Tar69 drc o&g

soUth africa Who can resuscitate the economy?

w w w.t he a f r ic a r ep or t .c om

liberia Johnson Sirleaf bets on West Africa revival

Uae-africa New markets for property and travel

N ° 6 9 • a p r i l 2 015

Mining

The peace dividend after a decade of stability for miners, Kabila’s government sees investments in gold and copper pay off

central & east africa 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 $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

groupe jeune afrique

TANK MC

cartier.com

MANUFACTURE MOVEMENT 1904 MC SINCE THE CREATION OF THE FIRST TANK WATCH IN 1917, THE TANK COLLECTION HAS CONTINUED TO BREAK NEW GROUND. THE INCREDIBLY REFINED AESTHETICS OF THE NEW TANK MC WATCH ARE FITTED WITH THE CARTIER MANUFACTURE MOVEMENT 1904 MC. ESTABLISHED IN 1847, CARTIER CREATES EXCEPTIONAL WATCHES THAT COMBINE DARING DESIGN AND WATCHMAKING SAVOIR-FAIRE.

NIGERIA Security jousts with economic opportunity

SOUTH AFRICA Who can resuscitate the economy?

w w w.the af ric arepor t.com

UAE-AFRICA New markets for property and travel

N ° 69 • A P R I L 2015

DRC Miners profit from the peace dividend

UAE-AFRICA New markets for property and travel

LIBERIA Johnson Sirleaf bets on West Africa revival

w w w.the af ric arepor t.com

SOUTH AFRICA Who can resuscitate the economy?

N ° 69 • A P R I L 2015 THE AFRICA REPORT

After losing the first rounds in the Ebola war, it is time for the region to win the peace, says Liberia’s Ellen Johnson Sirleaf

The peace dividend

Who can resuscitate the economy?

Ambitious plans for manufacturing and infrastructure face headwinds from debt and failing power

Rob Davies, Ebrahim Patel, Nhlanhla Nene and Cyril Ramaphosa

GROUPE JEUNE AFRIQUE

GROUPE JEUNE AFRIQUE INTERNATIONAL EDITION

SOUTHERN AFRICA 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 $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

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 $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

CENTRAL & EAST AFRICA EDITION

The AfricA reporT # 69 - April 2015

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 $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

MONTHLY • N° 69 • APRIL 2015

“West Africa must bounce back”

contents

N ° 69 • A P R I L 2015

Mining

After a decade of stability for miners, Kabila’s government sees investments in gold and copper pay off

South Africa Beyond Ebola

UAE-AFRICA New markets for property and travel

LIBERIA Johnson Sirleaf bets on West Africa revival

w w w.the af ric arepor t.com

GROUPE JEUNE AFRIQUE

cover crediTs: inTernATionAl: e. pierMonT/Afp; J. GoldswAin for TAr - souThern: l. Gillieron/epA/MAXppp; e. Miller /wef; r. TshAbAlAlA/fM; J. GoldswAin for TAr; o. Morin/Afp - cenTrAl & eAsT AfricA: f. coffrini/Afp; o. Morin/Afp

FREE with this issue: an investing supplement on the democratic republic of congo. not to be sold separately

Business

4 Editorial Politics in the crucible

60 south africa Who can turn the lights on?

The government’s nine-point plan seeks to transform the country into one that processes its raw materials prior to export

6 lEttErs 8 thE QuEstion

Briefing 10 signposts

18

12 intErnational 14 pEoplE 16 calEndar

frontLine

dossiEr oil and gas 74 Big winners and sore losers Which oil producing firms and exporting countries are winning and losing from the plunging price of crude?

26 financE Cash, oil & blood Investigative journalist Tom Burgis decodes the resource rents and shadow states that are robbing Africans of their future

76 angola Oil and Luanda’s best laid plans 78 uganda From Russia with refining capacity

30 nigEria The real security vote

Art & Life

34 chad Déby takes on Boko Haram

80 tourism Waiting for the big spenders Travellers return to the land of the pharaohs, and new types of tourism are on the rise

36 kEnya Shrinking the airwaves 37 burkina faso Transitional troubles

country focus 43 drc All eyes on 2016 After delays, machinations and protests, the government has announced a programme of elections leading up to the presidential vote in late 2016 the africa report

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70 baromEtEr Making moo-lah in Ethiopia

73 hannibal At the Africa CEO Forum

poLitics

38 anansi

68 livEstock Broken machines and broken trust in Nigeria

72 intErviEw General Electric CEO Jeff Immelt

18 libEria The fightback against Ebola Liberia reached zero Ebola thanks to community activists, an information campaign and tens of thousands of volunteers working alongside government and foreign medical help

37 lEsotho Coalitions of instability

66 uaE-africa Dubai is back

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84 briEfs Taarab music, and author Abdellah Taïa 86 travEl Africa’s Galápagos, São Tomé e Príncipe 88 lifEstylE Food markets in South Africa and Behind the Scenes with Juliet Ibrahim 90 day in thE lifE Tewodros Terefe, an azmari musician in Addis Ababa

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editorial

The AfricA reporT A Groupe Jeune Afrique publication

By Patrick Smith

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

Politics in the crucible

I

t is tempting to look at the photo on page 20 of Beatrice Yardolo, Liberia’s last known Ebola patient, and imagine that this crisis is nearly over. It is true that Liberia declared it has no Ebola patients, but Guinea and Sierra Leone are still reporting new cases.

