestserving indigenous staff member was the HR [human resources] manager, who’d been in the same position for 30 years. Nobody had gone beyond him. That’s a common scenario, whether it’s Portuguese talent out to Mozambique or Angola, or Indian talent going to East Africa, or British or European talent going elsewhere, it’s the same scenario,” says Brice.

Nigeria has been more successful in using foreign direct investment to drive development in its oil sector, but only after five decades of marginal local input.

Investment in basic infrastructure is another option. A World Bank report celebrates Rwanda and Ethiopia for their high and

Ethiopia has also been successful at investing in people as well as hardware. In 1990, an estimated 204 Ethiopian children in every 1,000 died before their fifth birthdays – just six countries had a higher rate. The rate dropped to 68 in 2012. Peter Salama, the United Nations Children’s Fund country representative in Ethiopia, salutes the ambitious targets that the government set: “It has then backed them up with real resources and real commitment sustained over the past 10 years. The best example [of this] is the health extension programme. The programme put on the government payroll more than 36,000 health workers and deployed them to 15,000 health posts across Ethiopia.”

Investment in education can be a key to unlocking shared growth.

There is some way to go here: in Kenya, out of 100 teachers, just 55 are in class teaching, according to a July 2013 World Bank service delivery indicator report.

Investment in education could also help African countries to train for the next big challenge, industrialisation. That involves going from a continent dominated by countries whose primary exports and economic activity depend on raw commodities to one where the manufacturing sector can absorb many of the young Africans joining the workforce. Botswana, long held up by donors as ● ● ●

75% of the pilot cash grant recieved by poor Zambian families is spent on food alone

THE AFRICA REPORT

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A multi-profession group, a pan African presence Created in 1995, SAHAM GROUP, a key player in the insurance, offshoring, health and property sectors in Morocco, is actively pursuing its international expansion strategy.

• Insurance

• Real estate

The group has set up in Lebanon and in 17 African countries, rising in three years to the top rank of the continent’s insurance companies, outside of South Africa, with the brands CNIA SAADA, COLINA and LIA Insurance.

Its subsidiary ISAAF Assistance, leader of assistance in Morocco, covers a network of 600 intervention sites.

Drawing on its extensive experience in property promotion in Morocco, SAHAM GROUP has bought up the Ivorian company BATIM AFRIQUE, with the ambition to cover the region.

• Offshoring Pioneer in offshoring professions, SAHAM GROUP manages 8 contact centres and offers technical assistance, client relations services, telemarketing, back office and directory services to its clients.

• Health The acquisition of a pharmaceutical industry in 2011 has allowed SAHAM GROUP to launch its health division. The objective: to produce and distribute drugs – in particular generics – in Morocco as well as in the rest of Africa.

• Strategic partnerships To build its expertise and consolidate its international growth, SAHAM GROUP is relying on strategic partners, capital intensive as well as commercial, with first rate operators such as Bertelsmann, Mondial Assistance, CEGEDIM, Sanam Holding, the International Finance Corporation (IFC) and Abraaj Capital.

SAHAM GROUP in figures

• A turnover of 900 million dollars in 2012 • 5 900 collaborators • 34 branches in 19 countries

Seeking synergy between branches and concerned about making skilled jobs sustainable, SAHAM GROUP is investing in quality, innovation and training to meet its clients’ needs and to contribute to the economic and social development of the continent. www.sahamgroup.com

BUSINESS | COMPANIES & MARKETS

a leader in governance in Africa, nevertheless has had structural unemployment of nearly 20% despite decades of strong growth. It is also very dependent on diamond exports.

There are divergent opinions about industrialisation in Africa today. South Africa’s finance minister Pravin Gordhan says: “It is actually quite refreshing to hear talk of industrial policy on the international circuit today – we need to be asking what are the labourabsorbingsectorsweshouldbein.”

On the other hand, Ayittey fears

●●●

the return of the state: “If you look across Africa in the post-colonial period, the problem was that we had heavy state interventionism in African economies. It got to a point where they created this giant state behemoth that was literally suffocating the economy.”

In Botswana, at least, the government has chosen the first path, incentivising companies to move diamond processing and sales to Gaborone (see page 120).

And here too the debate is evolving, partly in response to the success that China and South

Korea have had in tackling poverty with a developmental state approach. Even the World Bank’s vice- president for Africa, Makhtar Diop, is taking a fresh view. “Look at infrastructure companies for example, they are mostly dominated by non-African actors. We have been accused of favouring foreign investment. This is a taboo subject, I know, but I would like to look at how to take the trader in Cocody [in Abidjan] and help him move towards manufacturing, investing in the productive sector. How can we help him transition?” ●

20.7% Botswanans classed as ‘extremely poor’ by AfDB, yet it is a middleincome country

4x4s line up outside Accra Mall, but not everyone is invited inside

YOURI LENQUETTE

78

Accra’s optimistic divide The signs of economic growth in Ghana’s capital city are visible, but the benefits are not shared by all

O

n the doorstep of Accra’s Kotoka Airport you can see new high-rise apartmentsoutofwhichlarge4x4screep out onto the narrow roads. New restaurants are also springing up.

In this city, the unofficial currency is the United States dollar.

Ghana’s economy has experienced rapid growth in recent years.

Between 2009 and 2012, an average of $3bn per year of foreign direct investment flowed into the country, but many Ghanaians are waitingforthebenefitsoftheboom to reach their wallets.

In the supermarkets of the city’s largest shopping centre, Accra

¢12 Price of a large packet of eggs, up from ¢7 in a year

Mall, shoppers are getting ready for Christmas as they sort through artificial trees and multicoloured tinsel. “I agree that there is growth in the economy,” says Catherine Adu-Boadi, a senior civil servant.

“But the thing is, do we feel it in our pockets?”

Gesturing to the breakfast cereal she has in her basket, AduBoadi says that the cost of her children’s morning sustenance has nearly doubled to 10 ($5), adding that a package of large eggs has gone from 7 to 12 in the last year. “Prices can shoot up two or three times within the year and your salary goes up once if you THE AFRICA REPORT

•

are lucky,” she laments. “So there is always this thing where you are trying to catch up.”

A 15-minute drive from the mall in the bustling neighbourhood of Lapaz, the optimism sours further.

Charles Manu, 35, is a secondhand shoe dealer. He says: “They say Ghana is rising and the economy is booming, but I don’t feel it.Theworryingthingisthatpeople don’t buy like they used to. The little money that I get goes into paying utility tariffs. I hardly sell more these days.”

Mobile phone credit vendor Margret Nartey, aged 28, lives with her son and sick father. Nartey agrees with Manu: “This business does not bring more money like others do. I come here early in the morning, and the money I make isn’t enough to provide for the house these days. Prices of things have doubled. That means people like me are not making profit these days.”

Like Adu-Boadi, the two cite the rapid development of the Airport Residential Area as evidence that there is money in the system, but both say that the money is in the hands of the government and big businesses. The stress on people’s purse strings means that they are having to find alternative ways to supplement their income. “Now nobody does one job,” Adu-Boadi says. “You need to survive.” ● Billie Adwoa McTernan in Accra

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BUSINESS | COMPANIES & MARKETS

OPINION

Illicit financial flows are the bane of Africa Governments must fight against trade misinvoicing, tax evasion, terrorism financing and other forms of illicit financial flows that sap the continent’s strength

