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Which way forward? With elections now balanced on a knife-edge, politicians, generals and businesses take their positions for the coming titanic struggle

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contents

INVESTING Senegal 2015

In the footsteps of Asian Tigers Strong states are helping to push Africa’s new champions into global markets

ETHIOPIA SPECIAL

Forget famine and drought, Ethiopia today is producing tycoons in finance, trade and real estate SOUTHERN AFRICA EDITION

GROUPE JEUNE AFRIQUE EAST AFRICA EDITION

The AfricA reporT # 68 - mArch 2015

MONTHLY • N° 68 • MARCH 2015

GROUPE JEUNE AFRIQUE INTERNATIONAL EDITION

GROUPE JEUNE AFRIQUE

Doing Business in Africa

FREE with this issue: an invesTinG guide on senegal. not to be sold separately.

Business

4 Editorial Nigeria’s high-tension vote

68 thE africa cEo foruM Seizing African opportunity The issues that businesspeople are grappling with today in Africa, to mark the third Africa CEO Forum on 16-17 March

6 lEttErs cover crediTs: inTernATionAl: BUlenT Kilic/Afp; isAAc emoKpAe @ iep/YoUTopiA; mArK chilvers for TAr - soUThern: Boris AUsTin/GeTTY imAGes; issoUf sAnoGo/Afp - eAsT AfricA: foToliA; mArK chilvers for TAr

8 thE QuEstion

Briefing 10 signposts 12 intErnational 14 opinion Nicholas Norbrook, managing editor, The Africa Report 16 pEoplE

74 Morocco The CGI’s house of cards crumbles

76 lEadErs Christian de Faria, Airtel Africa CEO

18 calEndar

frontLine 20 nigEria Which way forward? Talk of new election delays and interim governments leaves would-be voters increasingly restive

34 south africa With all due respect... Televised battles in parliament open a new chapter in politics

80 Gas-fired development Mozambique is powering ahead with a $40bn liquefied natural gas project, ahead of first production in the early 2020s 84 stEEl South Africa and Egypt forge ahead, Nigeria dithers

86 intErviEw Andrew Alli, CEO of the Africa Finance Corporation

art & Life

40 opinion Raymond Suttner, activist and scholar

88 innovation Better by design Ingenious designers are finding solutions to Africa’s spatial, mobility and energy problems

42 kEnya After the pain, the politics 46 drc Electoral gauntlet

92 briEfs Johannesburg’s Norwood district gets a makeover; Film-maker Tala Hadid

48 ghana The vote must go on 48 MozaMbiQuE Fractured family

94 lifEstylE Behind the scenes with actress Pierra Makena

49 anansi

94 trEndhuntEr Kampala’s lust for laughter

ethiopia focus 51 Ethiopia Zeal and progress Leaps forward are balanced by frustration at a sometimes heavy-handed government the africa report

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78 hannibal infrastructurE dossiEr

24 opinion A. Igoni Barrett, author

poLitics

78 Ecobank Tanoh wins cases in Côte d’Ivoire and Togo

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96 travEl Cameroon, Africa in miniature 98 day in thE lifE Daniel Nwana, traffic cop

editorial

The AfricA reporT A Groupe Jeune Afrique publication

By Patrick Smith

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Nigeria’s high-tension vote

he difference between serious concern and panic mongering is getting blurred as Nigeria’s political climate swings from jubilation at the prospect of a credible election and political competition to doom-laden forecasts of drawn-out disputes and regional clashes. The reality of a bloody insurgency in the northeast spilling over national borders and the shock waves caused by crashing oil prices further jangle the nerves. Political tensions are evidently rising after the postponement of the elections to 28 March. In Abuja these days, politicians on all sides preface their remarks with a reference to a ‘dangerous time’ for the country. A banker and strong supporter of President Goodluck Jonathan laments that neither the ruling People’s Democratic Party nor the opposition All Progressives Congress have shown a will to accept defeat at all, let alone gracefully. “We don’t have a good record of managing close election results,” he says. Nigeria’s most threatening crises have been resolved by the political, military and business elites stitching together backroom deals. There seems little scope for compromise between backers of Jonathan – the first president from the Niger Delta, who started out with a serious agenda to reform power and agriculture – and his challenger Muhammadu Buhari, a tough former military leader whose anti-corruption record has made him wildly popular in the north and parts of the south-west. Yet following claims last year by Lamido Sanusi, the former central bank governor, that the state oil company had failed to

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 e x e Cut i ve P ub l i s he r JérôMe MillAn

transfer more than $20bn to the government’s accounts, it is the determination of Buhari – himself a former oil minister – to promote accountability that boosts his poll ratings. Now, his message to worried politicians and businesspeople is that he will focus on the future and not spend government time on probes into Nigeria’s multitudinous historic scandals. The big risks will not stop on election day or even at the presidential inauguration due on 29 May. Reforms in the power and oil and gas sectors have nearly ground to a halt and are slowing efforts to The big diversify the economy. Most of all, the money risks will not tree is bare. stop on That is prompting election day, some bold thinking among some business and that leaders and politicians. is prompting If the new government were to privatise the some bold state oil corporation, thinking it could raise well in excess of $100bn – the funds so badly needed to fix the power sector and finance a network of gas pipelines across the country. This would slash energy prices and improve provision. Such a radical move could help to fight the political patronage and commercial corruption that has undermined the industry and distorted Nigerian politics. For now, such radicalism may look problematic – cutting across vested interests as it raises billions of much-needed cash for government. But for whoever holds the government reins on 1 June, high-tension politics and empty state coffers could hold by far the bigger risk. ●

m a r K e t i nG & d e ve l o P m e nt AlisOn KinGsley‑hAll 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 chArlie hAMiltOn a s s o Ci at e e d i t o r MArshAll VAn VAlen e d i t o r i a l a s s i s ta nt OheneBA AMA nti Osei r e G i o na l e d i t o r s PArselelO KAntAi (eAst AFricA) crystAl OrdersOn (sOuthern AFricA) tOlu OGunlesi (West AFricA) s ub - e d i t o r AlisOn culliFOrd 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 P r o d uCt i o n PhiliPPe MArtin christiAn KAsOnGO r e s e a r Ch sylVie FOurnier P ho t o G r a P hy clAire VAtteBled o nl i ne Prince OFOri‑AttA sales sAndrA drOuet sOlène deFrAncq 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 ‑ $60 ‑ £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 JeAnny chABOn r e G i o na l m a na G e r s FAdOuA yAqOBi liliA BenAceur elOdie BOussOnniere us r e P r e s e ntati ve AzizA AlBOu a.albou@groupeja.com

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africans in china: tools for integration

TOP 500 companies

EXCLUSIVE

RANKING

AFRICA-ASIA Go East, young man!

w w w.t h eafri car ep or t .c om

RWANDA Kagame faced with stark choices

N ° 6 7 • F E B R U A R Y 2 015

any Africans in China are stigmatised Nigeria The men behind at work ‘Africa-Asia: Go East, young man!’ the money [TAR67 Feb 2015], but this was not my experience. I worked in a Taiwanese firm and my colleagues were always welcoming and supportive. I now teach African studies and believe that negative media exposure plays a major part in people’s perception of Africans in China. It is important to understand the culture and make an effort to learn Mandarin. Living and working in Asia is a very rich experience, both professionally and personally, with many opportunities for an MBA graduate like me. A few black expats from Africa have distinguished themselves in China, whether in academia, finance, or even consultancy. These people are aware of the large potential of development of the African continent, and I am happy to be a part of it. Faustino Hyacintha Olaitan, The University of Hong Kong, via email The inside story on the shadowy campaign funders who spend billions on their candidate in the hope of post-electoral rewards

GROUPE JEUNE AFRIQUE

INTERNATIONAL & WEST AFRICA EDITION

the commodity party’s over

declines to fully sober up. That has now happened. So for the next few years the nationalist rhetoric of increased taxes, ownership and royalties should tone down significantly, at least until the ‘next’ bull run.

supply which have now evaporated [‘Commodities’, TAR66 Dec/Jan 2015]. Lower oil prices should be positive for the world economy. Purchasing power will be transferred from oil producers to consumers, who will spend more. Admittedly, there will be some big losers – many in Africa – but the slump in oil prices is potentially good news for producers of other commodities. Costs will be lower, particularly in mining and agriculture. So while oil economies might struggle, other commodity producers could actually benefit.

Julian Jessop Chief Global Economist & Head of Commodities Research, Capital Economics Ltd. via email

where are the african lobbyists?