The virus has claimed 10,000 lives over the past 15 months.

Unlike in Liberia, attempts to mobilise communities to manage the contact tracing and to police the quarantine arrangements are yet to win widespread support in Guinea and Sierra Leone. Apart from organisational and political matters, the UN-led programme to fight Ebola requires an additional $400m by the end of June.

The outbreak can teach us some critical political lessons: the first relates to the practical power of grassroots organisations. After a false start, Liberia’s government realised that communities were the key to fighting the virus. It was the innovative response of those communities that helped shut down the virus in Liberia by March.

For taking on such responsibilities, many activists are demanding their rights: to contribute to policy-making and to ensure that resources are being managed accountably. The same goes for some of the heroic health workers, such as Jerry Brown, the medical director at the Eternal Love Winning Africa hospital in Monrovia.

Dr Brown was one of the first to risk his life and set up facilities – with minimal resources – to treat Ebola patients. After his neardeath experiences, he has strong views on the planned overhaul of Liberia’s health system. The general verdict from communities is that national governments should devolve resources and power.

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

National governments faced the sharpest judgements at the outset of the Ebola crisis. In all three countries, there was a breakdown of trust between the rulers and the ruled. Many people simply refused to believe government claims about the virus, suspecting some financial scam to divert aid money or a plot to wipe out citizens using witchcraft.

Finally, the initial incompetence with which the Ebola crisis was managed showed huge flaws in the international system. True, donor countries have cut funding to the UN’s World Health Organisation For many (WHO) by some $500m for 2013-2014, but it health was the WHO manageworkers, ment’s decision to take this Ebola most of that money out of the budget for outbreak regional health emerwas a test gencies. The WHO also did not announce an of our ability emergency in Ebolato respond hit countries until last August, six months after Médecins Sans Frontières had launched its operations. For many health professionals, this Ebola outbreak was a wake-up call, a test of our readiness to respond. The international system was found wanting, and the next outbreak could come from a much more contagious virus.

There seems to be a strong case for a new UN body charged solely with the management of such crises. Yet if the rich countries blanch at financing the WHO and with the worst memories of the Ebola outbreak beginning to dim, what will it take to make finance ministers from rich countries write that cheque? ●

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 s AlisOn culliFOrd 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 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

editorial@theafricareport.com the africa report

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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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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

african smes must play by the rules

D

ETHIOPIA The Addis millionaires’ club

OLUSEGUN OBASANJO “God is a Nigerian!

We have survived much worse”

Seizing African opportunity

w w w.t heafricarepor t .c om

N ° 6 8 • M A R C H 2 015

Nigeria Elections oing business in Africa is not easy and Which way forward? the environment needs to be more SMEfriendly to allow businesses to grow [‘Seizing African Opportunity’, TAR68 March 2015].

However, African SMEs must also quit the begging syndrome encouraged by too much free money from development agencies. If they want to get to the next level and truly make a positive difference in African economies, African entrepreneurs need to understand that they have no choice but to be better structured and have improved governance. There is a lot of available funding out there, but some effort needs to be made by entrepreneurs if they want to have a chance of tapping into this pool of financial resources.

This requires a strong mindset shift, which is essential if African SMEs want to compete internationally.

Carole Ramella Founder & Managing Director, GFA Consulting, Ghana, via email With elections now balanced on a knife-edge, politicians, generals and businesses take their positions for the coming titanic struggle

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 $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA

for rwanda’s flower industry to bloom The challenges facing flower exporters in Rwanda, as highlighted in your article [‘Agriculture: A harvest of thorns’, TAR67 Feb. 2015], demonstrate how hard it is to break into a new market, albeit a growing one. Countries like Kenya and Ethiopia have achieved significant gains in the European cutflower market due to their ability to reduce production costs and an effective logistics and transport infrastructure. It is a big challenge for flower exporters in Rwanda to break into this market when they do not have the volume of production necessary

to support the logistics and marketing infrastructure. The secret will be to find their own niche – what is different and special about flowers from Rwanda – and to build on that.

Tim Briercliffe Secretary General, International Association of Horticultural Producers (AIPH) via email

the geography hurdle The article ‘Join the adding value chain’ [TAR66 Dec./Jan. 2015] addresses a crucial topic but misses the stark divide in the potential of African countries to participate in global supply

chains. The article depicts Central Africa as left behind, but the concern is more for West and inland Africa. The first hurdle is not infrastructure, as the article indicates, but geography. Countries with easy ocean access have enormous advantages. More subtly, coastal North and East African countries have obvious markets to ship to. If Chinese firms lead global supply to Africa, this disparity will become even more pronounced.

Derek Scissors Resident scholar, American Enterprise Institute via email

expat pros and cons Both multinational and local companies exhibit more confidence in young African professionals who boast both a foreign degree and international exposure [‘Afropolitans on the attack’, TAR65 Nov. 2014]. Having left Europe to work as an expatriate in West Africa, it goes without saying that my living conditions are more advantageous than those of the ‘ordinary’ local worker.