I

n May 2013, Global Financial Integrity (GFI), A faster rate of economic growth is not in collaboration with the African Devela panacea because weak governance and opment Bank (AfDB), produced a report inadequate social benefits typically result showing that Africa was a net creditor to the in growth enriching only a tiny sliver of the world to the tune of $1.4trn over the period of population. Indeed, economic expansion may 1980-2009. In other words, during this period not even lead to a commensurate increase more money flowed out of Africa than into it. in tax revenue. This is because the high-netIllicit financial flows were, in varying degrees, worth individuals and corporations that face a the main culprit behind the net drain of rehigher tax burden on larger incomes are loath sources from African countries and not other to shoulder the costs, thereby driving more commonly cited financial flows like debt reillicit outflows. Hence, illicit financial flows payments. Such financial outflows involving can adversely impact countries with widely the cross-border transfer of the proceeds of different rates of economic growth. corruption, trade in contraband goods, criminal activities and tax evasion have long been Recent studies at GFI indicate that Africa the bane of Africa. Sub-Saharan Africa, parhad the second-highest rate of growth in ilChief economist, Global ticularly West and Central Africa, dominates licit outflows over the past decade, and the Financial Integrity and the pattern of illicit outflows. continent leads other regions in terms of former senior economist The loss of scarce capital has serious conoutflows as a percentage of gross domestic at the International sequences for economic development and product. Nigeria and South Africa (ranked Monetary Fund stability. In fact, illicit outflows seriously re7th and 12th) are among the top 15 exportduce the effectiveness of aid. Economists esers of illicit capital. Hence, all indications timate the adverse impact of illicit outflows by netting them are that Africa needs to do much more to curtail outflows out from recorded inflows. These inflows of capital include of illicit capital. official development assistance, remittances, foreign direct A GFI report commissioned by the UNDP for discussion investment and commercial loans contracted at market rates by ministers of the least developed countries (LDCs) in of interest. The net result of inflows and outflows is called Istanbul in May 2011 found that African LDCs accounted the net resource transfer. for 69% of total illicit flows from the group. Roughly, 6570% of outflows were due to the deliberate misinvoicing of Apart from purely economic consequences, massive external trade. We found that over the period of 1990-2008, illicit outflows can create the conditions for civil unrest and trade misinvoicing in LDCs as a whole increased at a rate heighten risks to national security. Speaking at an Internaof 5.8% per annum, while their merchandise trade grew at tional Monetary Fund (IMF) event in Washington DC last 9.5%. This indicates that without significant improvements year, Helen Clark, the administrator of the United Nations Dein governance – including strengthened customs adminisvelopment Programme (UNDP), noted that illicit flows drain tration and other regulatory oversight – trade misinvoicing foreign exchange reserves, reduce tax collection and worsen will continue to increase along with trade. poverty in the poorest developing countries. The destabilising The GFI/AfDB report made several recommendations to role played by massive illicit flows in the face of entrenched curtail illicit flows, including promoting transparency in the financial system, entering into automatic exchanges of tax poverty and high unemployment – which led to social and political upheaval in Egypt, Libya and Tunisia – is well known. information, undertaking tax reform to widen the tax base, The capacity of unrecorded illicit funds to finance all kinds of reforming customs administrations and strengthening AML/ CFT initiatives and enforcement. nefarious activities including terrorism is recognised by the very fact that international provisions defining an anti-money International organisations and African states need to laundering (AML) regime are almost always cobbled together do more to curtail illicit flows. In March 2010, the IMF anwith measures to combat the financing of terrorism (CFT). nounced that it was assisting 16 African countries to combat illicit financial flows arising out of corruption involving Africa needs to be vigilant on all these fronts. On the their gold and diamond industries. A range of IMF technical one hand, some African countries have managed to attain assistance programmes aims at helping these countries higher rates of economic growth in recent years. However, combat the financing of terrorism through the misuse of that growth has not been inclusive, leaving vast swathes of their natural resource industries. African countries must their populations in abject poverty. On the other, massive seize such initiatives to strengthen governance in order to illicit flows together with endemic corruption and political break the cycle of illicit flows, poverty and social and ecoinstability have pushed other African countries to become nomic instability. ● failed or near-failed states.

GFI

80

Dev Kar

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Africa50 Infrastructure Fund

I

ncreasing the rate of infrastructure delivery in Africa implies a greater focus on project preparation and project development as well as specialized financial tools to address specific market challenges. In 2012, African Heads of States in their Declaration on the Program for Infrastructure Development in Africa (PIDA) called for innovative solutions to facilitate and accelerate infrastructure delivery in Africa.

In response, and after broad consultations with African stakeholders, the African Development Bank has proposed the establishment of a new delivery vehicle called Africa50.

Africa50 is the result of experience and innovation. The vehicle aims at mobilizing private financing to accelerate the speed of infrastructure delivery in Africa, thereby creating a new platform for Africa’s growth. Africa50 will focus on highimpact national and regional projects in the energy, transport, ICT and water sectors. Africa50 is to be structured as a developmentally-oriented yet commercially operated entity. It will be complementary to and legally independent of existing development finance bodies in Africa. Accordingly, the operational decisions will be made by a management team selected solely on technical merit and demonstrated managerial competence.

Africa50 will establish two business segments: Project Development and Project Finance.

© AfDB 2013 – DESIGN CERD/YAL

Africa50’s critical objective is to shorten the time between project idea and financial close. Africa50 builds on AfDB’s

recent successes in overcoming early-stage bottlenecks to infrastructure projects, mobilizing political support for necessary reforms, and deploying skilled experts to work along-side government.

To deliver on Africa’s current infrastructure pipeline, including PIDA, Africa50 will need an equity investment of USD 10 billion, thereby attracting USD 100 billion worth of local and global capital. Depending on funding needs and the project pipeline, Africa50 will augment its financial capacity by raising debt in the international capital markets. In order to ensure reliable access to capital markets while also offering additional operational flexibility, Africa50 will target an investment grade rating of single A. As a commercially oriented financial institution, Africa50 will seek to preserve and grow its capital base as well as provide a return to shareholders. It will have three broad groups of investors: i) African Countries, ii) the AfDB and other major development financiers, iii) institutional investors such as sovereign wealth and pension funds.

The ownership of the founder’s equity by African countries is central to the strategy of Africa50. Such ownership is intended to send a strong signal to developers and financiers about the commitment of African countries to address the continent’s infrastructure challenges.

Africa50 is expected to be fully operational in Q1 2014.

www.afdb.org

82

BUSINESS | COMPANIES & MARKETS

DEALS

Projects and prospects in the pipeline Companies are lining up their investment and acquisition programmes for 2014. Firms from Africa and abroad are aiming to expand their activities in high growth sectors

I

nfrastructure, healthcare, retail and real estate are set to be the hot investment targets for 2014.

Deals should start flowing from infrastructure-focused vehicles such as the African Development Bankbacked Africa50 Infrastructure Fund, which is targeting a $500m close by the middle of 2014.

Private equity companies will try to align their dealmaking with these plans. “As this infrastructure is developed, we see the opportunity to fulfil a whole range of emerging consumer needs,” says RondenBesten,managingdirector at the Abraaj Group.

In September, Abraaj announced an undisclosed investment in Moroccan pharmaceutical firm Steripharma. However, there is uncertainty about whether shareholders will accept Chilean pharmaceutical giant CFR’s bid to buySouthAfrica’sAdcockIngram.

Mining wrangles will also continue. In Guinea, as the government battles with BSG Resources over its share of the Simandou iron ore deposit, British-Australian miner Rio Tinto and Chinese firm Chalco, which hold the other half of the Simandou mine, signed a draft agreement to start exporting by 2018. It will also be interesting to watch how commodities company GlencoreXstrata decides to use the new flexibility gained from its November 2013 secondary listing on the Johannesburg Stock Exchange. ●

Iron ore in Mauritania

65%-75% Stake the Tanzanian government has indicated it wants to hold in eight new offshore gas blocks as part of a fourth licensing round due to end on 15 May.

After the Société Nationale Industrielle et Minière (SNIM) discovered a deposit containing 830m tn of iron ore in October, the West African country is hotting up as an iron ore destination.

GlencoreXstrata subsidiary Sphere Minerals already has a 50% stake in the Tintekrate deposit.

80%

Malaysia’s Petronas plans to sell its majority stake in South Africa-based fuel retailer Engen.

PetroSA is one of the potential buyers.

Libya Telecoms In a shake-up of its mobile industry, the government announced it could list state-owned Libyana on the Tripoli stock exchange in the second quarter of 2014. The government also intends to invite a tender for a third private mobile operating licence.

Gulf operators Etisalat and Zain are likely bidders.

Gas in Equatorial Guinea All eyes will be on the government as it plans to revise its lopsided 2004 deal with BG Group in an effort to supply more gas to Africa. Ophir Energy, which won four offshore blocks in Gabon in November, will be looking to finalise terms for a floating liquefied natural gas unit, which will be the first in Africa. A new petrochemical complex is also in the offing at Riaba.

We cannot go it alone.

It’s going to be a totally new set of risks, new geographies, new legal dispensations. We need partners to help us manage those risks optimally.”