In this world where notoriety, contacts and influence are major Nothing sobers a person, political assets, no African consultancy firm yet party or whole country up quicker than seems capable of fulfilling the request a bucket of ice-cold water poured over of their clients [‘Nightmare on K Street’, their head. For commodity-producing Peter Major TAR65 Nov 2014]. If Africa produced countries in Africa reality hit in 2014 Mining Consultant, Cadiz Corporate more ethical politicians, once out in the form of rapid and massive price Solutions, via email of office they could easily start another decreases [‘A new landscape’, TAR66 career as advisers, successful lobbyists Dec/Jan 2015]. Few of the senior in the footsteps of former prime people in African governments were looking on the bright minister Tony Blair. Excellencies please in office in 1992-2002. Most have been take note! We need an African way side of the oil slump in power from 2002 until now, when of lobbying that truly serves the African commodities went up every year While most commodities had been agenda and the Africans themselves. at compound rates of 20 to 25% Lionel Kpenou-Chobli weak for years, partly due to the per annum! It always takes the majority slowdown in China, oil was the outlier, Lobbying & Public Affairs Manager, West of partygoers a couple full years of price propped up by fears over Middle East & Central Africa, Optimum Consulting How To gET youR copy of THE AfRIcA REpoRT On sale at your usual outlet. If you experience problems obtaining your copy, please contact your local distributor, as shown below. ghana: TM HUDU ENTERPRISE, T. M. Hudu, +233 (0)209 007 620, +233 (0)247 584 290, tmhuduenterprise@gmail.com – kenya: NATION MEDIA GROUP, Antony Mutunga,+254 (0)72 15 19734, amutunga@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: RNA DISTRIBUTION, Butch Courtney, +27 (0)11 602 9800, butchc@mad.co.za • SUBSCRIPTIONS: RAMSAy MEDIA, Karin Mulder, +27 860 100 204, subs@ramsaymedia.co.za – tanZania: MWANANCHI COMMUNICATIONS, Emmanuel J Lyimo, +255 716 500 500, elyimo@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

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I am A. Kabato Bentu Barley Farmer Beriti Ethiopia

We have learnt that Africa can help us. GROWING TOGETHER.

EINEKEN has had a close relationship with Africa for more than one hundred years. In this time, weâ&#x20AC;&#x2122;ve learnt the importance of partnering for growth. To this end, we are committed to sourcing 60% of our agricultural raw materials from farmers in Africa by 2020. Today, collaborative projects are flourishing in the Democratic Republic of Congo (DRC), Nigeria, Sierra-Leone, Egypt, Rwanda, Burundi, South Africa and Ethiopia. We launched our barley project in Ethiopia in 2013 together with the Dutch Government, our NGO partner Eucord, Ethiopiaâ&#x20AC;&#x2122;s Agricultural Transformation Agency (ATA) and the Ethiopian Institute of Agricultural Research (EIAR). An extensive programme has been put in place: from testing, then selecting the most appropriate barley varieties for the

Ethiopian soil and climate to training smallholder barley farmers. Today, improved seeds are already being used to deliver better quality barley, higher yields and increased household income. So far more than 6,000 farmers have reaped the benefits of our project; we aim to reach 20,000 by 2017. This successful collaboration between community and our company is also beneficial for us. It is helping to create a sustainable source of raw materials, a shorter supply chain, a reduction in transport and importation costs and a lower carbon footprint. We are truly growing together. Many people still believe that Africa needs help. We have learnt that Africa can help us.

the question To respond to this month’s Question, visit www.theafricareport.com. You can also find The Africa Report on Facebook and on Twitter @theafricareport. Comments, suggestions and queries can also be sent to: The Editor, The Africa Report, 57bis Rue d’Auteuil, Paris 75016, France or editorial@theafricareport.com

Norway has recently signed a multi-million-dollar deal with Liberia to stop logging in order to protect the environment, but what will be the impact of such deals on the communities who rely on the industry for their livelihood?

Does logging help poor and developing countries?

President, Liberia Timber Association

Logging helps the poor and in Liberia it has been instrumental in our economic growth. Logging in Liberia has contributed more than 10% of GDP and has been a catalyst for development. Prior to the crisis in Liberia the timber industry created more than 25,000 jobs and was the driving force behind the construction of more than 60% of the country’s roads, enabling rural communities to better access healthcare, education and trade. Almost all of the rural economy was spurred by the timber industry. Since the new logging restrictions, most of the rural economy has ceased, impoverishing the rural areas. When logging is done in a sustainable way it provides a long-term support for development in rural communities. Today, around 48% of Liberia’s landmass is forest, totalling more than 43% of West Africa’s forest. Liberia has always – except during the crisis period – practised sustainable logging as introduced by the German Technical Mission advisory team to Liberia Forestry as early as the late 1950s and early 1960s. The country has by law set aside 30% of the forest area for protection and the rest for various economic uses including commercial logging. However, it has not achieved this owing to taxation and a restrictive legal regime. ●

No JonatHan Gant Senior campaigner, Global Witness

No, it should be stopped because we don’t need more desertification in Africa. Majed Mohmed Yes! The $150 million Norway deal is good for a country such as Liberia but thousands of locals are going to suffer. However, prevention is better than cure and the government has plans for those local lumberers. Peter K. Barya

Yes Hon. RudolpH J. MeRab

your views:

What poor countries have in order to compete with other rich countries are their natural resources. Therefore if one loses their natural ecosystem and environment, reversing it will be very difficult. Therefore it is simpler to maintain [the forests] than to try and recover it back once they are lost. Ephaso Solanbu

Working in Liberia, our experience has been that logging by large companies who export timber to international markets has benefited neither the people who own the forests nor the country as a whole. During Liberia’s 1989-2003 civil crisis, logging companies were linked to arms traders and provided money directly to former President Charles Taylor’s war efforts, leading to UN sanctions. Since logging restarted after the war, companies have failed to pay tens of millions of dollars in taxes that they owe to the government and to communities living in concession areas. This, combined with companies’ persistent determination to break Liberia’s laws, has sorely undermined efforts by President Ellen Johnson Sirleaf to rebuild the country. This is not to say that all logging is bad. Global Witness believes that the people who live in the forest – the people who own the forest – have the right to manage the forest. The 2014 Liberian government’s US$150m partnership agreement with Norway is very encouraging. If Liberia is able to demonstrate that it has reduced its carbon emissions from decreased deforestation, Norway will provide up to US$150m – a remarkable sum. So while industrial logging may not be good for Liberia, the country’s new forest policy may well be. ●

No, it only leads to massive deforestation – at a cheaper price for developed countries. The elites are the biggest beneficiaries, getting richer from those deals, which mostly exclude local communities. After everything has been mowed down, where does the indigenous population get its livelihood? Sen Raphepele If the government really cared about the situation, then logging would be stopped. Gouled Ismail

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briefing

international 1

3 5

1 4

china

$690m

In February, China’s ICBC, the world’s largest bank by assets, bought 60% of the London-based global markets unit of South Africa’s Standard Bank. ICBC is pushing into the commodity market in an attempt to rival giants such as Citi and Goldman Sachs.

Yemen

Conflict out of control

DIMITRI MESSINIS/SIPA

Yemen is on the brink of civil war, warned the UN, as Sunni insurgents mounted a counterattack against the Shia Houthi rebels who seized control from the government earlier in February. Both sides took to the streets of the capital, Sana’a, to protest as several countries, including the US, Britain and Italy, closed their embassies and evacuated staff. The Houthis, said to be backed by predominantly Shia Iran, clashed with Sunni fighters from Al Qaeda in the Arabian Peninsula and local tribes. ●

Greece

Bailout blues

Amidst Greece’s financial problems, Alexis Tsipras and the anti-austerity Syriza party won the 25 January elections, setting up a conflict between Athens and the EU ahead of the expiry of Greece’s bailout package on 28 February. Prime Minister Tsipras and finance minister Yanis Varoufakis quickly launched a charm offensive to win European support for an easing of the Greek debt burden. It proved a failure and set the pro- and anti-austerity factions in Europe on a collision course. The standoff raised fears of a Greek exit from the euro and even the breakup of the euro currency union. Tsipras’s political credibility relies on him setting Greece on a new economic course, but February talks in Brussels between Greece and the troika of international lenders – the International Monetary Fund, European Central Bank and European Commission – struggled to agree a roadmap for the discussions. Tsipras lobbied for a bridging loan and an eventual renegotiation of the bailout terms. Germany, one of Greece’s principal creditors, insisted the debt must be repaid or the deadline extended and refused a renegotiation of terms. Despite the tough talking, analysts expect a deal will be struck. ● 3

Ukraine

Ceasefire with daggers drawn Russia and Ukraine agreed a new – and shaky – peace deal in the latest effort to halt the fighting in Ukraine’s east that has claimed more than 5,300 lives. However, the Minsk II plan agreed in February was on the brink of collapse only days later amid continued fighting in the Ukrainian town of Debaltseve, and new European Union sanctions against Russia. The truce plan came only days after NATO announced it would send an additional 5,000 troops to bolster its security presence in Eastern Europe. ●

italY

“This is

a tragedy on an enormous scale and a stark reminder that more lives could be lost if those seeking safety are left at the mercy of the sea.” S. HoPPER/UNHCR

Vincent Cochetel, Europe director of the office of the UN High Commission for Refugees, on the 300 migrants believed drowned on 11 February while crossing the Mediterranean from Libya in dinghies. the africa report