But, on the flip side, being an expatriate, especially in an African country, requires one to embrace an often challenging environment and manage people with a mentality not always conducive to business. The pros and cons have to be weighed, keeping in mind that a fulfilling expatriate experience offers greater opportunities to building one’s future career.

Andrea Dawson Projects Manager, Bolloré via email

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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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

yOur viewS:

Opposition and rebel groups hope to derail April elections in Sudan, where a new wave of violence has forced an estimated 50,000 to flee their homes in 2015 and President Omar al-Bashir still faces charges of genocide

They are not leaders, they are dictators.

How can a normal person lead a country for 40 years?

Noel Gutu

Can Sudan survive another term of Omar al-Bashir’s rule?

Yes MARK FATHI MASSOUD Awardwinning author of Law’s Fragile State

Foreign investment from Sudan’s economic allies including China and an uninterrupted flow of oil through Sudan’s pipelines suggest the country’s economy will survive but international sanctions and domestic instability will continue to batter it. Further fractures may emerge among ruling elites, and Bashir’s health and the International Criminal Court’s arrest warrant for genocide will limit his travel. However, during the past quarter-century Bashir’s government has developed a far-reaching security and military apparatus designed to last. The Sudanese people will not emerge unscathed if Bashir succeeds to an unprecedented 31st year in office in 2020, but their struggles for justice will survive. Civil society organisations, including women’s, youth, and legal aid groups, will keep fighting to promote equality and the rule of law.

The United Nations and Western governments will keep pressuring the Sudan government to make political accommodations that reflect human rights obligations and Sudan’s diversity. And aid agencies will keep venturing into Sudan to provide reprieve from the violence and the poverty that have plagued the nation since its 1956 independence. These socioeconomic, political and legal challenges are likely to remain, continually testing Bashir’s rule and the people’s endurance. ●

No JEHANNE HENRY Senior researcher, Africa division, Human Rights Watch

The question is not whether Sudan can “survive,” but rather under which conditions. History tells us that unless Sudan’s leaders end abuses and make deep reforms, people will continue to face violence, repression and assaults on their dignity. In the conflict zones of Darfur, Southern Kordofan and Blue Nile, government forces will continue to attack populated areas, killing, maiming and raping civilians. Even in the capital city, protesters face excessive and lethal force. More than 170 protesters were shot dead in cold blood in September 2013, and not one of the victims’ families has seen justice. Across Sudan, the National Intelligence and Security Service (NISS) will continue to arrest and detain journalists, students, activists, lawyers and other perceived opponents of the ruling National Congress Party, such as the three high-profile political activists detained since December after signing an opposition declaration, the Sudan Call. The number of others languishing at often unidentified sites remains unknown.

NISS routinely censors the media, seizing papers and blacklisting journalists, such as in mid-February 2015 when officials raided 19 newspapers. These are hardly conditions for free, fair and credible elections, much less a country in which basic rights are respected. ●

We need political correctness in Africa.

A renewed call for citizens who will be responsible to build a continent where political office is not seen as a lucrative gold mine.

Africans must demonstrate the moral courage to be good stewards, designing and respecting their national constitutions.

David Meek Jah Incumbents in Africa never lose elections, so he’ll be around for another term.

Abdinasir Kamau Countries such as Uganda, Sudan and Zimbabwe have allowed themselves to be ruled by dictators. It’s time [they] amended their constitutions to prevent leaders from exploiting power.

Kevin Gikurumi The bad news is [the government] makes sure they have a majority in parliament to defend them.

They only amend [the constitution] to suit their interests.

Abdinasir Kamau Considering the amount of atrocities imputable to President Bashir, it’s surprising he still has enough civilians left in his country to vote for him.

Tory Groman

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briefing

InternatIonal 1

€60bn

3 1 2

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europe

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On 9 March the EU launched its programme of monthly bond buying, known as quantitative easing, to stimulate the lagging economies of Europe. The policy is set to weaken the exchange rate for the euro even more, with analysts predicting dollar-euro parity.

4

Iran

Hardline gets harder

LAn HOnggUAng/XInHUA-REA

President Hassan Rouhani may have less room for flexibility in domestic and foreign policy after clerics chose 83-year-old hardliner Mohammad Yazdi to lead the Assembly of Experts, the body that names the country’s supreme leader. Ayatollah Ali Khamenei, 75, is in poor health, and the Assembly of Experts is responsible for selecting his replacement. Iran and major world powers are working on an agreement to deal with the country’s nuclear weapons capacity. The draft terms of the deal include weakening sanctions against Tehran in exchange for more openness about its nuclear capabilities. ●

2

ChIna

How soft a landing?

The long-predicted slowdown of China’s economy is setting in, but the government is worried that the housing downturn and poor retail sales could send the economy into a tailspin rather than a controlled landing. The National People’s Congress closed its session on 15 March with an announcement of a reduction of China’s annual growth forecast to 7%, which would be the slowest growth in 25 years.

There are worrying signs in key sectors. Property sales dropped at an annual rate of 17% in January and February, leading house builders to scale back their activities rapidly. The Chinese legislature heard plans to fight corruption and reform state-owned enterprises, but the government passed the buck on tackling $3trn in local government debt.