ELIAS MASILELA | South Africa’s Public Investment Corporation CEO discusses plans to invest 5% of its assets under management in Africa

Warren Dick in Johannesburg, Charles Idem and Gemma Ware FRICA REPORT

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83

e for 2014 There is latent demand for quality retail and office space. This will also act as a precursor to further investments in the consumer goods space […] one of [our] major focus points.”

NATALIE KOLBE | Partner, Actis

Automakers advance After Renault-Nissan inaugurated its second production line at its Tangiers factory in Morocco in October 2013, other Asian car manufacturers such as Tata are considering whether to set up operations in the nearby Tanger Automotive City.

Ugandan refinery The government plans to announce the winner of a tender to build a $2.5bn oil refinery by April 2014. It wants a 40% stake in the project. Russian firm Rostec has announced its intention to bid.

Dangote’s London listing Nigerian magnate Aliko Dangote put a plan to list Dangote Cement on the London Stock Exchange on hold in 2013 due to ongoing management changes. The listing is set to take place in 2014, but the date remains unclear.

It could lead to a dip in foreign flows to the Lagos Stock Exchange.

15

RICE IMPORTS BY REGION Million tonnes, milled eq.

10 5 0

05

06

07

Far East Near East

08

09

10

11

Africa Lat. Am.

THE AFRICA REPORT

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13

14

Europe Others

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$2bn The Kenyan government plans to sell its debut eurobond in January, according to treasury secretary Henry Rotich. He indicated that it will be earmarked for infrastructure (see page 88).

We will look to develop associated infrastructure [such as] the onshore infrastructure required to harvest the enormous gas finds off the northern Mozambican coast.

GREG BABAYA | Head of infrastructure investments, Stanlib

BUSINESS | LEADERS

INTERVIEW

Admassu Tadesse

President, PTA Bank

Everybody is captivated by the narrative The COMESA-based financial institution is expanding its geographical reach in Africa and attracting investors from the continent, Asia and Europe

P

TA Bank’s rebound is a sign both of the global interest in investments in Africa and the need for financial institutions that are able to support the integration of Africa’s regions. Ten years ago the bank was in crisis. In late 2013, however, the balance sheet nearly doubled to $2.2bn from $1.3bn in January 2012. The return on equity for the past five years has been more than 10% and rose to 14% in 2012. “And this year we are looking at about 15%, and that’s on a dollar balance sheet,” says Admassu Tadesse, the president and chief executive of PTA Bank.

“We are a development finance institution with long-term lending targeting small businesses, microfinance, agriculture and long-term lending for infrastructure. These are all the areas that the market typically does not serve very well,” explains Admassu. “But we also have a very strong trade finance mandate, a package of services to clients

PTA BANK

84

moving in and out of short, medium and long-term lending, which is a very interesting suite of services to be able to provide.”

There is a strong commercial attractiveness for short-term lending, he says. According to Admassu: “It’s much less risky, so about two-thirds of our portfolio is in short-term lending and a lot of it is structured trade finance - so it’s collateral-backed, asset-backed short-term lending which is very attractive.”

EXPOSURE WITHOUT RISK

Investors are queuing up both to finance and to buy into the bank, which has been growing its asset base at around 30% per year for nearly four years. “Everybody is captivated by the Africa narrative, and everybody wants exposure,” explains Admassu. “But how do you manage your exposure in a

MINI-BIO 1991 Graduated from the University of Western Ontario 2002 Awarded a master’s in business administration from Wits Business School 2002 Begins work at the Development Bank of Southern Africa April 2012 Joins PTA Bank as president and chief executive

“Commercial banks see us as a very strong partner, and this is unique in the finance industry” THE AFRICA REPORT

•

smart way? You have countries like Zimbabwe, Ethiopia, Sudan.

These are not frontier markets that are very well known to standard commercial banks, so people get comfort working with us because we are multilateral. We have the IFC [International Finance Corporation]-type legal structure.”

With its November 2012 international syndicated loan, PTA Bank raised $150m from a diverse group of banks. “We’ve always had a good relationship with Asian banks, but the Bank of Tokyo-Mitsubishi came in for the first time, as well as the Industrial and Commercial Bank of China. These two were amongst the biggest banks that participated in our syndicated loans,” says the bank’s president. “We spend about 50% of our time building and maintaining our relationship with commercial banks who see us as a very strong partner, and this is quite unique in the finance industry.”

Current shareholders are also increasing their stake in the ● ● ● N° 56

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www.globalpacificpartners.com

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5th Eastern Africa Oil, Gas, LNG & Energy 2014 28th - 30th April 2014, InterContinental Nairobi, Nairobi, Kenya

5th

5th Eastern Africa: Strategy Briefing - 28th April 2014 5th Eastern Africa Oil, Gas & Energy Conference - 29th - 30th April 2014 57th PetroAfricanus Dinner - 29th April 2014

Senior Partners Dr Duncan Clarke: duncan@glopac.com Babette van Gessel: babette@glopac.com

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Marketing Contact Jerry van Gessel: jerry@glopac-partners.com

BUSINESS | LEADERS

86

the participation of South Korea, Malaysia, India and Japan as well as the Gulf countries, Brazil, the Nordic countries, France and Germany.

As a way of attracting large pension funds, “we also reformed the board structure. We said, let’s introduce some more voices, more institutional members on the board,” says Admassu. “And let’s also introduce some independent non-executive directors who are world-class professional bankers, who come in to exercise a very strong fiduciary role, enrich the skill base within the board and ensure that we can run a very well risk-managed financial institution.” There has also been a push to diversify investments, which had been concentrated in Zimbabwe and Zambia.

Tunisia

Algeria

Libya

Egypt

Chad

Sudan

Eritrea Djibouti Ethiopia

South Sudan

C.A.R.

Uganda Rep. Congo

Existing members and targeted additions

D.R.C.

Angola

Existing members SOURCE: PTA BANK

Targeted members within the tri-partite free trade area Targeted eligible member states Eligible member countries

Namibia

Kenya

Rwanda Burundi Tanzania

Zambia

Somalia Seychelles Comoros

Malawi Madagascar

PIPELINE FIT TO BURST

Zimbabwe Mauritius

Botswana

Reunion

Swaziland Lesotho South Africa

bank. It is receiving $35m from existing shareholders, and a further $43m is coming from new subscriptions. PTA Bank is an institution of the Common Market for Eastern and Southern Africa (COMESA) and currently has 17 member states from COMESA. South Africa, Botswana and Angola are not members, but the bank has invited all of the remaining Eastern and Southern Africa countries that are not part of COMESA to join. “We said all these countries that border the Eastern and Southern African space, we should be open to doing business with them too. So they’re now eligible to join as well, including Algeria, Tunisia, Chad and the Central African Republic,” explains Admassu.

The next important evolution was a change in January 2013 to the structure of shareholdings. Previously, all shares had a 20/80 split: 20% paid-in capital ●●●

and 80% callable. “Commercially oriented institutional investors, they don’t like this business of callable capital contingent liability because that’s the thing only states can really do. They have unlimited taxpayer money if they ever need to raise it,” he says. The new ‘class B’ shares behave like a typical company’s shares because they are paid for in full and earn dividends.

Does the bank have enough business to warrant the scaling up in size? A regular concern for fast-growing financial institutions is how to put money to work without suffering from high levels of bad loans. “We have so much quality business coming our way that we take on a lot of it, and we sell it down to all our partner commercial banks in the trade finance area,” says the banker. “On the infrastructure side, there are a lot of new

“We have a South African pension fund that signed up, and a Nairobi-based insurer” projects coming through and again, there’s more than we can buy. That’s another indication of why the capital is coming.

There are a lot of institutions that are looking to take some of our ‘class B’ shares because they’re amongst those who do master risk participation with us and they know the overflow.” As a sign that the bank is moving in the right direction, ratings agency Fitch upgraded its rating from BBB- to BB in October because of its strong capitalisation and robust profitability. ●

AWAKEN DOMESTIC CAPITAL

The result was immediate. “It’s been fantastic!” says Admassu.