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The Group

briefing

opinion

Nicholas Norbrook

Managing editor of The Africa Report

African Lions follow in the footsteps of Asian Tigers

he upswing in Nigeria tech companies has taken some by surprise. With Konga, Dealdey, iROKOtv and Computer Warehouse Group, the tech space now boasts serious players. And, so the standard thinking goes, they have not relied on government to get there. Chika Nwobi, an entrepreneur who created MTech – the largest panAfrican mobile-telephone content company – says that government was not involved in his latest venture, an accelerator for a new wave of tech companies called 440ng. Actis’s former co-head of private equity for Africa, Simon Harford, goes further and warns investors in Nigeria to stay away from sectors with active government involvement. There are other views out there. “If you’ve got a business, you didn’t build that. Somebody else made that happen,” said US President Barack Obama in 2012. His point was that government investment in infrastructure is what fosters corporate growth. “The internet didn’t get invented on its own. Government research created the internet so that all the companies could make money off the internet.” Not surprisingly, in the poisonous partisan atmosphere in Washington DC, this went down badly. The truth is somewhere in between. Successful countries, including the US, allow their companies the freedom to stretch their wings and treat their companies like engines of growth and development. As African leaders and company bosses gather at our Africa CEO Forum in Geneva in March, we are keen to hear from both sides of the equation and learn exactly how government and corporations can work together beyond endless talk of public-private partnerships. Are there sectors better suited to active state involvement – high-tech rather than textiles? Given the pitfalls of crony capitalism, should state involvement be avoided at all cost? In recent history, countries in Asia with similar endowments and similar traumatic histories to African countries have seized the initiative and embarked on accelerated stretches of development. African Development Bank president

Donald Kaberuka says Africa needs double digit growth for several decades, so the ‘Asian Tiger’ experience speaks to Africa. These successful ‘development sprints’ in Asia were achieved when the state helped the private sector flourish. Be it through the Darwinian ‘export discipline’ that South Korea and Japan used to allocate extra finance to successful exporters, or the stock market listing of 30% stakes in parastatals in China, there are ways to combine the rigours of the market with the nurturing powers of the state. All this is a far cry from the more primitive forms of state/corporate combinations seen earlier, such as when Britain sent gunboats to open new markets for its East India Company or the US used brutal economic diplomacy to open the way for its oil companies. There is today a small band of African countries that use the state strategically to nurture the private sector. These ‘African Lions’ are following their Asian peers. There is a marked similarity between China’s ‘going-out’ policy, whereby Beijing encouraged and financed its companies’ global expansions, and Morocco’s own ‘going-out’ policy that has seen Moroccan companies sweep across West Africa in finance, telecoms, aviation and construction. To make developmental states succeed, firstly it involves getting the business environment right, including both the physical infrastructure and administrative burden. In Ethiopia, H&M, Tesco and Ikea are

briefing

looking to operate in the country’s growing manufacturing clusters, and Turkish textile giants have already invested $2bn. Secondly, businesses need cheap inputs to compete in world markets. South Korea knew heavy industry would need cheap steel and so created steel giant POSCO, ultimately privatising it. Morocco’s strategic fund, the Société Nationale d’Investissement, is investing $2bn in a gas terminal at Jorf Lasfar. More plentiful power will be the result.

The power of the state can be allied to the discipline of the market Another key input to business is people. A healthy and well-educated workforce would boost any business, and the government’s role here is obvious. “We actually have some pretty good universities in and around Lagos,” says NTech’s Nwobi. “We have seen people from Obafemi Awolowo University, Babcock University and Covenant

all producing good technology and engineering graduates.” Tellingly, only the first is a government university. Morocco and South Africa both have strong training programmes in their automobile production sectors, but the number of engineers Africa trains is still low. Beyond good graduates, you want people with a bit of money in their pockets. You cannot have a consumer-facing business – which will sweep the continent according to the ‘Africa rising’ trope – if consumers have spent all their money getting home on a series of buses. That is why cheap mass transit systems, put in place by governments, are essential to creating that space in people’s wallets for an extra beer or telephone credit. That is why the Addis Ababa light rail, inaugurated on 1 February, is feted as an example of Ethiopia’s pro-poor growth polices. Thirdly, government can use the power of procurement to boost local businesses, something Emmanuel Katongole of CIPLA Quality Chemicals talks about (see page 72). The Ugandan government helped provide an anchor order of anti-retroviral and anti-malarial drugs, which helped local investors bring in Indian expertise and create one of Africa’s largest pharmaceutical projects. But the Asian leaps forward were not just about building slick infrastructure and guaranteeing some state contracts. Instead, governments worked with business to help them – with a combination of carrots and sticks – transform from rent-based import/ export models to more productive forms of enterprise. Nigeria is trying this: the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending has inspired players like cement tycoon Aliko Dangote, who began life as a major importer of commodities. He has now launched a tomato-canning factory in Kano. It is generally at this phase that developmental-state governments trying to bring on their private sectors come unstuck. A late 2014 World Bank report showed that Tunisia before the revolution was “an environment where cronyism and [rent] extraction, rather than competition and performance, drive economic success”, and that 20% of the country’s corporate profits ended up in the hands of just 114 relatives of then President Zine El Abidine Ben Ali. That is why Ethiopian commentators such as Merkeb Negash (see page 56) are so keen for the government to keep a close eye on new parastatals like the Metals and Engineering Corporation and the Sugar Corporation. These will either augur a new economic dawn or drag the country back into poverty. ●

Sea-Air Cargo: The solution SigniďŹ cant reduction in transit times to Land including East Coast of the It helps businesses unlock their capital on high

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briefing

people

ThE risE of saTa’s succEssor 11 November 1956 Born in Ndola 1981 Graduated with a bachelor’s in law from the University of Zambia 2001 Joined the newly formed Patriotic Front opposition party December 2013 Appointed by President Sata as defence minister

Rogan WaRd/ReuteRs

25 January 2015 Became the sixth president of Zambia

spotlight

Edgar Lungu With the tightest presidential vote in the country’s history behind him, Zambia’s new president is seeking to continue the populist policies of his predecessor while maintaining investor interest at a tough moment Faced with a party divided by the 28 October 2014 death of president Michael Sata, and the lowest copper prices in more than five years, president edgar Lungu is promising to fight graft, improve the livelihoods of the poor and reassure investors. in the 20 January vote, Lungu defeated frequent presidential contender hakainde hichilema of the UpNd (United party for National development) by 27,000 votes,

the narrowest win in the country’s electoral history. the new government has announced it will freeze electricity tariffs for two years for domestic consumers while increasing charges for industrial consumers, a key indicator that the populist policies of the patriotic Front (pF) did not die with Sata, its founder. in January, supporters in key provinces like copperbelt and Lusaka remained disenchanted by the failure

quotes

of the pF to deliver on key 2011 election promises like improving their standard of living and making sure the mining sector contributes adequately to the economy. Zambian workers, a key support base for the pF, said they were let down after the pF government banned salary increments for public-sector workers in 2014 and 2015 to help contain the fiscal deficit, which rose 5.5% last year, its highest level in almost 10 years. whereas Sata’s government imposed a new tax regime on the copper industry last year, Lungu is showing himself to be conciliatory. he re-appointed christopher yaluma as mines minister to find a compromise with companies on delayed value-added-tax refunds and complaints about higher royalties. however, the influence of finance minister alexander chikwanda, who also served under Sata, may mean

“No efforts should be spared, as part of the AU counter-terrorism agenda, to defeat this group.”

“Are you in Tahrir Square? Don’t talk too much or I’ll give you three more years.”

Nkosazana Dlamini Zuma Chair of the African Union Commission. Up to 2,000 civilians were reported killed after the Boko Haram Islamic militant group attacked the Nigerian towns of Baga and Doron Baga in January.

Egyptian judge Mohamed Nagy Shehata responds to ironic applause as he jails 230 activists for life for rioting and violence during the overthrow of ex-President Hosni Mubarak the africa report

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Benon Kizza

RajindRapaRsad seechuRn

The Ugandan rugby player vanished after the Commonwealth Games in Glasgow in 2014 and was found safe and sound playing for a Welsh club in Cardiff in February. He and teammate Phillip Pariyo are claiming asylum.

The Mauritian ref was suspended for six months for “poor performance” after his decision to award a penalty led to Tunisia being knocked out of the Africa Cup of Nations.

angélique Kidjo

alfRed KeteR

aRMel MingatolouM sayo The Central African Republic sports minister was released unharmed by gunmen believed to be from the anti-balaka militia in February. He had been pulled from his car at gunpoint in January.

Christopher Mwambazi in Lusaka

The Kenyan MP was filmed in late January attempting to intimidate officials at a weighbridge while they detained a lorry owned by another MP. Police launched an investigation into the case. ALL RIGHTS RESERvEd; A. dALSH/REUTERS

The Beninese singer and UNICEF goodwill ambassador scooped a Grammy award for the second time, this one for her album Eve, which she dedicated to the “beauty and resilience” of the women of Africa.