One of the areas of reform that the government is focusing on is its control of state-owned companies. It says that they will be forced to rely on profits rather than government support and to list on stock exchanges. A new policy with more details about the future of parastatals should be released within the next few months. ● 3

5

all means live in a remote location, but there’s a limit to what you can expect the state to do for you if you want to live there.”

russIa

Putin counts on friends in Cyprus Isolated over its role in the Ukraine crisis, Russia signed a deal with the government in Nicosia in late February that will allow Russia’s navy to use Cypriot ports. Amid talk of a rekindled Cold War, Russia’s President Vladimir Putin said that the ports would be used for anti-terrorism missions.

Cyprus’s President Nicos Anastasiades says other talks are ongoing about allowing Russian forces to use an airforce base. Russia is also trying to improve its relationship with EU renegades Greece and Hungary. ●

australIa

“Fine, by

RIcK BAjORnAs/Un

12

Australia’s Prime Minister Tony Abbott tries to justify cutting budgets for Aboriginal communities the africa report

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Venezuela

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Burma

Students in the streets Police officers and plainclothes thugs beat and arrested protesters in the city of Letpadan on 10 March over an education law that students say restricts academic freedom and strengthens the role of government. To maintain its grip on power, the military junta is seeking to divide the legalised opposition and prevent civil society groups from gaining strength. The students and government had agreed to work together to reform the law, but youth leaders withdrew from the talks before the government started its crackdown. ●

+33 1 71 19 47 32 contact@adexen.com www.adexen.com

An estimated one million people protested across the country on 15 March to call for President Dilma Rousseff to resign or face impeachment for her of poor management of the economy and the involvement of her party in a multibillon-dollar kickback scheme with the state-owned oil company Petrobras. The latest political victim of the scandal was governing Partido dos Trabalhadores treasurer Joao Vaccari, whom authorities charged with corruption on 16 March.

Rousseff’s supporters dismissed the March protests as the machinations of the losers of the October 2014 elections, in which Rousseff narrowly won a second term. Analysts argue that impeachment proceedings are unlikely.

Petrobras is still reeling from the scandal and the drop in oil price, while the government has not yet formulated a viable turnaround programme for the debt-strapped company. ●

PEOPLE ARE THE FUTURE OF AFRICA

Expatriate Recruitment Recruitment of African Profiles & Local Content policies support HR Consulting & Staff assessment Executive Search Manpower supply Paris (France) Lagos (Nigeria) Accra (Ghana) Luanda (Angola) Abidjan (Ivory coast) Casablanca (Morocco)

Hubi HoffMann/un

unjust and harmful step that has ever been taken by the US against Venezuela”

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Brazil

Bad and worse

“The most aggressive,

Venezuela’s President Nicolás Maduro criticised new sanctions against the country in early March

13

briefing

people

spotlight

Zitto Kabwe

The Tanzanian MP says he has years of troublemaking ahead of him as he seeks a new political home outside the CHADEMA party. He promises to keep digging into the details of corrupt deals to hold the powerful to account zitto kabwe is used to making enemies in his drive for better governance. the member of parliament (mP) for kigoma north was kicked out of his party in march after leading an investigation that cost the jobs of two senior cabinet ministers and being accused of seeking to take over the party leadership. Polls as recent as last december put him as the second most popular opposition figure in the country, but at 39 he is still one year shy of being able to run for the presidency in october 2015. asked about his future and whether he will join a new opposition party like the alliance for Change and transparency, he says with a smile: “time will tell.” He adds that he will make a decision about his political future this coming may. since he joined parliament in 2005, kabwe has been responsible for exposing at least six scandals. He says that set standards for parliament to put aside partisan politics and support issues of national interest. “tanzania faces a lot of challenges, yet it is full of opportunities. we have plenty of resources on one side and grinding poverty on the other. what we need to be able to move forward is responsible politics. Leaders should

brains and political brawn 24 september 1976 Born in Mwandiga 2003 Bachelor’s degree in economics from the University of Dar es Salaam 2004 Campaigns and elections director for CHADEMA 2007 Became CHADEMA’s deputy secretary general 2010 Obtained a master’s degree in business and law from Bucerius Law School, Germany

Pernille Bærendtsen

14

be responsible to their people, and there has to be a strong mechanism to punish leaders when they abuse their positions,” kabwe stresses. the latest scandal involved the tanzania electric supply Company and independent Power tanzania. as chair of parliament’s Public accounts Committee (PaC), kabwe presented a report to mPs in late 2014 showing how $122m was

quotes

“I’m prepared to forgive. I forgive because if we don’t forgive, this country will burn. I am satisfied with this trial. I told my part of the truth.”

Former first lady Simone Gbagbo was jailed for 20 years in March for precipitating electoral violence in Côte d’Ivoire in 2011.

improperly withdrawn from the central bank escrow account to be paid to senior officials and politically connected businessmen. in vibrant, red maasai attire – the clothing of a warrior – kabwe sat in a small meeting room with three members of the influential PaC on 14 december 2014 to discuss his next move. “Powerful politicians involved in the scandal were scared they would

“The government will not allow a single mining job to be lost.”