“We have a South African pension fund that signed up, we’ve got a regional insurance company based in Nairobi and a Mauritius-based institution. These three should be concluding their shareholding by Christmas this year. There is also an Italian financial institution, and it’ll be the first European shareholder of the bank.” PTA Bank has also invited THE AFRICA REPORT

Interview by Nicholas Norbrook •

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Geneva, 17-19 March 2014

2ND EDITION

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ORGANIZERS

88

HANNIBAL Approaching payback time

I

f your neighbours get a cheap loan to build their new railway, you are going to want one too. But Hannibal cannot help worrying about the flush of ‘me-tooism’ behind the flurry of African countries heading to the international sovereign debt markets.

They might be wiser to first peer over the fence at how quickly the train tracks are being laid and how their neighbours are planning to pay back their creditors.

Those countries sitting ready with sovereign credit ratings are keen to issue eurobonds before the United States (US) Federal Reserve begins the long-awaited process of tapering its quantitative easing programme in 2014. When this begins, US treasuries are likely to become more attractive to global investors, cooling off recent enthusiasm for emerging market debt and meaning African countries could find themselves paying higher rates of interest.

In November, Barclays predicted a 20% rise in the sale of emerging market dollar bonds in 2014, due in part to more issuances from sub-Saharan Africa. Kenya has announced it will issue its first eurobond in January, while Ethiopia, Tanzania and Angola are gauging how soon they can go to market.

At the same time, those countries that have already launched bonds are starting to thinking about how to pay back the principal rather than just the regular coupon payments they had to make so far. The first two sub-Saharan eurobonds outside of South Africa – Ghana’s $750m bond and Gabon’s $1bn bond both issued in 2007 – reach maturity in 2017.

The two countries are trying different strategies. Gabon has created a sinking fund, paying a portion of its principal over several instalments into an account based in the US. Although it missed a few scheduled payments, it seems to have caught up on itself. When the bond reaches full maturity, Gabon should have put aside around half of the total, still leaving it to find $500m from its budget in 2017.

Ghana is starting to pay its debt back – with more debt. When it issued its second 10-year $750m eurobond in August 2013, Ghana used $250m of the money to pay back some of its bond due in 2017. But it

paid a premium, issuing the debt with a yield of 8%, compared to the 6% its first bond was trading at. And all this while the country is trying to claw its way out of deep current account and fiscal deficits.

Such repayment tactics are commonplace in developed countries. But in the case of African countries with one or two eurobonds this strategy could be “a risky bet”, according to Christian Esters, a senior director for sovereign ratings at Standard & Poor’s. In these relatively untested waters, finance ministers do not know what market conditions will be when they need to issue a new bond.

Zambia will be a key country Borrowing to watch on this front in 2014. more to It launched a $750m eurobond in September 2012 that was 15 pay back debt times oversubscribed and issued could be with a yield of 5.6%. The government denied local media reports a risky bet in September 2013 that it was for African using the money raised to pay a spiralling public wage bill. Of countries; course, one advantage of external finance sovereign debt issuance is that ministers governments can do what they want with the money. Although do not know many politicians indicate the prowhat market ceeds will be put to immediate use for infrastructure projects that conditions will boost growth, such promises will be are not bound into the terms of the bond. Zambia was considering the launch of a second $1bn eurobond in October as a way to plug its fiscal deficit, but this will do little to boost the attractiveness of the country’s first issuance. Ratings agency Fitch downgraded Zambia’s sovereign rating to B in October.

There still remain lots of reasons why governments like international debt markets. Eurobond yields of 10% are much lower than those on shorter-term domestic debt, and it can be a good way of diversifying funding sources away from concessional lending, with all its strings attached. Sovereign debt also provides a good benchmark for domestic firms launching their own corporate bonds, thus helping expand Africa’s private sector and creating jobs. ●

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90

DOSSIER MINING

Golden days Miners across Africa face difficult financial headwinds after the price of gold dropped by more than a fifth in 2013.

Companies are cutting jobs and rethinking their investments

By Gregory Mthembu-Salter in Cape Town and Billie Adwoa McTernan in Accra

G

old miners in Africa should ask for a crystal ball for Christmas. The price of gold fell by more than 20% in 2013, mainly due to concerns over when and how quickly the United States (US) Federal Reserve would bring to an end its programme of bond buying known as quantitative easing, whichhadhelpedpushupthegold price. Analysts differ about how the gold price will move in 2014 (see box), but gold’s decade-long rally is definitely over.

In Ghana, the fall in the gold price has sent shockwaves across THE AFRICA REPORT

•

the industry. Joshua Mortoti, manager of US miner Newmont’s Brong-Ahafo mine, says the company is reducing its workforce, cutting back on mining exploration and chasing higher-value ounces. “[It is] all geared toward value and not volume,” says Mortoti. Nevertheless, he adds, “We are bracing ourselves for a full recovery [of prices].” Newmont’s new mine in Akyem began production in late October and is set to produce 350,000-450,000oz per year over the next five years.

Exemplifying the industry’s grim mood, in November the world’s third-largest gold miner, AngloN° 56

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Gold’s decade-long rally is over, and mining companies are feeling the pinch

Gold Ashanti, announced plans to cut400jobsatitsmineinObuasiby the end of 2013. AngloGold, which also operates in South Africa, the Democratic Republic of Congo, Guinea, Mali and Tanzania, has embarked on a brutal cost-cutting drive across all its operations. Chief executiveSrinivasanVenkatakrishnan says he intends to cut 40% of the company’s management jobs within 18 months. The company also cut back heavily on exploration and hopes to realise savings of nearly $500m next year.

African Barrick Gold (ABG), which operates in Tanzania and Kenya, has so far maintained a THE AFRICA REPORT

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N° 56

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$500m AngloGold Ashanti’s planned savings from its cost-cutting programme in 2014

steady level of production, but its costs are high. Hunter Hillcoat, a natural resources analyst at Investec, points out that ABG’s total costs for the third quarter of 2013 stood at $1,275/oz, just $35/oz below the gold price. The company also drew down $30m of its long-term debt to meet its capital expenditure costs.

COST CUTTING

“The harsh reality is that for gold producers in Africa such as ABG, they are still under a lot of cost pressure, mainly labour and fuel,” says Hillcoat. Miners will have to rethink which ounces they are

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going to mine, he says, and may have to leave aside marginal and lower-grade resources.

In South Africa, the gold mining sector is in what looks like free fall.

Output from January to June 2013 was 14% lower in volume terms than the year before and 42.6% lowerinvalueterms.In1970,South Africa was the world’s number one gold producer, mining 80% of total global output. It has been pushed into sixth place by Peru and today produces only 6% of the world’s total. China is the world’s top gold producer, followed by Australia, the US and Russia. The problems for South Africa’s gold

MAX MILLIGAN/JAI/CORBIS

are gone

DOSSIER | MINING

mines are structural and seem set to persist whether global demand goes up or down next year. “The industry is in crisis and is contracting,” says Chris Hart, chief strategist at Investment Solutions.

South Africa produced 167tn of gold in 2012, its lowest annual total since 1905. Hart estimates that if current trends continue, South Africa’s gold industry will produce fewer than 90tn in 2020 and employ fewer than 60,000 people, down from an estimated 140,000 today. South African gold’s main problems are ageing mines and steep increases in input spending – electricity costs for the sector rose 238% between 2007 and 2012 and worker renumeration rose 12% a year over the same period.

On top of this, there is continued unpredictability in the regulatory environment (see page 96).

BOOST FROM WEAK RAND

A 16% fall in the value of the South African rand against the US dollar in 2013 has been crucial for local producers to mitigate the impact of the slump in the gold price. In its 2013 annual results, Harmony Gold said the rand’s weakening meant it was “a huge advantage to be a predominantly South African producer”. Harmony’s costs are in rand, but sales are in dollars.

Harmony’s gold output fell 2% year-on-year to June 2013 to 1.1m oz. Operating costs rose, reducing its annual operating profit

GOLD’S RISE AND FALL ($/oz) 1,750 1,500 1,250 SOURCE: MINEWEB

92

1,000 750 500 Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 08 09 09 10 10 11 11 12 12 13 13 14

by R800m ($78m) to R4.5bn. The main reason for the fall in output was a protracted strike at the company’s Kusasalethu mine, where three-quarters of the workforce belong to the radical Association of Mineworkers and Construction Union (AMCU).

The strikes in the gold sector in 2013 did not drag on as long as they did in 2012, with workers from the main gold mining union, the National Union of Mineworkers, accepting an 8% pay hike in earlySeptemberafterathree-week stoppage. But AMCU says it is not bound by the settlement and is pondering fresh industrial action.