M. HoRWood/REX/REX/SIPA; C. PIzzELLo/AP/SIPA; STR/AFP

some heavy-handedness remains when dealing with the mining sector. Born on 11 November 1956 at Ndola Central Hospital, Lungu grew up in Chimwemwe, in the sprawling township of Kitwe in Copperbelt Province. Lungu was admitted to the Zambian bar in 1983 after stints as a lawyer at the justice ministry, defunct mining conglomerate Zambia Consolidated Copper Mines and Barclays Bank Zambia, among others. He made his entry into politics by joining the UPND in 1999 before ditching the party for the newly formed PF in 2001. In 2001, Lungu stood for, and lost, the Chawama constituency under the PF banner. In 2011, Lungu ran for the same parliamentary seat and won the election. In September 2011, Sata appointed Lungu deputy minister in the office of the vice-president under Guy Scott. In July of the following year, Lungu was promoted to head the home affairs ministry before becoming defence minister in December 2013. After the shocking dismissal of succession frontrunner Wynter Kabimba in August 2014, Sata named Lungu as PF secretary general as well as defence and justice minister. This gave him prime positioning to represent the party at the 20 January vote. ●

Good times

sospeteR Muhongo Tanzania’s energy minister resigned in late January over a scandal relating to a $122m payment linked to an energy deal. The attorney general and the lands minister also lost their jobs over the controversy.

Bad times

DEVIENT

MIDDLE EAST

BECOMES BECOMES

AUTOREDO FZE | +971 4 880 94 50 | Jebel Ali Free Zone, Dubai (UAE) | www.autoredo.ae | africareport@autoredo.com

briefing

cAlendAr

ERIC LARRAYADIEU fOR JA

AfricA ceo foruM 16-17 March GENEVA | switzerlAnd Business and political leaders will gather at the Geneva Intercontinental Hotel for The Africa CEo Forum, organised by Groupe Jeune Afrique. on the agenda, two days of debates and networking as top-level speakers deliver their vision for Africa’s economic development, and delegates thrash out the best business strategies to get ahead in a changing continent. Themes this year include urbanisation and growth paths for the continent. Bringing investors and entrepreneurs together under one roof, the forum will also celebrate the year’s outstanding companies and CEos. theafricaceoforum.com

cArds & pAyMents AfricA 10-11 March

AfricA Business conference At HArvArd Business scHool 27 feb. – 1 March BOSTON | us A new-venture competition, interactive panel sessions, and a tailored networking lunch are among highlights at the 17th edition of the annual HBS conference, this time embracing the theme of ‘A more inclusive Africa’. africabusinessconference.com

AsA BAAko festivAl 6-8 March BUSUA | GHAnA A three-day long festival of music, dance, street performance and visual arts, coinciding with Ghana’s Independence Day, 6 March. asabaako.com

JOHANNESBURG | soutH AfricA Looking at innovation, strategy and security. terrapinn.com/exhibition/cardsand-payments-africaMo

retAil world AfricA 10-11 March JOHANNESBURG | soutH AfricA E-commerce and traditional retail come together. terrapinn.com/exhibition/retailworld-africa M

eXtrActive industries in AfricA 16-17 March LONDON | uk Government ministers from Angola, Ghana and Guinea will join business leaders and academics at Chatham House to debate the future of mining. chathamhouse.org

niGeriA oil & GAs 16-19 March ABUJA | niGeriA The essential gathering for Nigeria’s petroleum industry. cwcnog.com

wHArton cluB of AfricA eXecutive investMent suMMit 17-19 March LAGOS | niGeriA wcaexecsummit2015.eventbrite. co.uk

eMrc AGriBusiness 2015 22-25 March KINSHASA | drc This year’s pan-African forum will focus on ‘Towards Inclusive Growth: A Vision for Africa’s Transformation’. emrc.be

power And electricity world AfricA 24-25 March JOHANNESBURG | soutH AfricA terrapinn.com/exhibition/powerelectricity-world-africa

cApe town internAtionAl JAzz festivAl 27-28 March CAPE TOWN | soutH AfricA Hugh Masekela, Oliver Mtukudzi, Mike Perry and Victor Masondo are among more than 40 acts filling Cape Town with the sultry sounds of jazz. capetownjazzfest.com

AnnuAl investMent MeetinG (AiM) 30 March – 1 April DUBAI | uAe Delegates flock to Dubai to discuss investing in high-growth regions. aimcongress.com

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mcbgroup.com

business

Seizing African African companies face stiff international headwinds in the year ahead, a period in which governments are lowering intra-African trade barriers and companies are increasing their reach and sophistication By Nicholas Norbrook

n the banks ofLake Geneva in Switzerland this 16-17 March, more than 500 business leaders, bankers and politicians will gather for the annual Africa CEO Forum. Some of the themes to be debated – finance, urban growth and the role of state and market –

are argued about everywhere on the planet. Here, The Africa Report talks to several chief executives to understandtheconcernsofAfrican managersamidsttheshiftingglobal economic currents in 2015. There has been a slow but sure rise in intra-African trade, but it remains hamstrung by politicians’ inabilitytodismantletradebarriers.

Africa trades 12% with itself, where Asia and Latin America have internal trade levels of about 60%. There are now some causes for optimism:threelargetradeblocsplan to fuse, with an official announcementexpectedinCairoinMay.The tripartite agreement between the Southern African Development Community, the Common Market forEasternandSouthernAfricaand theEastAfricanCommunityshould createafree-tradezoneacrossEastern and Southern Africa that encompasses 625 million people, 26 countries and a gross domestic product of $1.2trn. Infrastructure concerns are also being addressed in many African countries and regions. There has

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Some 680 people from 38 countries attended the 2014 CEO Forum

opportunity never been such a solid pipeline of power, port, road and rail projects in Africa. Importantly, regional infrastructure such as power pools and cross-border transport projects are also being tackled, such as East Africa’s rail projects to link Uganda, Kenya, Rwanda, Burundi and South Sudan. bonds and bourses

In the year ahead, there are fears that financing acquisitions and expansion – and indeed infrastructure – may become tougher in Africa with a strengthening dollar and rising interest rates in the US. Nonetheless, at the sovereign level international investors have maintained their appetite for the africa report

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African IPOs expected in 2015, up from 24 in 2014 source: Baker & Mckenzie

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African debt, with 2014 bringing nine African bonds. They raised $8.5bn, with similar levels of debt issuance expected in 2015. For companies, stock markets are also proving attractive. There could be 30 African initial public offerings (IPOs) in 2015, up from 24 the previous year, according to law firm Baker & McKenzie. More than $2bn was raised in 2014. Real estate, finance and energy companies are expected to be busiest this year, with stock exchanges in Egypt, Kenya, Morocco, Nigeria, South Africa and Tunisia seeing mostoftheaction.AsAustinOkere, chief executive of Nigeria’s Computer Warehouse Group, explains (see page 70), listing a company

Eric LArrAYADiEU for jA

brings more than money. Corporate governance is more sophisticatedtoday,morerigorousandmore widespread, so a new generation of leaders has to play with a new set of rules. Companies have become larger, more sophisticated and more spread out over larger geographical zones. New skill sets are becoming essential. Managing teams in several different countries requires the ability to delegate, for example. For Andrew Alli, (see interview page 86) chief executive of the Africa Finance Corporation: “What is the point of taking time andenergyexpensivelyassembling a team of top professionals if I am not going to let them get on with their their job?” ●

business | companies & markets

Austin Okere

Chief executive, Computer Warehouse Group, Nigeria

Listing has opened doors

Richard China

Chief executive, International Green Structures, US

Huge demand for housing Africa is urbanising at a breakneck speed. This is a headache for politicians who have to create city master plans to best absorb new populations. But it provides an opportunity for businesses, especially those that can offer cheaper and faster solutions for the housing boom. Companies can benefit from economies of scale, and Morocco’s third-largest property developer, Résidences Dar Saada, listed on the Casablanca bourse in December and raised Dh1.1bn ($115m) for new projects. It is still dwarfed by the two other Moroccan property giants, Addoha and Alliances. For others, it is technology that creates advantages. International Green Structures (IGS) uses compressed agricultural fibre to create modular panels that can be assembled into houses. The company has signed a contract with a property developer in Nigeria, where it has a pilot project of 500 houses. It is also building a KSh1.3bn ($14.2m) manufacturing facility in Kenya. “That first production line has commitments for 15 months,” says chief executive Richard China, “and those commitments are with the local builders and developers who either have private projects or government projects.” The company is creating linkages to the local economy and has signed off-take agreements with farmers to supply biomass residue. The backlog in housing construction is immense, and finance institution Shelter Afrique says around 400 million Africans require some form of affordable housing. “In Nigeria, the current affordable housing demand ranges somewhere between 12m and 20m units,” says China. “If you look at Uganda, they currently have a demand for 2m houses. If you look at Kenya, their annual extra demand is 300,000 a year, and that is just so they don’t go backwards.” And, says China, it is not a case of the winning technology takes all: the market is so deep that it is more a case of all hands to the pump. ●