Zambia’s President Edgar Lungu pledges to prevent job cuts at Barrick Gold’s copper mine after the firm said royalty increases were forcing it to shut the facility. the africa report

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briefing

Tidjane Thiam

madeni Kipande The acting director of Tanzania’s port authority was suspended in February amid claims that he breached procurement procedures.

His predecessor Ephraim Mgawe was axed in 2013 as part of a graft investigation.

The Ivorian-born banker will become the new chief executive of Credit Suisse. Thiam, who has been head of insurance firm Prudential for the past six years, will replace Brady Dougan, who will step down in June.

Khalifa hafTar

Yassine aYari

Kofane Timoleon Crepin The Cameroonian scientist was awarded an AU and World Academy of Science Kwame Nkrumah award for his research on non-linear dynamics and chaos on 31 January, one of two Cameroonians honoured.

Erick Kabendera in Dar es Salaam

A military appeals court sentenced the Tunisian blogger to six months in jail – from an original 12-month sentence – for publishing comments on Facebook claiming corruption in the army and defence ministry.

maxwell mwale

ALL rIGHTS rESErvED

The Libyan general and former close confidant of Muammar Gaddafi was sworn in as head of the army for the internationally recognised government on 2 March. His appointment triggered claims that Gaddafi allies are gaining power.

B. LEvy/DIvErGENCE-IMAGES; M. ELSHAIKy/EPA/CorBIS; ICTP/yoUTUBE

lose their positions. They were prepared to steal the report or harm us,” Kabwe recounts.

In Tanzania, Kabwe is known as a vocal politician on good governance, human rights and natural resources.

In 2010, he led activists to demand that the government find ways for the country to benefit from its vast mineral and other natural resources.

The result was a law increasing royalties from 3% to 4% and forcing mining and gemstone companies to cede 50% of their shares to the public.

Kabwe says the escrow account scandal capped a difficult 2014, which included squabbles within the Chama cha Demokrasia na Maendeleo (CHADEMA) opposition party and the death of his mother, Shida, who was his mentor and an MP. Kabwe lost his position as CHADEMA’s deputy secretary general after opponents claimed he wanted to plot against the party leadership.

A court issued an injunction barring the party from revoking his membership early this year, but officials announced his expulsion in mid-March.

Kabwe joined the party when he was barely 19 and became its youngest MP in 2005 at 29 years old. “It is one of the political challenges I have accepted. I am ready to explore other opportunities,” he says. ●

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country focus

Democratic Republic of Congo

MICHAEL KAPPELER/EPA/CoRBIs

Joseph Kabila, sitting pretty but for how much longer?

All eyes on 2016 “ N After delays, machinations and violent protests, the government has announced an ambitious programme of elections leading up to the presidential vote in late 2016. Before this happens it intends to bring about the decentralisation called for in the constitution

By Gregory Mthembu-Salter in Kinshasa

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o,Ihavenoideawhomy bourgmestre [mayor] is,” says Alphonse Mabwa as he shakes his head. Mabwa, an even-tempered, stout man with a shining bald pate, works in the house of a local Indian family and has lived in the impoverished Lemba suburb of Kinshasa since the late 1980s. In nearly all that time, says Mabwa, he has neither known nor cared to know the identity of his senior local government representative. “There was a man back in the early 1990s who I remember was at

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country focus | democratic republic of congo

SOUTH SUDAN

CAR CAM. Kisangani GABON CONGO KINSHASA

Atlantic Ocean

Goma

DEMOCRATIC REPUBLIC OF CONGO

UGANDA RWANDA BURUNDI TANZANIA

Lubumbashi

ANGOLA 400 km

ZAMBIA

DRC in nUMBERS 67.5 million

SourceS: World Bank 2013, * african economic outlook 2014, ** united nationS conference on trade and development 2014 report

PoPulation urban PoPulation (% of total)

41%

life exPectancy at birth

50*

infant mortality (per 1,000 births)

108.1*

fDi, inflows (current US$)

$2.1bn**

GDP (current US$)

$32.7bn

GDP Growth (annual %)

8.5%

inflation, consumer Prices (annual %) 1.6% internet users (per 100 people)

2.2

mobile cellular subscriPtions (per 100 people)

42

MinERal RESERvES Reserve level, DRC and global, at the end of 2012

Source: uS GeoloGical Survey, mineral commodity SummarieS 2015

8,000,000

7,200,000

6,000,000

4,000,000

700,000

2,000,000

20,000 Source: united StateS aGency for international development (uSaid), 2014

150 0

Cobalt

(mineral tonnes)

Copper

(thousand metric tonnes)

730

Diamonds (million carats)

GRoSS DoMEStiC PRoDUCt

Others

57.5%

estimates that the elections will cost a staggering $1.2bn – money that the Congolese government does not have.

As donors mull the best way to respond, they are uncomfortably aware that the timetable is bound to slip and possibly to slip badly. Even if donors open their chequebooks immediately, it would still take many months of hard work before local elections could be held in enough parts of the country to make the poll credible. However, that does not take into account the explosive impact the process might have on the fragile politics of the country’s warscarred eastern provinces of Nord-Kivu and Sud-Kivu.

To complicate matters, the government is promising within the next two months to implement decentralisation, which would mean increasing the number of provinces from 11 to 26.