Gold production is typically an uphill battle, according to officials from Nordgold, a Russian firm that also operates gold mines in BurkinaFasoandGuinea.“Atevery existing operation you go deeper to get the ore. The ore gets harder, so it’s more difficult to process,” says Igor Klimanov, director for

167tn South Africa’s gold production in 2012 matched production levels from 1905

Africa at Nordgold. “There is no new technology that makes recovering gold any easier or cost effective,” he explains. Nordgold’s production from July to September 2013 grew 26%, but its revenue only rose 1% over the same period because of a 21% drop in the gold price since 2012.

Hillcoat says the pipeline of gold projects has dried up, except the costlier options. ABG has put a Tanzania project called Golden Ridge on the back burner while Randgold Resources has stopped talking so positively about its Massawa project in Senegal. Junior miners seeking funding for marginal projects are finding it even tougher and may have to turn to alternative forms of financing such as private equity, Hillcoat says.

In Ghana, companies are shifting strategies. Chris-Samson Andoh, founder and managing director of mining company Star Africa Commodities and Minerals, says: “Our focus now is the acquisition of concessions during this downturn. Then once the market picks back up, we’ll most likely shift back into production.”

The government-owned Precious Minerals Marketing Company (PMMC) last year commissioned construction of a $6m refinery, to process 70,000oz per year from 2014. “Once we start adding value these price incidents will not affect us that much,” says managing director Reuben Darko Damptey. ●

Bulls root for Asia while the bears point to quantitative easing The bear scenario An under-performing US economy has kept the dollar low, pushing investors into gold as a safe haven. But fears over when the US Federal Reserve will cut back on its purchase of $85bn per month of government bonds – a policy called quantitative easing (QE) – has depressed the price of bullion.

When the Federal Reserve tapers its QE programme, the dollar will strengthen, gold will lose its shine and investors will flood back into the US money markets. ABN Amro Group NV predicts gold will be worth $1,150/oz in 2014, dropping to $900/oz in 2015. Undercutting the optimism over demand from Asia, the government in Mumbai restricted gold shipments and raised taxes in 2013 to shore up the rupee and reduce the current account deficit.

The bull scenario Bullish projections for the gold price depend on Asian demand. China consumes all of its own domestic gold production and has become the world’s largest consumer, buying bullion at record levels in 2013.

HSBC Holdings says gold demand in Asia is still rising and the region now represents around 60% of global demand for gold. Analysts at Bank of America-Merrill Lynch and Scotia Bank have turned more bullish, projecting that the price of gold could remain above $1,400/oz and even break $1,500/oz. The continued gridlock in the US political system over the national debt could lead to further delays in the tapering of QE amid global concerns over the US economy, keeping gold relevant.

THE AFRICA REPORT

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DOSSIER | MINING

First Quantum says it provided 21% of Zambia’s tax in 2011 PHOTO12/ALAMY

ZAMBIA

The legacy of nationalisation First Quantum’s mining development in Zambia faces expectations born in the days of government ownership

had a hospital. And at one time these hospitals were extremely well equipped.”

But there’s a dark side to the ZCCM story that seldom penetrates the romanticised version of a benevolent state provider. When copper prices buckled in the 1970s, Zambia’s economy went into a tailspin.Ontheeveofprivatisation, ZCCM losses were at a rate of $12m per day, and copper production dropped to roughly 250,000tn.

D

uring an October visit to and launched corporate social responsibility (CSR) programmes.

First Quantum Minerals’ Thecompanysaysthattherebuild(FQM) Sentinel mine, independence-era president Kening and compensation packages neth Kaunda unwittingly brought surpass best international pracup nostalgia for the days when the tice and conform to Zambian law. mines were nationalised by praisFQM has two other Zambia proing a privately owned developjects and is at pains to underscore Zambia’s its share of the tax base – 21%, it ment. Kaunda’s government crecopper atedZambiaConsolidatedCopper says, in 2011 – and the scale of its production Mines (ZCCM), a huge parastatal CSR, nearly $20m in Zambia in that used industrial profits to fund 2012. The day before Kaunda’s Peak during social service delivery and run arrival, non-governmental organZCCM (1972) isations travelled from Lusaka to towns surrounding mine sites. A little more than a decade after meet with the area chief and the government privatised the population. Hundreds ZCCM, the 89-yearof people turned out old Kaunda hobbled to itemise grievances about land acquisition, off a small plane an unclear developin North-Western 1.5m 700,000 ment agenda, and Province to endorse tonnes tonnes compensation and reFQM’s $2bn project. settlement. Some villaThe mine will account gers threatened to destroy for nearly a quarter of local infrastructure.

Zambia’s 2015 copper proThe spectre of ZCCM haunts duction target of 1.5m tn. themines.MutaleChanda,deanof PRIVATE SECTOR PARADIGM the University of Zambia’s School 2016 “I must thank God for this,” said of Mines, grew up in Copperbelt projection Kaunda. “What’s happening here, Province, the historical seat of the if it can be followed in all corners country’s mining sector. “The maof this country, development will jor perception which has been be wonderful.” But can ZCCM’s running in the country since privatisation is that the mines are architect convince Zambians to not putting back, for the benefit of adjust their expectations? the society, enough of the profits Sentinel goes into operation next year. Vancouver-based FQM they’re making,” he says. “ZCCM has employed locals in its conleft lovely infrastructure on the struction phase, resettled villagers Copperbelt. Each mining town

REDUCING ITS STAKE

“So what we have,” says FQM community engagement manager Garth Lappeman, “is constant reference of what used to happen in the past, of what ZCCM used to do, and a complete misunderstanding because of low literacy levels. I think mainly, that the mining sector has been privatised and it’s a different context now.

We pay tax.”

In October, President Michael Sata’s government said it would reduce majority ownership in ZCCM-Investments Holdings, the successor to ZCCM that holds minority shares in many of the country’s mines. But some observers want to see strategic investments along the value chain.

“For me,” says Saviour Mwamba, former director of the Centre for Trade Policy and Development, “that’s the only sure way African countries are going to get away from this trap of having so many resources and so few benefits.” ●

SOURCE: ZAMBIA DEVELOPMENT AGENCY

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THE AFRICA REPORT

Paul Carlucci in Kalumbila •

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CLASSIFIED ADS

POWER The provisional handover has been signed, which states that the Angolan Ministry of Energy and Water will co-manage plant maintenance with HIMOINSA for a period of one year. During this time, the technical staff of the multinational energy company will train the local staff to use the technical tools necessary for its maintenance.

HIMOINSA delivers Luanda 25 MW power generation plant to MINEA The National Director of Electrical Power from the Angolan Ministry of Energy and Water (MINEA), Mr António Belsa da Costa, together with the Director of the National Electricity Company of Angola (ENE), Mr Euclides de Brito, and the Sales & Marketing Director of HIMOINSA, Guillermo Elum, have signed the provisional acceptance document by which it is agreed that MINEA, together with the multinational energy company, will co-manage the 25MW power generation plant that HIMOINSA has commissioned in Cassaque, Luanda.

HIMOINSA is therefore part of a macro project that consists of the installation of power plants in Luanda. “There is one 185 MW plant plus another 102 MW plant from other suppliers and the 25 MW plant created by HIMOINSA”, says Mr Euclides de Brito, Director of National Electricity Company of Angola (ENE), who

adds that the project designed by HIMOINSA will make a significant contribution to improving the living conditions of the population. “There will be more possibilities and new projects for HIMOINSA in this context because we have growth of 3% per annum and energy demand is therefore constantly on the increase”.

HIMOINSA Sales & Marketing Director, Guillermo Elum, is convinced that one of the main reasons why HIMOINSA was the company awarded the power supply contract was the modular solution that it offered.

“Known as ‘Plug & Play’, this system gives MINEA greater flexibility when it comes to increasing the generating capacity of plant facility, as The project is well as the ability to designed to gedismantle and install nerate 25 MW power production moPRP and deliver dules anywhere in the 20 MW of contiGuillermo Elum, Euclides de Brito, country. Right from nuous power, with António Belsa Da Costa the start, the idea of 15,000 volts at 50 being able to expand Hz. At the same time, it will be used the project has been a point in its fato supply Zango IV and the Cassaque vour because the MINEA is aware of pumping station next to the River the phase of social and economic deKwanza. In total, 18 generator sets velopment taking place in the counhave been installed: 9 series HMW try”, adds Elum.