Stock exchange listing is a fast way to gain capital, but capital is not everything. For some companies, it is about seeking new customers and markets. “Really, it has given us recognition for who we really are – the largest information technology [IT] company on the exchange, doing $150m in revenue every year. A lot of people didn’t know that our company was that big,” says Austin Okere, chief executive of Nigeria’s Computer Warehouse Group. The company provides communications infrastructure for 14 of Nigeria’s banks, including around one third of Nigeria’s cash points. It is also making an IBM-style pivot to providing IT-related services and has opened Nigeria’s largest data centre. This has not been plain sailing. There is not as much demand for cloud-based services as the company had thought. The company requires a larger pool to fish in. “We listed in November 2013. And when the World Economic Forum (WEF) was held in Nigeria, our company was recognised as a global growth company. This wouldn’t have happened if we weren’t listed. No one would have known much about us. It has opened doors. I have now personally been invited to two WEF councils – on innovation and entrepreneurship, and on emerging multinationals. So it’s a lot of exposure but also a lot of responsibility.” Okere also says that he appreciates the rigour that being listed demands of a company and believes better corporate governance leads to better results across the board. “The other good thing about listing is that you are held to a higher standard. You hold yourself to better standards: you have to file proper returns, you have to report in a way that is fair to everybody, so you have to file forecasts and alerts if things change. It holds us to higher integrity, which I feel is the currency of any company.” ●

Sikarin Fon Thanachaiary/weF

MaxiMilian Franz/The Daily recorD

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business | companies & markets

Emmanuel Katongole

Chairman, CIPLA Quality Chemical Industries, Uganda

The issue of the government’s role in the private sector is thorny. For most of the 20th century, the Keynesian consensus held sway: governments had a role to play in nurturing local businesses. Then came the Milton Friedman revolution, and [Margaret] Thatcher and [Ronald] Reagan played their part in changing the global mindset around free trade and government. The success of Asian countries like South Korea and Japan – who have both strong government and strong private sectors – is changing things yet again, and African leaders are paying attention. For Emmanuel Katongole, the role of African administrations in promoting their own private sectors is critical: “It’s high time Africa woke up. We have to realise that every country will look after its own priorities. Every country protects its industry. African companies may need to receive subsidies to make these industries work. If you cannot look after your own people, then that is a huge problem.” His company, CIPLA Quality Chemical Industries, was helped by the Ugandan government, which acts as an anchor client for pharmaceuticals. With this bargaining chip, Katongole was able to bring in Indian investors and build one of the first manufacturing facilities for anti-retrovirals and anti-malarials on the continent. He says that this kind of use of government contract is the way to go. “You have to look at the way procurement is done internationally to realise that governments are always using this to boost minorities. Many African companies have statutes that encourage local procurement. Unfortunately, most fail to implement them. In Uganda, that kind of protection

Yannick TYlle/corbis

African countries must promote their private sectors

was given to this industry, which explains the growth that we have had. Otherwise, it becomes very difficult to compete with multinationals and with countries who subsidise their pharmaceutical export industries,” says Katongole. It is worth pointing out that the success of Japan and South Korea rested on boosting those companies that were strong enough to export, not open-ended commitments to unviable companies. ●

Ziyad Bundhun

Chief executive, Rogers Capital, Mauritius

Profiting from the best of both worlds

bruno levY THe aFrica ceo ForuM

Is it that the French are more formal but their food is better? Could it be that the Anglo-Saxons have the language of business but also the arrogance to match? Is it pragmatism versus flair? Among Africa’s colonial burdens and baggage is the cultural competition between Britain and France, with their subtle and not so subtle differences in approach. Who has not cheered on the inside when a speaker at a summit’s podium says ‘All protocols observed’ and gets stuck into their content rather than an endless list of recognitions of ranks attendant? But for Ziyad Bundhun

of investment management company Rogers Capital, the Francophone tendency to formality has its good side, too. “The French are well known when it comes to the financial world and accounting, financial statements and so on,” he says. “When you look at it from the French way, you have the plan comptable général (a set of accounting rules). In the Anglo-Saxon world, this doesn’t exist at all. There are very flexible ways about how to present [statistics] using international standards but nothing quite like the plan comptable général.” ● the africa report

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business | companies & markets

Morocco

The CGI’s house of cards crumbles

The company’s stock is being removed from the market, and two top managers have lost their jobs in the scandal of the Madinat Badès real estate project

nvestigations into a troubled real estate project in northern Morocco have led to the announced delisting of a major state-owned firm and a shakeup in the leadership of the Caisse de Dépôt et de Gestion (CDG), a state-run financial institution. On 16 October, the CDG, parent company of CDG Développement, which owns a majority stake in the Compagnie Générale Immobilière (CGI), announced the suspension of trading of the CGI’s stock due to the government’s discovery of mismanagement at the company. The day before, CGI managing director Ali Ghannam and CDG managing director Anas Alami – both of whom were later sacked – appeared with some 20 other officials before a judge in Fez following an investigation into embezzlement at the Madinat Badès projectinthecity of Al Hoceima.To buy time to reform the company, CDG Développement is now planning to buy back all outstanding CGI shares that it does not already own, a move that will hurt its bottom line and investment budget.

chilly at the palace

The planned purchase of the publicly held CGI shares has damaged investor confidence and is a symptom of a growing cold war between powerbrokersinKingMohammed VI’s palace. The two camps in the conflict are led by Mounir Majidi, member of the royal cabinet and

personal secretary to the king, and Fouad Ali El Himma, founder of the Parti Authenticité et Modernité and a senior adviser of the king. El Himma usually focuses on politics, leaving economic questions to Majidi, who is also head of SIGER, the parent company of royal holding SNI (Sociéte Nationale d’Investissement). Insiders say, however, that El Himma had been hoping for a long time to see a change in the upper management of the CGI, known to be the domain of ‘Majidi boys’. The CDG plays an influential role in Morocco’s financial sector asthecountry’slargestinstitutional investor. Recently, it has participated in the financing of several large projects including the Tanger Med port and Tanger Automotive City. Alami was appointed to lead the CDG in 2009 with a mandate to reorganiseandrestructureitsoperations in order to avoid repeats of the major losses it suffered through unsuccessful investments in tech 3 000

Charting the CGI stock price in Moroccan dirhams

2 500 2 000 1 500 1 000 500 0

Source: BourSe de caSaBlanca

01/01/ 01/01/ 01/01/ 01/01/ 01/01/ 01/01/ 01/01/ 01/01/ 2008 2009 2010 2011 2012 2013 2014 2015

ticker tape Telecoms Maroc Telecom buys Etisalat subsidiaries in Africa for $650m

mining SA-focused Sibanye Gold lifts capex by 10% to $320 in 2015

companyNemotekTechnologieand tourism outfit Club Med. The CDG and its real estate subsidiary are now under increased scrutiny. Mohammed VI replaced the CDG’s Alami on 29 January with Abdellatif Zaghnoun, the former director general of taxation. Zaghnoun is said to be an ally of El Himma, suggesting his side is winning favour in the battle for influence. The Cour des Comptes, Morocco’s auditor general, announced in December that the group will be the subject of an intense programme of investigations. The CGI’s troubles are set to continue, too. In December, the company announced it was revising its projected turnover for 2014 to Dh2.7bn ($282m), a fall of 28% from the previous year, which it blamed on project delays and other problems.

Rail Chinese competition forces Qalaa to invest $70m more in Rift Valley Railways

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where we needed to reassure investors. It created a crisis in trust that impacted the CGI’s image and economic results. We were on such a positive trend in 2014. We even announced a corporate bond issue of Dh1.5bn in June last year. How can the real estate projects of the group keep going on as before if we’ve lost our clients’ trust?”

CGI’s Rabat headquarters were a scene of drama on 16 October when police burst in to arrest managing director Ali Ghannam

Hassan Ouazzani fOr Ja

devastating blow

Delays at the Madinat Badès development ultimately led to the CGI’s announced delisting. The project has had a history of delays, as have many others in the region. Startedin2003,MadinatBadèswas supposed to involve the constructionof2,100housingunitson54ha. Only a dozen hectares have since been developed. Contractors did not respect building specifications, contributing to the delays and cost overruns. Those who purchased units in the development, mainly Moroccans living in Europe, complained to the royal palace last year about the sloppiness of the work. On 23 August, King Mohammed VI asked the finance and interior ministries to investigate Madinat Badès and other CGI projects in the north, including projects in Tangier and Nador. With the first results of the probe in the hands of the authorities,

28% The CGI’s forecast drop in turnover for its operations in 2014 source: cgi

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police officers arrested managing director Ghannam on the CGI premises on 16 October. A CGI employeewhorequestedanonymity sets out the scene: “It happened sosuddenly.Thepoliceenteredthe building in broad daylight. They went straight to Ghannam’s office. Nobodyunderstoodwhatwashappening. We knew that there was an investigation, but we would never have expected to see the managing director arrested like that.” Anemployeeatparentcompany CDG told The Africa Report that the CGI scandal is creating confusion in the market: “If you understand what is happening, please let us know because we don’t. I mean, all of a sudden we lost the top of our upper management. It is now such an internal mess to deal with. Moreover, the CGI had a big market capitalisation and it [the arrest] happened in a phase