Decentralisation is a requirement of the constitution, but many observers have dismissed the idea as impractical and too expensive. Yet Kabila, who rarely says anything in public, has called for decentralisation to happen quickly on more than one occasion this year.

A cALEnDAr At LAst

DRC World

3,400,000

least nice to people. But the others…

I have never seen them. They are not interested in people like me.”

There have never been free, multiparty local elections in the Democratic Republic of Congo (DRC), and Toussaint Kapuku, Mabwa’s bourgmestre – like all the bourgmestres in the country’s cities and towns, plus all the territorial administrators in its rural areas – was appointed to his position from on high.

Mabwa is thus of no use to Kapuku as a potential voter. Mabwa does not own a business that needs permission to do something from the local authorities, which would create a handy opportunity for them to extract rents, so he is of no financial interest to Kapuku either.

Footage of Kapuku appeared on YouTube on 21 January, showing him speaking to camera on a Lemba street surrounded by heavily armed riot policemen. Kapuku reassured viewers that Lemba was under control following two days of unrest in the neighbourhood and the city as a whole. His aim was clearly also to dispel rumours circulating that the rioters, who had torched his offices, had also assassinated him.

The protests followed the introduction in the national assembly in mid-January of a draft electoral law requiring a census to be held before elections. Opposition parties immediately denounced the requirement as a ruse to enable President Joseph Kabila to delay presidential polls and called out their supporters onto the streets. The resulting violent protests panicked the senate into striking down the census requirement, and Kabila quickly endorsed the change.

Agriculture

42.5%

Satisfied that they had made their point, the rioters returned to their homes – but only after scores of people had been killed. Estimates range from the government’s 29 to more than 100 according to some opposition party sources, and many more people were arrested and detained, including several high-profile politicians. Under intense pressure from international donors, the electoral commission finally produced a comprehensive electoral calendar in February, with presidential elections scheduled for November 2016. Local elections are set for October this year, and they are to be followed by provincial and then the legislative and presidential polls. The electoral commission

FEDERICO SCOPPA/AFP

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democratic republic of congo | country focus

An announcement about the measure seems increasingly imminent.

Decentralisation would almost certainly delay the electoral calendar still further and would also significantly curtail the power base of existing governors. These governors include Moïse Katumbi, whose province of Katanga is destined to be cut into four. Under the current proposals, the current Katangan capital of Lubumbashi will become the capital of Haut Katanga, and 85% of the country’s copper production would end up in the neighbouring province of Lualaba, with Kolwezi as its capital.

That would drastically reduce Katumbi’s power, particularly if miners persuaded the Lualaba authorities to give their blessing to a new border crossing on the road from Kolwezi to Solwezi in Zambia. If the new province’s mining companies could truck their production out that way instead of using the congested Kasumbalesa border post down the road from Lubumbashi, the companies would save time and money.

Meanwhile, Katumbi and his shrunken fiefdom would lose a huge chunk of their income.

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There is increasing suspicion that of his supporters were arrested and weakening Katumbi’s capacity to chalsome were killed. lenge Kabila for the presidency is the The UNC leader is now on trial at the real intention behind the decentralsupreme court in a politicised case datisation plan. Katumbi has not openly ing back to the last elections in 2011. announced his intentions but has given Kamerhe had at the time disputed the a convincing impression of being interresult of the vote for one national asested in the top job, particularly during sembly seat, saying that Wivine Moleka a rousing speech in Lubumbashi in early January There is increasing suspicion in which he criticised atthat weakening Katumbi is tempts from Kabila’s camp the reason for decentralisation to engineer a third presidential term. had won because of ballot stuffing. An kamerhe on trial electoral court later rejected the claim The relationship between Kabila and and Moleka sued Kamerhe for defamhis former ally Vital Kamerhe has furation. The plaintiff later dropped her ther degenerated. Kamerhe was once suit after she and Kamerhe reached the president of the national assembly a negotiated settlement. Reviving the but broke with Kabila several years back case and taking it to the supreme court after Kabila invited Rwandan troops to seem a clear case of the political maeastern DRC to fight the rebels of the nipulation of the justice system.

Kamerhe’s supporters are asking Forces Démocratiques de Libération du Rwanda (FDLR). Kamerhe then formed donor governments to raise the issue his own party, the Union pour la Nawith Kabila, but he has made it plain tion Congolaise (UNC). He was one that he is in no mood to be lectured of the main instigators of the January about this or indeed on anything. On 15 February, Kabila summoned diplodemonstrations, during which many mats to a 45-minute address in which Opposition he angrily accused them of sponsoring leader Vital opposition parties and failing to give Kamerhe him and his government the respect found they deserve. Kabila also tore into a himself recent decision of the UN mission in on trial the DRC not to work with the Congolese at the army in a new military campaign against supreme the FDLR. The UN made the move to court in protest Kabila’s choice of two generFebruary als who had committed major human – in what rights abuses to lead the offensive. At many see the meeting with diplomats, Kabila said as political the UN peacekeeping force had given manipulation “nothing” to the country “except water and tinned sardines”.