1785 T5 with the other 9 being series HMW 2200 T5.

Euclides de Brito Director of the Angolan National Electricity Company (ENE) The first time I came into contact with HIMOINSA was two years ago and I believe that the Cassaque power plant in Luanda has been a great success. This 25 MW energy project is an element of excellence that will contribute to HIMOINSA continuing to work in this market and which will lead to further similar projects.

We are living in a country with an isolated electricity system and we have to provide the population with resources through this type of project.

António Belsa Da Costa National Director of Electrical Power from the Angolan Ministry of Energy and Water (MINEA) The Cassaque project will improve the living conditions of our population. It will have a direct effect on the population of Luanda, supplying water on a more regular basis. This plant represents 60% of the water processed by the Luanda water treatment plant for human consumption by the population.

Guillermo Elum Sales & Marketing Director of HIMOINSA One of our main objectives has always been to add value to the product. In this case, by training the MINEA technicians so that they are capable of managing and operating the plant independently. Local staff will work directly with professional technicians for one year. It will be twelve months of daily work, during which all personnel will be trained in the use of the technical tools required.

Henry Alemán Project Manager ‘Power Plant & Special Projects’ The main objective of this project was to be able to deliver the power plant, fully operational, within four months. The last stage in this process was to assemble the modules of the power plant in Angola with our ‘HIMOINSA Plug & Play’ technology, which led to us being able to deliver the power plant on the scheduled date.

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DOSSIER | MINING

REGULATION

Mining code shifts across the continent

A

number of countries are reassessing their mining codes in the hope of getting more value out of theirnaturalresources.WhileGuineaand Sierra Leone are reviewing mining contracts, others are conducting revamps of their regulatory frameworks (see boxes).

Some countries are working on ways to tax the profits made on the sale of mining titles by holding companies based in other countries. Governments can lose huge amounts of money in capital gains tax when an offshore-listed miner sells a licence to another offshore-listed

miner. Changes to Cameroon’s mining code two years ago sought to address this, introducing a payment of a bonus where there is any transaction related to mining licences. However, it is not clear how such a bonus payment would be enforced and whether it could breach double taxation avoidance agreements.

Other governments are also considering new models for mining deals akin to the production-sharing contracts (PSCs) common in the oil industry, but companies oppose the idea. President Alassane Ouattara’s government proposed the

introduction of PSCs in Côte d’Ivoire in 2012, but the industry rejected them, and a mining code change still looks far off.

Christophe Asselineau, who heads the African practice of Paris-based law firm Shearman & Sterling, says at least 18 African countries have published new mining codes since 2000. He is critical of countries such as the Democratic Republic of Congo, which has gone through a revision of its mining code every five years. “Changing mining codes on such a regular basis is worse than having high taxes,” he says. ● Gemma Ware

DEMOCRATIC REPUBLIC OF CONGO (DRC)

KENYA

Main minerals Copper, diamonds, gold and cobalt.

Main minerals Coal, titanium, gold and rare earths.

Timetable Changes to the DRC’s 2002 mining code, created with the help of the World Bank, are likely to be submitted to parliament in 2014.

Timetable Kenya’s Mining Bill 2013, which would overhaul the Mining Act of 1940, is expected to come into force by December, according to cabinet secretary for mining Najib Balala.

Proposed changes The government has spent the past year drawing up a new code that is worrying investors.

The first proposals were for the state to get a 35% free stake in all new projects, up from the current 5%.

In October, officials indicated that they were lowering the proposal to 15%. It also remains unclear how plans for a 5% shareholding for local communities will be managed.

Other proposals include tax breaks for companies that use Congolese sub-contractors.

Proposed changes The bill proposes to impose a 10% free stake in mining projects for the government. The government had proposed a 35% local shareholding but has since abandoned that idea. The bill includes provisions for the sharing of royalties between the local community (5%), the county (20%) and the central government (75%).

The bill restricts mining dealer licences to entities with at least 60% local shareholding. Miners are opposed to the proposed law. The issuance of new licences has been suspended in the meantime.

SOUTH AFRICA

MOZAMBIQUE

Main minerals Platinum, gold and coal.

Main minerals Coal, bauxite.

Timetable A draft bill proposing a raft of changes to the 2002 Mineral and Petroleum Resources Development Act is set to be debated by parliament in early 2014.

Proposed changes Proposals include a 20% free stake for the state in all new oil and gas ventures. The amendments would allow the mineral resources minister to declare minerals to be strategic resources.

Those resources would then be subject to special rules, particularly concerning what percentage must be processed locally. Industry reaction was overwhelmingly negative, with miners Anglo American and BHP Billiton claiming the new rules could be unconstitutional and would increase uncertainty and deter investment. Trade unions backed measures to make beneficiation compulsory. The bill was due to pass through parliamentary committee stages in 2013, but was delayed because of further changes to the amendments.

Timetable A much-delayed draft of a new mining law was due to go to parliament in mid-2013, but is now scheduled to be discussed in the next parliamentary session starting on 25 November.

Proposed changes The government has stated that the new mining code will not change any royalties or taxes.

Officials have indicated they may try to start taxing the transfer of licences, according to law firm Clifford Chance.

The law also plans to extend mining concessions for locally owned companies from one year to five years in an effort to give a head start to Mozambican firms. Small-scale mining certificates for locals will also be extended from two years to five years.

THE AFRICA REPORT

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DOSSIER | MINING

EMPLOYMENT

Zambia says no cuts

The Botswana operation will draw buyers 10 times a year

An escalating row over job cuts resulted in the Zambian government revoking the work permit for the chief executive of Konkola Copper Mines in early November. Kishore Kumar had announced that the company would sack 1,529 workers. India’s Vedanta Resources, Konkola’s parent company, issued an apology.

The events raise questions about the stability of the Patriotic Front government’s mining regime.

PER-ANDERS PETTERSSON/GETTY IMAGES

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DIAMONDS

A new home for trading

TRANSPARENCY

Cameroon compliant

Gaborone’s first gem sales bolster the negotiating power of African governments in the natural resource sector

I

nasignificantearlyvictoryinthe battle for local beneficiation of naturalresources,DeBeersheld itsfirstdiamondsaleon11November in Gaborone, Botswana, after ending the sales operations of its London-based Diamond Trading Company. Known as ‘sights’, thesesalesheld10timesayear will eachbringmorethan80sightholders – authorised buyers – to Botswana to sift through gems in the offices of the Diamond Trading Company of Botswana (DTCB),whichunderwent a $120m refurbishment and expansion.

Anglo American owns 85% of the De Beers Group, with 15% owned by the government of worth of Botswana. While Anglo American sightholder is in the midst of a round of cost diamond sales cutting, Varda Shine, the outgoing per year for executive vice-president for global De Beers sightholder sales at De Beers, says that “cost was never the real drive” for the move. The fundamental goal was securing supplies. As part of the deal to bring its sales to Gaborone, De Beers signed a 10-year sales contract with the government in September 2011.

De Beers sells an average of $500-$600m worth of diamonds

Cameroon achieved compliance with the Extractive Industries Transparency Initiative (EITI) in October, becoming the fourteenth African country to do so.

EITI gave it a last chance to comply after the Cameroonian government failed to meet deadlines in 2010 and 2012.

Senegal also became a candidate country and must publish its first report by 17 October 2015.

per sight. From next year, the DTCB will also incorporate sales from the local cutting and polishing industry – worth a few hundred million dollars per year – into its sights, which Shine says should push annual sales to close to $6bn. The Botswana operation will employ 170 people, 60 of them Batswana.

There have been rumblings of discontent among sightholders at the distance they will have to travel. With few direct flights to Gaborone, most will havetotravelviaJohannesburg. “The sort of infrastructure needed to fully capitalise on the sort of high-income diamantaires who will be coming for sights does not yet exist in Botswana,” says Roman Grynberg, a research fellow at the Botswana Institute for Development Policy Analysis. “We probably have at least two decades of supplywhereBotswanawillbeone of the world’s biggest suppliers of diamonds,” says Grynberg. “Diamond beneficiation has been an important policy objective of the government for at least a decade.