BAnks Nigeria liquidates 21 mortgage banks due to bad loans

The CGI has successfully developed projects in Casablanca, Marrakech and Rabat. It has also been a key player in the government’s rehousing programme to transfer families from slums to social housing units. The CGI’s stock will be delisted once it can come up with a buyout figure for the 15.4% shareholding held by small investors and the 8.5% owned by insurance company RMA Watanya. The CGI’s share price was Dh725 on 16 October, the day it was suspended. The stock market authorities rejected the CGI’s first buyout offer on 13 January and called for a second independent evaluation to better determine a fair value for the shares. The buyback will be a devastating blow for the CGI. If the shares are purchased at the 16 October price, it will cost the company approximately Dh2bn, a sum greater than its turnover last year. To reduce the backlog in CGI projects and purchase land for development along the Rabat-Casablanca corridor, the company had planned to spend at least Dh27.4bn over the period of 2013-2016. Such spending may no longer be possible. The news is also a blow for the wider financial sector, especially at a time when the government is focusedonbuildingupCasablanca Finance City. Meanwhile,the cases related to Ghannam and Alami are ongoing, and they are due to reappear before the judges in Fez Nadia Rabbaa in May. ●

Power India’s Jindal in 350MW Senegal power plant deal, worth $900m

business | leaders

interview

did Airtel commit an error in 2010 by focusing on reducing per-minute charges? At that time, this strategy had worked in India, where Airtel is ranked number one. However, the group realised that this approach was not totally adaptable to Africa. Since my arrival, my task has been to Africanise the model to speed up the growth of the group. It’s worth mentioning that Airtel is already the leader in 10 countries. In other markets such as Kenya and Nigeria, we have to be more aggressive and closer to customers.

Christian de Faria

Chief executive, Airtel Africa

I’m not worried about the future the manager of Airtel’s Africa operations says that the years of difficulty are behind the company and that mobile internet and banking will buoy the firm’s performance

ive years after arriving in Africa, and having been through a tough start, Indian telecoms operator Airtel is extending its network and developing innovative offers. In 2013, after leaving South African telecoms giant MTN, Christian de Faria considered slowing down his pace. However, the challenge that billionaire Sunil Mittal offered him was too tempting to resist. At 62, De Faria settled in Nairobi, where he has been heading Airtel’s 17 operations on the continent since January 2014. His mission is to revive Airtel’s growth by stripping it of its low-cost image and, above all, improve its profitability. TAR:Airtel’sthird-quarterresults for 2014 continued to be disappointing. How do you explain the difficulties you are facing on the continent? CHRisTiAn de FARiA: This period is traditionally less favourable, and our profits were affected by regulatory measures. In Ni-

Phil Moore for JA

geria, for example, Airtel’s largest market, the regulator prohibits promotions, with the aim to limit network congestion. However, Airtel remains confident that the continent offers numerous opportunities. We’ve enhanced network capacity and expanded network coverage, and we’ve changed information technology platforms. As far as we’re concerned, 2014 was a pivotal year.

“The group realised the Indian approach was not totally adaptable to Africa” You have also completely reorganised your operations. Yes, we have. All our 17 subsidiaries were grouped into two divisions, one Anglophone and one Francophone. In March 2014, I created new groups based on the position occupied by the different subsidiaries in their markets. The DemocraticRepublicofCongoand Nigeria are managed independently due to their size.

What percentage of your earnings comes from data? Data excluding SMS represents 10% of our earnings, which is a similar level to that of our competitors. For the year 2013-2014, the volume of data increased by more than 90%. The number of customers using their mobile to surf the internet surged by 50% in one year to 26.4 million. Up until this year, we weren’t proposing 3G in all our subsidiaries because we didn’t have a licence […]. Our 17 subsidiaries are now well positioned to capture this market. Can we still consider telecoms as a locomotive of the economy in Africa? Yes, but in certain countries direct and indirect taxation has become a major problem. It exceeds 40% of earnings. Governments don’t realise the scale of required investment as they prioritise shortterm strategies. What will Airtel look like in five years’ time? Not only do we want to operate one network, we also want to provide our customers with a wide range of intelligent services. We are striving to include a digital dimension to our offers. However, turnover generated by voice calls continues to rise. Rural areas still have great potential. Considering the potential of internet development and mobile banking, I’m not worried about the future. ● interview by Julien Clémençot in Cape Town

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hannibal

EcobaNk

Tanoh wins cases in Togo and Côte d’Ivoire The legal battles related to Tanoh’s sacking in 2014 are set to continue at international tribunals

n a twist to a tale Ecobank had hoped was consigned to the past, a former chief executive of the bank, Thierry Tanoh, won two court victories against his former employer in West African jurisdictions in early 2015. Tanoh, relieved of his duties in July 2014, was awarded $15m in damages for defamation from the commercial court in Abidjan and $11.6m by a court in Lomé, where he filed a case for wrongful dismissal. The bank is appealing both cases. It is unlikely that the matter will end there. Rather, things might get messy. Ecobank’s response has been twofold. First, it says these courts have no jurisdiction: “The [employment] contract expressly provides that all disputes shall be settled by international arbitration in London by an arbitrator appointed by the president of the International Chamber of Commerce in Paris.” Ecobank is also pursuing legal action of its own, saying it has lodged a criminal complaint against Tanoh over computer files it says he deleted on his departure, as well as official papers that have gone missing. Tanoh denies all wrongdoing. The West African lender, in which Qatar’s QNB and South Africa’s Nedbank bought large stakes last year, had hoped to spend 2015 consolidating its position (see TAR 66, December 2014/January 2015) rather than fighting in court. ● Nicholas Norbrook

Development on your doorstep It Is hard to be cynIcal about urban development when you see it creep by your hotel in addis ababa. In the ethiopian capital for the aU’s January summit, hannibal was delighted to see the yellow and grey railings advance past his window over the course of a six-day stretch: here is nation building in action! they say they are going to build it, and they build it – pretty much on schedule and on budget. the light rail network, which will have the capacity to transport 60,000 passengers per hour in all four directions of the compass, cost nearly $500m, financed by the china railway Group and the export-Import bank of china. Work began in december 2011, and 1 February 2015 brought the inauguration, albeit with several months of testing to come.

A model for engagement with China and, oF coUrse, only a cynIc WoUld sUGGest that china’s relatively straight-forward engagement in ethiopia is purely a shop window to market china’s infrastructure prowess to the rest of the continent – a demonstration effect. Indeed, it is perhaps the other way around. ethiopia’s readiness to turf out chinese contractors who are not doing their job is a model for the rest of africa. the telecom company Zte has learnt this to its cost recently, with sweden’s ericsson gleefully picking up the pieces. the demonstration effects go both ways. african countries need a china strategy, as much as china has an africa strategy.

Document of the century so It Was perhaps no sUrprIse when the aU – based in addis ababa – announced that it had signed a memorandum of understanding with china to deliver regional infrastructure and assist with projects that will boost industrialisation. this is perhaps the first time we have seen the continent thinking at a pan-african level about what kind of relationship it should have with beijing. aU commission chair nkosazana dlamini-Zuma called it the “most substantive project the aU has ever signed with a partner.” For china’s vice foreign minister Zhang Ming, it was the “document of the century”. the aU has drawn up committees to study where to locate regional airport hubs and high-speed train lines.

Money goes in, money goes out oF coUrse, all thIs WIll have a cost, so diplomat thabo Mbeki’s report on illicit financial flows could not have come at a better time. the document says that $30bn-$60bn is being drained out of the continent in unpaid taxes and capital flight. be it through tackling the tricky accounting practices of multinationals or shining a light into secrecy jurisdictions like the british virgin Islands or Mauritius, african politicians now have the tools to start clawing back some of that unclaimed revenue needed for infrastructure and social spending. this is something that governments in the West have been doing since the financial crash in 2008. ● the africa report

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dossier infrastructure

Gas-fired development

Mozambique’s gas infrastructure and wider economy will be forever changed after huge investments both upstream and downstream. Can its government handle the challenge of resource riches?