Martin Kobler, the special representative of the UN secretary general to the DRC, was sufficiently shaken to inform close associates that he anticipated his possible expulsion from the DRC. Since then, however, the political temperature has cooled somewhat, and discussions have tentatively begun within the UN about what kind of assistance it can offer for the electoral process.

So, perhaps, the time is drawing nearer when Congolese can finally elect their local representatives, meaning that if Kapuku wants to retain his Lemba seat he will have to campaign for it, and Mabwa might end up knowing – and caring about – who he is. ●

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country focus | democratic republic of congo

PeoPle to WatcH

Pitching in for the chance of a better DRC

A

1

2

all riGhts reserveD

ll eyes are on Moïse Katumbi (1) and his decision about whether he will run for the presidency in 2016. The charismatic and popular governor of Katanga has never clearly answered the question and says his priority is to finish his mandate at the head of his mineral-rich province. He announced on 7 March that he will soon step down from his position as governor when Katanga is divided into four provinces under a new decentralisation law. Few think that this will be the end of his political career, and his supporters are awaiting his next move.

All is notcalmin PresidentJosephKabila’s camp. Pierre Lumbi, a special security adviser to Kabila, is head of the Mouvement Social pour le Renouveau (MSR), the second-largest party in Kabila’s coalition. The MSR welcomed the publication on 12 February of the longawaited electoral calendar and stressed how important it was that the calendar and the constitution be fully respected, thus implying that Kabila must leave at the end of his term in 2016. However, the MSR “still remains worried about a series of constraints objectively listed by the CENI [Commission Electorale Nationale Indépendante],” the party said in a press release. “These constraints […] may handicaptheimplementationofthecalendar”, so“everyinstitutionimplicated–thepresident,theparliamentandthegovernment” must “get involved” and the international community must “promptly” help the Democratic Republic of Congo (DRC) with “significant technical, financial and logistical support”, the press release said.

On 9 July 2014, President Kabila nominated Jeanine Mabunda (2) as his special adviser in charge of the fight against sexual violence and ending the recruitment of child soldiers. In 2010 the DRC was branded the “rape capital of the

Gwenn Dubourthoumieu/ja

The months to come will show who shoots for the presidential seat, but some people are already making progress in their goals for the country

3

issouF sanoGo/aFp

46

world” by Margot Wallström, the then UN special representative on sexual violence in conflict.

Mabunda, a former representative in the national assembly for Equateur Province, regularly goes into the field to meet victims and also monitors how the justice system is dealing with the perpetrators of violence. Much still needs to be done, but she stresses that there have been a few important victories. Among others, Jérôme Kakwavu, a former rebel promoted general, was sentenced in November 2014 to 10 years of imprisonment and to pay $100,000 in damages for the rape of under-age girls, two murders and torture in 2003 and 2004 when he headed a militia. Mabunda’s priorities are prevention, fighting impunity, helping victims get damages and finding them a place in a society that tends to marginalise them. stand-up for your right

Ados Ndombasi is another person who wants to help change the negative image of the DRC. He is the brains behind the popular Toseka (‘Let’s laugh’, in Lingala) festival which, for its third edition, brings together 30 humorists – including four women – from Africa.

Comedians from the DRC, Rwanda, Burkina Faso, Congo, Cameroon, Gabon, Togo, Ivory Coast, Morocco, Algeria, Benin, as well as Canada, Belgium and France, will entertain people in Kinshasa from 25-30 August. The goal of the festival is “to have Toseka become a major event in Africa” that can “participate in renewing the image of the DRC”, says Ndombasi. He also wants to “bring together every social class” and people “sharing French as a language”.

The budget for this year’s festival is estimated at “about $1.2m”. Its partners and sponsors include the DRC government, the Organisation Internationale de la Francophonie, the UN-financed Radio Okapi, the Hirondelle Foundation, Kenya Airways and Airtel.

While Katumbi is pondering what to do next, he can enjoy watching his latest investment. Ivorian goalkeeper Sylvain Gbohouo (3), 26, signed a five-year contract with Katumbi’s football team TP Mazembe in February. Gbohouo will be training with Robert Kidiaba, 39, the creator of the ‘bottom bounce’ celebration dance, who ended his international career after helping DRC win third place at this year’s Africa Cup of Nations. ● Habibou Bangré in Kinshasa

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48

Providing they can keep costs down, gold miners are not facing too much of an uphill struggle

copper sector, the main producers are Katanga Province’s Tenke Fungurume – which is majority owned by US major Freeport-McMoRan – Mutanda Mining and Katanga Mining, both of which are majority owned by Swiss commodities giant Glencore. Tenke produced 203,000tn of copper in 2014, Katanga Mining 152,000tn and Mutanda Mining 197,000tn. Mutanda’s production was an impressive 31% higher than the previous year. The total investment in the three mines is reckoned to be around $6bn.

LIONEL HEALING/Afp

kibali stands out

mining

Record breakers

Gold and copper production are soaring after significant investment by mining companies, which have taken the lead in tackling power deficiencies

L

ast year was an outstanding time for Congolese mining output, with production records smashed for copper and gold. The country’s chamber of mines estimates that copper output for the year reached an unprecedented 1,029,800tn, up from an estimated 920,000tn in 2013, and also much higher than neighbouring Zambia’s estimated output of 708,000tn.