It is not a stop gap.” ●

$5-6bn

URANIUM

Niger negotiations After the release in October of four Areva employees held

by Al Qaeda-linked groups in the Sahara, the uranium miner is preparing for another tough set of negotiations, this time with the government of Niger.

The French company’s 10-year contract for its deposits in Niger’s north are set to be renegotiated at the end of 2013. In October, thousands of people went on a march to call for the government to negotiate a better deal.

Gemma Ware THE AFRICA REPORT

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At the crossroads of Africa, the Arab world and Asia

The future is growing

An environment conducive to innovation Diversified economy Busy and reliable banking system Regional transport and telecommunications hub

DIFCOM Š : V. FOURNIER /JA - DR

Modern infrastructure

DJIBOUTI SERVING INVESTORS

110

Country profiles Unfinished transitions and elections in South Africa and Algeria will dominate the political calendar in 2014. Strikes about service delivery and the cost of living show that governments have a lot of work to do to meet the needs of their populations in the year ahead

169 WEST AFRICA

By Marshall Van Valen

S

even out of the 10 fastestgrowing economies in the world are set to be African in 2014, but the year ahead will also challenge the talk about ‘Africa rising’ and ‘Africa as the final frontier’. International financial institutions predict robust growth for 2014, and projects like the Inga III and Grand Ethiopian Renaissance dams are set to take shape to support a vast economic transformation within the next decade. However, there are many political challenges that lie ahead that risk detracting from the growth story, including the stalled political transitions in the Central African Republic, Libya, Tunisia and Egypt. These countries are due to hold elections in 2014, but political actors had yet to agree on the rules of the game as 2013 came to an end.

Big infrastructure projects will not bring an economic revolution on their own, so governments must also invest in healthcare and education. Countries that are advancing on the education front are not necessarily those with higher rates of growth, and fast-growing countries like South Sudan and ● ● ●

194 ALGERIA

141 ERITREA

184 NIGER

118 ANGOLA

142 ETHIOPIA

185 NIGERIA

172 BENIN

165 GABON

146 RWANDA

120 BOTSWANA

177 GAMBIA

166 REP. OF CONGO

173 BURKINA FASO

178 GHANA

167 SÃO TOMÉ

138 BURUNDI

180 GUINEA

187 SENEGAL

158 CAMEROON

181 GUINEA-BISSAU

147 SEYCHELLES

174 CAPE VERDE

144 KENYA

188 SIERRA LEONE

160 CENTRAL

121 LESOTHO

148 SOMALIA

182 LIBERIA

127 SOUTH AFRICA

197 LIBYA

149 SOUTH SUDAN

122 MADAGASCAR

200 SUDAN

123 MALAWI

129 SWAZILAND

183 MALI

150 TANZANIA

198 MAURITANIA

189 TOGO

124 MAURITIUS

201 TUNISIA

199 MOROCCO

152 UGANDA

125 MOZAMBIQUE

130 ZAMBIA

126 NAMIBIA

132 ZIMBABWE

AFRICAN REPUBLIC 161 CHAD 139 COMOROS 175 CÔTE D’IVOIRE 140 DJIBOUTI 162 D. R. CONGO 195 EGYPT 164 EQUATORIAL GUINEA

THE AFRICA REPORT

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111

CONTRIBUTORS Nicolas Agbossou Akouété, Ruby Audi, Léonce Bitariho, Mathieu Bonkoungou, Frank Chikowore, James Copnall, Frida Dahmani, Ntaryike Divine Jr., Hippolyte Donossio, Zoé Eisenstein, Nuno Andrade Ferreira, Emilie Filou, John Grobler, John Hamilton, Celeste Hicks, Charles Idem, Elissa Jobson, Kimberly Johnson, Parselelo Kantai, Erick Kabendera, Clair MacDougall, Billie Adwoa McTernan, Gregory Mthembu-Salter, James Mbugua, Jon Marks, Jeff Mbanga, Berna Namata, Nicholas Norbrook, Paul Melly, François Misser, Monica Mark, Olivier Monnier, Madjiasra Nako, Nadia Rabbaa, Saliou Samb, Rose Skelton, Raphael Tenthani, Gemma Ware, Sean Williams

191 NORTH AFRICA

135 EAST AFRICA

EDITING : Richard Synge and Marshall Van Valen

155 CENTRAL AFRICA DATA SOURCES

115 SOUTHERN AFRICA

THE AFRICA REPORT

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Population (2009-2012) and urban population (2012) – World Bank Development Indicators; life expectancy (2012), aid flows (2011 net official development assistance, all donors), infant mortality (2012, number of deaths of infants under one year old per 1,000 live births), main export (2011) – African Economic Outlook 2013, African Development Bank; adult literacy (2010) – United Nations Education, Social and Cultural Organisation; inflation (2013 estimate), current account as % of GDP (2013 estimate), GDP % growth, nominal GDP – IMF World Economic Outlook, October 2013; foreign direct investment (2012, inflows) – United Nations Conference on Trade and Development; mobile phone penetration (2013, mobile cellular subscriptions per 100 inhabitants) – International Telecommunications Union; last change of leader – The Africa Report research

COUNTRY PROFILES How Africa measures up TIME TO IMPORT

(Trading across borders, no. of days)

130

Weakest

63

er

DR C

71

da

ut

h

Su

Ch

n

ad

e bw

So

Zi

Se

m

ba

Ni g

isi

s

a

17

Tu n

lle

135

(Time to register, no. of days)

101

90 66

66

.G Eq

ng Co

1,715

(Time to resolve a dispute, no. of days) 1,225

1,070

1,296

B

Gu in

ea

a go l An

Lib

er ia

i ib o Dj

Ga

bo

ut

n

a m bi

M

au r

Ga

ita

ni a

ea in Gu

an da Rw

Su da n

1,280

407

370

276

230

a ui

Re o

ba m Zi

ENFORCING CONTRACTS

228

ne

p.

e bw

ia

Na

An

m

go

ib

la

Se ne ga l Za m bi a

Bu ru nd i M au rit iu s

da an Rw

6.5

6

6

5

2

295

REGISTERING PROPERTY (Time to register, no. of days)

122

THE AFRICA REPORT

N° 56

•

To go

a go l An

Se ne

bo n Ga •

ni

21

Be

15

a an d Rw

da n

15

M au rit iu s Bo ts w an a Sw az ila nd

12

9

120

ga l

103

n

191

D E C E M B E R 2 013 - J A N UA R Y 2 014

SOURCE: WORLD BANK DOING BUSINESS 2014

co

he

yp

M

or oc

Eg

17

yc

ga

Se

ne

rit i au M

16

62

STARTING A BUSINESS

th

The projections for sub-Saharan Africa depend on the continued robustness of commodity prices and the strength of demand from Asia. An IMF report in October found that a 1% increase in China’s domestic investment tends to result in a 0.8% increase in the export growth rate for resource-rich African countries. However, downside risks to natural resource prices are prompting the governments of Botswana and South Africa to push for more local processing.

Oil exporters like Gabon and Equatorial Guinea face the usual challenges of adjusting to changes in oil price and production levels. Gabon recorded the lowest inflation rate, -1.5% in 2013, while the Equatorial Guinean economy is set to shrink by 1.9% in 2014.

Business reforms are on the agenda across Africa, with 47 countries implementing at least one business reform over the period June 2012 to June 2013.

But while Mauritius ranks among the best performing countries in Africa on the World Bank’s Doing Business survey, it is Africa’s worst performer in terms of financial secrecy, according to the Tax Justice Network (see graph).

Newer statistics show that some of the hype about the mobile phone revolution in Africa has been overblown. The overall penetration rate for unique subscribers in sub-Saharan Africa was just 30.8% in mid-2013, with less than 30% penetration in Nigeria and less than 20% in Ethiopia, according to the GSM Association. “Penetration on an individual subscriber basis is much lower than many in the industry, many in policy and regulatory circles are fully grasping. We have a lot more work to do, we have to create an environment that allows that growth to happen,” says Peter Lyons, director of spectrum policy for Africa and the Middle East at the GSM Association. ●

15

t

14

l

10

So u

COMMODITY CONFIDENCE

Strongest

98

us

Sierra Leone are not amongst the top performers on the Mo Ibrahim index’s education rankings (see graph).

Governments have an opportunity to implement difficult but necessary policies when commodity prices are high, and 2014 will test many governments with long lists of delayed reforms.