currahee shutter/fotolia

A brighter future for Mozambique lies offshore

By Douglas Mason in Maputo ozambique’s future as a significant energy exporter is closer to being assured following agreement on fiscal and operational terms for $40bn in foreign direct investment (FDI) to develop liquefied natural gas (LNG) facilities. Two consortiums led by Anadarko of the US and Eni of Italy wish to develop the reserves in the offshore Rovuma Basin. Approval of the special regime by the Mozambique authorities in December established investment conditions, most importantly stability provisions preventing terms from being changed for 30 years, although the fiscal terms can be renegotiated after 10 years. Recoverable gas reserves for Area 1 and Area 4 of the offshore Rovuma Basin, held by Anadarko’s and Eni’s consortiums, stand at 120 trillion cubic feet, according to energy analysts. Companies say that the upside for additional discoveries is considerable, making the Rovuma Basin one of the largest new global gas regions. Development of the gas fields will lead to the construction of a major industrial complex at Palma, in Mozambique’s remote northern province of Cabo Delgado, which will become an energy hub. The consortiums are planning two LNG facilities or trains each, with Eni proposing both onshore facilities and a floating LNG plant. Both groups are in the final stages of concluding engineering, procurement and construction contracts. The agreement on terms removes a major source of uncertainty at a time when concerns over market timing, falling energy prices and Mozambique’s difficult operating conditions are in danger of stalling its energy boom. The window for Mozambique to develop LNG capacity and begin fulfilling export contracts is narrow and must begin by the early 2020s before a large increase in LNG output from other projects in Asia, Australia and North America creates a possible global oversupply. Officially, the date for

the first LNG production is 2018 for Anadarko and 2019 for Eni, although there is scepticism about whether these dates will be met. Mozambique is trying to lock in investment as the downside of the commodity cycle leads investors to pull back from energy exploration and development in high-risk and frontier areas, particularly Africa. Already, companies have concerns about Mozambique’s regulatory regime, political economy and operational risks. These worries relate to aspects of the country’s petroleum law, passed in August 2014, which reserve 25% of production for the domestic market to promote industrial development. In addition, local content requirements inserted at the insistence of parliamentarians of the governing Frente de Libertação de Moçambique (FRELIMO) party require that some goods and services be provided exclusively by Mozambican nationals. These provisions may lead to rent-seeking, elite capture and inefficiency, as few local companies are capable of meeting the needs of such large projects. opaque deal

Controversy has already arisen over the Pemba Integrated Logistics Centre, which granted monopoly rights for supplying the hydrocarbon sector without public tender to an opaque Nigerian-Italian company, Orlean Invest. The Mozambique branch of the transparency watchdog Centre for Public Integrity brought attention to the deal in 2014, and foreign companies have complained that lack of disclosure over Orlean’s beneficial ownership has created compliance problems for firms with anti-corruption policies. The government has also watered down transparency provisions that made it mandatory for all contracts to be published. The era of resource wealth that beckons could be transformational for Mozambique, the thirteenth poorestcountryintheworld interms of per capita gross domestic product (GDP) in 2013, according to the International Monetary Fund. Gas

dossier | infrastructure

developments would add $39bn in economic activity by 2035 under a conservative scenario, according to a study by Standard Bank South Africa. That would increase per capita income from $630 to $4,500 and raise Mozambique to the status of a middle-income country. The projects will create an estimated 15,000 direct jobs, while the number of indirect jobs would be much higher. That is, if all planned projects go ahead, although that would be a decades-long process.

on available reserves, before additional upside from exploration, raising total FDI to $100bn. The large size of investment relative to Mozambique’s economy – two and a half times more than GDP in 2014 – is unprecedented in the energy sector, raising risks for both sides. Investors face higher financing premiums and concerns about security of investment due to high country risk in a small, low-income economy. There will be further high costs related to the lack of basic infrastructure and skills shortages. Mozambique’s institutional capacity is critical to development plans because a strong state is needed to guide investment and utilise resource revenue for the benefit of all Mozambicans. Wellknown risks of energy wealth involve poor governance, elite enrichment and the crowding out of other economic sectors that have a stronger impact on employment and poverty reduction.

engine for development

Opportunities for industrial development involve potentially vast new export industries. Under the government’s Gas Sector Master Plan, drafted with technical assistance from the World Bank, local gas processing could support petrochemical, fertiliser and methanol industries as well as power generation and energy-intensive sectors such as aluminium, steel and cement. The government foresees a total of $36bn in downstream FDI in these sectors, with planning for several projects currently being studied. They include a gas-toliquids plant proposed by Eni that would have the capacity to produce 96,000 barrels per day. The government strongly favours a proposed 2,500km north-south pipeline that would be the basis of a national energy grid and link provincial capitals and industrial nodes before continuing on to South Africa. The impact of gas on state revenue is set to be the most significant development, ending historic reliance on foreign aid and establishing a new era of hydrocarbon dependence with far-reaching consequences. In the first full year of production, gas revenue is predicted to exceed all foreign aid – still worth 34% of state spending in 2014 – and average $5.5bn per annum over a 26-year period based on an initial four LNG trains. A long-term investment boom would see these amounts increase exponentially as further LNG is added: 10 or more trains could be developed based

rent-seeking

FRELIMO recognises the challenge of resource riches and pledges to ensure that their impact will be positive, with benefits shared. But the party is divided between official policy objectives based on good practice and the reality of the private interests of its members. Under the 10-year presidency of former President

US$

39bn Amount gas exploitation could add to the economy by 2035

SoUrce: Standard Bank SoUth africa

Development of the gas fields will turn the northern province of Cabo Delgado into an energy hub, changing the lives of many

Armando Guebuza, the notional separation of the party from the private sector and the state was eroded. Rent-seeking, cronyism and the principle that FRELIMO should gain directly from all economic activity are already well established. Relations with Western donors, many of which campaigned for transparency, weakened considerably under Guebuza, whose assertive nationalism aimed to curb external influences. President Filipe Nyusi, inaugurated on 15 January, has made encouraging statements but is a political newcomer who may lack the clout to restrain or discipline party barons. Direct revenue from gas production is at least five years away, but the impact of the resource era has already arrived through capital gains taxes on mergers and acquisitions of foreign companies’ gas assets. The government has raised $2bn in this way since 2012. A window of five years exists to improve internal controls and management systems before a large and lasting change in resource revenue. Does the state have the capacity and does FRELIMO have the discipline to manage these challenges without the pitfalls of the resource curse found elsewhere in Africa? The result will determine if Mozambique is destined to be the next Angola or Botswana. ●

Franck GUIZIOU/hemIs.Fr

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ezz steel, egypt’s largest producer, sticks to international standards

Materials

Steely reserve required for takeoff High demand for rebar and other steel products from construction projects across the continent offers an opportunity for African investors to see off foreign competition

hebuildingsettobeKenya’s largest, the 39-storey Hazina Trade Centre, will add to already high demand for cement and steel in East Africa’s largest economy. Consultants at PwC predict that sub-Saharan Africa’s construction industries will grow from $75bn in 2013 to $180bn by 2025. African producers are unable to meet the demand for steel, especially long steel products like reinforcing bars (rebar), meaning that steel imports remain high. The needs of the construction sector are driving investors to set up a number of projects that will rapidly increase supplies (see graph). While concrete has compressive strength, its tensile capacity is significantly lower, making it necessary to reinforce concrete and balance its brittleness with rebar. Flexible and durable, rebar can also be an environmentally friendly building material. It can be produced from recycled metal and is itself highly recyclable at the end of its life.

“Rebar dominates demand across the African continent,” explains Andrzej Kotas, a steel expert and managing director of Metals ConsultingInternational.However, the quality of locally produced rebar often does not meet widely used international standards. Researchers from the University of Ilorin in Nigeria concluded that locally produced rebar used in construction was brittle and was a major contributing factor to the increasing number of building collapses. For Kotas, “the opportunity for Africa in this market is enforcing international standards to stop building collapses and increase local investment.” fighting imports

Investment is increasing and rebar production is gaining momentum, withsteel-producingheavyweights South Africa and Egypt leading the way. In April 2014, South Africa’s Agni Steels started production at its new R400m ($35m) mini steel mill near Port Elizabeth. The mill’s third phase of expansion, due to

$bn

4.5

The estimated cost of China’s biggest overseas steel plant set for completion in South Africa in 2019

start at the end of 2015, will lead to the production of rebar and other long rolled products. Top Steel Kenya is planning a new steel mill in Kwale County with an installed capacity of 20,000tn per year. Having produced about 20,000tn of crude steel in 2013, according to the World Steel Association, the East African country has a long way to go in order to meet national steel demand estimated to be 1.2m tonnes. As production picks up, the issue of cheap steel imports will have to be tackled, as this is crippling the fledgling African market. “Dumping of finished products from abroad is affecting production and taking people out of business,” argues Titus Orimijupa of the Iron and Steel Senior Staff Association of Nigeria. In October 2014, ArcelorMittal South Africa announced it will consider seeking duties on long steel products from China, the world’s biggest steel producer, to curb the growing import trend. ● Oheneba ama Nti Osei

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infrastructure | dossier 30

Imports of semi-ﬁnished and ﬁnished steel products (in million metric tonnes)

South Africa and Egypt forge ahead, Nigeria dithers

Africa Algeria Egypt Nigeria South Africa Morocco

World Steel aSSociation (2013)

With 6.8m tonnes of crude steel produced in 2013, Egypt ranked second in Africa behind South Africa. Egypt’s imports of long steel products the same year stood at 446,000tn. The cost of steel imports and raw materials in 2013 was E£25.8bn ($3.4bn), a 28% increase on 2012 and the highest in more than five years. Rebar accounts for about 80% of all steel sales in Egypt. Ezz Steel is the country’s largest steelmaker and controls more than half of the steel market. Ezz Steel products, which adhere to strict international standards, are mainly exported to Europe and the Middle East and North Africa region. Egyptian Steel, founded in 2010, has announced ambitious expansion plans and should raise its steel production capacity from 355,000tn per year in 2014 to more than 2m tonnes annually by the end of 2016. It will still lag behind Ezz, which has a total capacity to produce 5.8m tonnes per year. Other private producers include Kouta Steel Group, Suez Steel, Beshay Steel, Aswan for Iron and the Arab Steel Factory. In October 2014, the government again imposed a temporary tariff on imported rebar to fight the dumping of rebar from China and Turkey. Over the past few years, the domestic industry has been hurt by weak provision of electricity.