The International Monetary Fund (IMF) predicts that gross domestic product in sub-Saharan Africa will rise to 6% in 2014 from 5% in 2013. North African economies are expected to grow by 3.6% next year compared with 2.3% in 2013.

●●●

Su

112

COUNTRY PROFILES PUBLIC ACCOUNTABILITY

PRIMARY SCHOOL COMPLETION RATE

Top 5 (Score out of 100)

Best performers (Score out of 100)

Cape Verde

68.1

Mauritius

65.2

Namibia South Africa

Bottom 5 (Score out of 100) 18.2 18 17.5

18.9

3.7 Angola

Zimbabwe

Eq. Guinea

Guinea B. Somalia

REAL GDP GROWTH (%)

1.9 0.2

-1.9 Eq. Guinea

0.3

C. A. R.

Sudan

2.5

Swaziland

10.5 10.5

Chad

Sierra Leon

Libya

South Sudan

SOURCE: IMF

14

INFLATION

11

Ghana

32.1

Sudan

2.1

26

Malawi

2

Niger

1.2

Highest rates of inflation

Burkina Faso

SOURCE: IMF

Lowest rates of inflation

12.3 12.7

Guinea

Eritrea

Senegal

Gabon

Mali

0.1 -1.5

AFRICAN COUNTRIES IN TOP 50 OF 2013 FINANCIAL SECRECY INDEX

19th

27th

28th

Mauritius

Liberia

Seychelles

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Niger Burkina Faso C. A. R. Eritrea Chad

1 2 3 4 5

93 84.2 74.4 72.5 71.1

Worst performers (Score out of 100) 43 25.7 44 24.7 45 22.9 46 20.2 47 18.9

UNIQUE MOBILE SUBSCRIBER PENETRATION BY COUNTRY (%)

… and slowest growing economies

Eritrea

Projected fastest growing economies in 2014 25.5

D. R. C.

43

Seychelles Sao Tome & Principe Zambia Egypt South Africa

SOURCE: MO IBRAHIM FOUNDATION INDEX

75.8

36th South Africa

D E C E M B E R 2 013 - J A N UA R Y 2 014

Ethiopia Burundi Djibouti Madagascar DRC Malawi Niger Comoros C.A.R. Mozambique Uganda Togo Nigeria Burkina Faso Liberia Rwanda Sierra Leone Kenya Sub-Saharan Africa Tanzania Lesotho Guinea Angola Cameroon Swaziland Guinea-Bissau Zambia Benin Côte d’Ivoire Senegal Zimbabwe Ghana Congo Namibia Mali South Africa Botswana Gabon Mauritius

30.8%

SubSaharan Africa average

SOURCE: GSMA

79.4

Botswana

SOURCE: TAX JUSTICE NETWORK

SOURCE: MO IBRAHIM FOUNDATION INDEX

85.8

0

10

20

30

40

50

60

70

80

113

LAST WORD

A Groupe Jeune Afrique publication

BY TOPE FOLARIN

The proximity of distance

B

57-BIS, RUE D’AUTEUIL – 75016 PARIS – FRANCE TEL: (33) 1 44 30 19 60 – FAX: (33) 1 44 30 19 30 www.theafricareport.com DAVID FLEMING

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CHA I R M A N A ND F O UND E R BÉCHIR BEN YAHMED P UB L I S HE R DANIELLE BEN YAHMED publisher@theafricareport.com EXECUTIVE PUBLISHER JÉRÔME MILLAN

efore anything else, you studied her eyes. They were large, brown, and oval. She had just arrived from Nigeria after almost a day of flying, and you earnestly believed, because you wanted to believe so badly, that she had come to America to take care of you, and that she would be the Mom you had always wanted.

Your parents had divorced three years earlier. Your mother’s illness overwhelmed her in the months before she left for Nigeria, and soon she had forgotten who you were. So when your stepmother stared down at you for the first time with those wide beautiful eyes, her serene smile, your face grew warm, because you saw her love flickering dimly from them.

Even as she smiled, though, you noticed that the love in her eyes had begun to fade. You ignored this. You told yourself that she needed a chance to get to know you, that you needed to show her you were worthy of her love.

You set about trying to impress her every way you could. You worked hard in school, you did all your chores, and you made sure that the love in your eyes was visible to her at all times. But her eyes remained blank and cold even as she cared for you like you’d always been hers. You persisted.

And you kept your attention on her eyes, hoping that the love inside would show itself to you.

Sometimes you tried to convince yourself that the love in her eyes was merely shy. You tried your best to draw it out – you washed more dishes, folded more clothes, earned more A’s and read more books. Nothing changed. Now you only saw her love when she interacted with her two sons, who had come from Nigeria with her. In

the quick moments it took for her to move her head from one position to another, from one child, hers, to another, not hers, the love in her eyes would leap out and disappear, and you always wondered where did it go?

After some time, you and your stepmother retreated to opposite ends of the life you were building together. Your family was a puzzle composed of missing pieces, a collection of In the quick clouds lacking a sky.

Your family excelled moments it at everything that a took for her family is supposed to to move her do well; your father made sure of this. head from He made sure you one child, and your brothers were respectful chilhers, to dren. He told you to another, not call your stepmother hers, the ‘Mom’. He told you that ‘stepmother’ and love in her ‘stepbrother’ were eyes would American words, that even though you were leap out and living in America you disappear could never use them.

Mom and Dad made sure that your family seemed perfect, but they somehow forgot that you were more than a mouth to feed. You ran on fumes for many years, fumes from school, from furtive hugs, and from your imagination, but when the fumes dissipated, finally, after so many years, you glanced around and tried to figure out who you were.

You did not know. And so you ran away, your only vision of family the fading family portrait that rested atop your family’s false fireplace, their fake hearth. ●

Tope Folarin won the 2013 Caine Prize for African Writing. He was educated at Morehouse College and the University of Oxford, earning two M.A.s as a Rhodes Scholar. He lives and works in Washington DC.

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E D I T O R I N CHI E F PATRICK SMITH M A NA G I NG E D I T O R NICHOLAS NORBROOK editorial@theafricareport.com A S S I S TA NT E D I T O R GEMMA WARE E D I T O R I A L A S S I S TA NT RUBY AUDI R E G I O NA L E D I T O R PARSELELO KANTAI (East Africa) A RT & LI F E E D I T O R ROSE SKELTON S UB - E D I T O R S ALISON CULLIFORD MARSHALL VAN VALEN ERIN CONROY P R O O F R E A D I NG KATHLEEN GRAY A RT D I R E CT O R MARC TRENSON DESIGN VALÉRIE OLIVIER CHRISTOPHE CHAUVIN SYDONIE GHAYEB ÉMERIC THÉROND P R O D UCT I O N PHILIPPE MARTIN CHRISTIAN KASONGO R E S E A R CH ANITA CORTHIER P HO T O G R A P HY CLAIRE VATTEBLED O NL I NE JEAN-MARIE MINY PRINCE OFORI-ATTA SALES SANDRA DROUET with HÉLÈNE CONSTANT Tel: (33) 1 44 30 18 07 – Fax: (33) 1 45 20 09 67 sales@theafricareport.com CONTACT FOR SUBSCRIPTION: Webscribe Ltd Unit 8 The Old Silk Mill Brook Street, Tring Hertfordshire HP23 5EF United Kingdom Tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 Email: subs@webscribe.co.uk 1 year subscription (10 issues): All destinations: €39 - $59 - £35 TO ORDER ONLINE: www.theafricareportstore.com D I F CO M INTERNATIONAL ADVERTISING AND COMMUNICATION AGENCY 57-BIS, RUE D’AUTEUIL 75016 PARIS - FRANCE Tel: (33) 1 44 30 19-60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com A D VE RT I S I NG D I R E CT O R NATHALIE GUILLERY with ANNGIE AVILA CARDENAS R E G I O NA L M A NA G E R S CAROLINE AH KING FADOUA YAQOBI US R E P R E S E NTAT I VE AZIZA ALBOU a.albou@groupeja.com PRINTER: SIEP 77 - FRANCE N° DE COMMISSION PARITAIRE : 0715 I 86885 Dépôt légal à parution / ISSN 1950-4810 THE AFRICA REPORT is published by GROUPE JEUNE AFRIQUE

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