0 2009

South Africa Egypt Libya Morocco Algeria Total

2010

2011

0.7 0.6 0.4

7.3 6.8

2012

2013

Crude steel production in Africa (in million metric tonnes)

15.8 Source: World Steel aSSociation (2013)

Building-site blues

(The percentage difference in construction costs across Africa in US dollars compared to a baseline average cost of 100)

Nigeria

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Steel intensity of GDP Steel use in tn/million real 2010 USD, 2012 <10tn 10-20tn >20tn

m a r c h 2 015

Source: World Bank, World Steel aSSociation

Accra Nairobi Johannesburg Kampala Lusaka Dar es Salaam Durban Cape Town Dakar Abuja Kigali Luanda

93 93 100 102 105 105 110 115 116 122 131 173 100

South Africa Among the top manufacturers of rebar in South Africa is ArcelorMittal South Africa (AMSA), Africa’s largest steel company and a unit of the world’s biggest steelmaker. Two of the company’s four major South African operations – Newcastle and Vereeniging – account for more than 50% of the local market. Other leading rebar manufacturers are Cape Gate and Scaw Metals Group. South Africa was the top-ranked steel-producing country in Africa with 7.3m tonnes of crude steel produced in 2013, according to the World Steel Association. However, the country still imported 335,000tn of long steel products in the same year. Rising import levels have been mainly attributed to technical failures at one of ASMA’s plants in early 2013. China is South Africa’s biggest steel supplier and total imports from China from January-November 2013 totalled 208,000tn, a surge of 37% compared with 2012. In November 2014, Chinese state-owned Hebei Iron and Steel announced plans to build the country’s biggest overseas steel project in South Africa after taking a 51% stake in a deal with South Africa’s Industrial Development Corporation and the China-Africa Development Fund. The two-phase steel plant, with an estimated cost of $4.5bn, will produce 5m tn per year once completed in 2019.

Source: ProPerty and conStruction HandBook international edition 2014 (aecoM), 2014

Egypt

Ailing state-owned Ajaokuta Steel Company, 31 years old and with the theoretical capacity to produce 1.3m tonnes of long steel products, is now almost completely inactive due to neglect under successive governments, managerial controversies, weak electricity provision and lack of funds to complete its final phase. The government estimates that it will take at least $1.2bn to get Ajaokuta operational. In 2013, the company’s management signed a series of deals with private firms to revitalise the plant but progress has been slow on the ground. The government privatised many of its steel-producing assets in the mid-2000s, and the now privately owned Zuma Steel, Delta Steel and Oshogbo Steel are facing difficulties. As of today, Dana Steel Rolling Mill – formerly Katsina Steel Rolling Mill – is the only functioning mill in Africa’s largest economy. The country currently spends $3.3bn annually on steel and iron imports, an amount likely to increase in the future if the local industry is not given the support it needs, according to industry minister Olusegun Aganga. The local industry produced an estimated 100,000tn of crude steel in 2013, according to the World Steel Association, or just 0.6% of the continent’s total.

dossier | infrastructure

interview

Andrew Alli

Chief executive, Africa Finance Corporation, Nigeria

There is a real increase in cross-border business

AFrICA FINANCe CorporAtIoN

Backed with public and private money since its founding in 2007, the development finance institution is pouring money into infrastructure schemes across the continent TAR: What will you be using your balance sheet for in 2015? AndReW Alli: We have a number of potential projects across the continent: port infrastructure in Côte d’Ivoire, various projects in the Nigerian transportation sector as well as a coal project in Mozambique. There are quite a few others in our pipeline, some of which I can’t disclose at this stage. But there will probably be a similar level of investment this year as last year, which is in the $800m range. You have a fair number of projects in Côte d’ivoire. What is it that allows them to move at such a pace, given they were fighting not so long ago? If you go back to the history, [Côte d’Ivoire] was always a leading economy for West Africa. They have a certain degree of human capital which might not be present elsewhere. And though, of course, it was eroded by the decade-long conflict, a large part has remained. It’s also the largest economy of the countries in that zone, so there is a great deal of potential for projects. And, finally, the government really does want to get something done. The Africa Finance Corporation (AFC) has an interesting structure, with public- and privatesector money. What are the advantages of this hybrid structure for infrastructure finance?

I think it is a large advantage. On the one hand, you have the public side of this finance, so we have the status and access of some of the other DFIs [development finance institutions]. But the private side of it injects a certain commercial realism into how we do our business, which makes us a little bit more nimble and commercial in our approach to things. This ultimately, I think, leads to better-structured projects. It also allows us to be more flexible and reactive than some other organisations. does building up the AFC brand give you access to cheaper finance?

“The public side of the finance gives us status, the private side makes us more nimble” It’s possible, but I’m not sure it will have such an impact on the liability side as on the asset side. The people who are providing finance will ultimately do their own due diligence on us and form their own opinions. But it does make investors more willing to sit with us than if they had never heard of us. do you see a greater interest in working across borders from African management today? With the private sector, particularly in the past decade, there

has really has been an increase in cross-border business. Ten years ago or longer, it was really mainly South African companies that invested in other parts of Africa. Now you will find many more companies from different African countries running operations outside their home market. You have got West African banks operating in East Africa, and East African banks looking to come into West Africa. Telecoms is operating on a panAfrican basis. There has also been some improvement – though not as sharp – in intergovernmental cooperation. In many regions there is one dominant economy that everyone else is scared of being overwhelmed by. Cultural differences between Francophone and Anglophone [states], and just the normal kind of politics have made it difficult. But there have been things like the West African Power Pool, which is developing projects in the Economic Community of West African States. How might the general slump in commodity prices hit African economies? It can be both a positive and a negative. On the negative side, countries that are dependent on commodity exports could be hard hit.Ontheplusside,itdoesprovide an opportunity for investors to come in at relatively low prices. ● Interview by Nicholas Norbrook

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day in the life Extraordinary storiEs of ordinary pEoplE

light on his feet

A police traffic warden in Nigeria’s commercial capital, Lagos, Daniel Nwana is known as ‘the Dancing Cop’ for the finesse he brings to his traffic duties

’m a traffic warden, part and parcel of the Nigeria Police Force. I put in all my energy, talent, time, everything I have. I don’t reserve anything for any other thing. I have two children in the university. I have been 31 years in service and have been promoted only three times. Is this not wickedness? What a wicked world. Is it a crime for one to be truthful, hard-working, dedicated? To abstain from corruption? Because if I say I don’t take bribes, they will say “Are people not giving you money?” But I don’t ask anybody to give me money. I don’t stop and arrest. Instead, I delay him for some time. That’s supposed to serve as a warning to the person. It’s not that I arrest you then I take money. I entered the force on 1 March, 1983 and in June 1991 I was promoted to Corporal. In September 1993 I was promoted to Sergeant, the rank I carried for 11 years before I was promoted to Inspector. It was never my ambition to do police work. I was simply searching for a job. I left my secondary school in 1982. In February 1983, my cousin, who was a police officer, sent for me to come to Lagos. He said they were recruiting traffic wardens. I didn’t want to stay idle. I came down to Lagos. He took me for selection. On 25 February I sat the entrance exam and passed. I started the job, even though I was hoping that when I began to make good money I would continue to further my education. But with time, I found out that the money was not coming. Everything was struggle, struggle, struggle. That was until 1992 when there was a training course for police traffic wardens. We were taught how we can work ourselves into the hearts of Nigerian citizens. They call it the ‘Papa Legge’ System of Control – it involves body language. You point your head or foot in the direction the vehicles should move. After that I got more desire to work. I said I will stick to it.

count your blessings

Since then I have had joy in my life. Because when you serve the people in a way that they love, they will show appreciation that you are serving them. Those that cannot give you something, they will greet you. They will tell you “God will bless you.” They will say “No man can reward you but God will reward you.” I believe that’s a good prayer and that is what you want when you are

Ben FIgo ezeamalu

working, you need something like “God will reward you” and not that “God will punish you.” Whenever I’m controlling traffic, children coming out of school line up and watch me. Sometimes it even causes a hold up in the traffic. You know you will not please everybody. Some will say “What is this one doing? Is this how dem teach you to control traffic?” Some will say “You will soon tire.” I told God, provided you give me strength, I will not be tired. I will do it and satisfy my desire. And he’s an able God, continuously helping me, giving me the strength to work. My only regret is not receiving my promotion, even though I have written to the highest authority. I need my promotion because it will also help me when I retire – it will bring up my pension. I need my promotion for my retirement. ● Interview by Ben Figo Ezeamalu the africa report

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THE CRUDE TRUTH OF LOW OIL WHAT DOES THAT MEAN TO YOU?

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