A beaming Simon Tuma-Waku, vice-president of the DRC’s chamber of mines, told the African Mining Indaba in Cape Town in February: “For the second

time in a year, we have beaten our southern friends.” Tuma-Waku added that in 2014 investment in mining exploration in the DRC was higher than in any other African country. He added, however, that at a mere $300m, exploration funding in the DRC was nonetheless much lower than in the US, Canada and Australia.

In the gold sector, the country’s recorded production increase was even more dizzying, with output rising from 6.2tn in 2013 to 19.6tn in 2014. In both domains, large private-sector investments are driving the production boom. In the

In the gold sector, the star performer is Kibali Gold, which is operating in Orientale Province in the north-eastern corner of the country. Kibali is owned jointly by Randgold and AngloGold Ashanti, which between them have invested $2.5bn in the project. Kibali produced 6.6tn of gold in 2014, up from just 1.1tn in 2013.

Randgold chief executive Mark Bristow is bullish about Kibali’s prospects, declaring with pride in early February during the announcement of the company’s fourth quarter results: “Kibali is on time and on budget. Our costs are below $700/oz and we have no debt.

We are profitable. Our company as a whole is in its fifth year of production growth – pretty impressive in a threeyear bear market.”

Some way behind Kibali is Torontolisted Banro Corporation, which produced around 2.7tn of gold from its Twangiza mine in Sud-Kivu Province in 2014. The company, however, says it is on course to start production this year at another site, Namoya, in neighbouring Maniema Province.

International commodity price declines, however, have meant that these big numbers have not always translated into higher earnings. The average copper price during the first two months of 2015 was just $5,756/tn, 16% lower than the 2014 average. The consensus among analysts is that copper prices will remain depressed during 2015 and 2016, though most anticipate an increase in 2017 and 2018 driven by improved global economic growth and increased copper supply constraints.

The average gold price has followed a similar trajectory. During the first ● ● ● the africa report

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country focus | democratic republic of congo

Copper production

power boost

Glencore, meanwhile, has been working on the refurbishment of two units at the Inga hydroelectric power plant on the Congo River, more than 1,700km away.

Thecompanyhasinvestedaround$300m in the project, and officials there say they expectittoyielddividendswithinthenext 12 months. The government is forcing Glencore and other miners in Katanga to invest in upgrades to transmission lines from Inga to Katanga, which are already at near capacity and are unable to cope with a significant increase in output.

Gold production

(000 tn)

(tn)

25

1,250 Prod.

Export

Prod.

1,000

20

450

15

500

10

250

5

Export

source: Drc chamber of mines

two months of 2015 it declined to $1,239/oz. Analyst forecasts for 2015 and 2016 vary immensely. Investors are cautious and are showing a marked reluctance to allocate funds to miners whose production costs exceed $750/oz.

While producers the world over fret about the downward direction of the copper price, another major constraint for Congolese miners in particular is a chronic shortage of electricity. Bucking the national trend, Tenke’s annual copper output fell 3.4% in 2014. According to a senior executive at the company who requests anonymity: “It was all due to a lack of power. We would like 105MW of electricity to operate our project, but we only get 69-82MW, and that’s not including unplanned outages and cutbacks.” Tenke’s solution has been to invest $250m in the refurbishment of Katanga Province’s Nseke hydroelectric power plant, which should be capable of generating 260MW once it is fully operational in late 2016. ●●●

0

0 2004

2006

2008

2010

2012

2014

2004

Kibali is so remote that there was never a prospect of it receiving electricity from the grid, and so the development of its own power source has been an integral part of the project from the beginning. Much of the capital expenditure by Randgold and AngloGold at Kibali has been on hydropower, which is currently peaking at 17MW. This is still not enough, however, forcing a continued reliance on diesel generators, which remain a major component of Kibali’s costs.

Mining companies and the ministry of mines have been arguing with each other for over a year without agreement about the government’s planned review of the mining code. The current mining code was introduced in 2002, but the The government is unable to keep up with the demands of the energy-hungry industry

OLIVIER POLET

50

2006

2008

2010

2012

2014

Congolese authorities argue that it has not created enough tax revenue. Mines minister Martin Kabwelulu submitted proposals for a new code to the cabinet in mid-February, infuriating the chamber of mines, which said he broke off negotiations without addressing its concerns.

This also sparked strong debate among Kabwelulu’s colleagues, many of whom said he had been too generous to mining companies, particularly regarding royalties.

In the draft code, Kabwelulu’s proposal for a 3% mining royalty was increased to 3.5%, the minimum government stake in new mining projects was set at 10% and the so-called stability provisions, which relate to the period of time that must elapse before contracts can be renegotiated, is to be reduced from the current period of 10 years to five. The national assembly was scheduled to debate the proposals in March.

While the country’s political class obsesses over what will happen leading up to national elections in 2016, mining executives profess to be unconcerned by questions of the presidency. “Whoever ends up in power will still need their mines to keep producing,” said one manager relaxedly on the sidelines of a breakfast hosted by the Congolese mines ministry at February’s Mining Indaba.

That may be so, but many miners acquired their assets via controversial middlemen like Israeli mogul Dan Gertler,allwithintimateassociationswith President Joseph Kabila’s inner circle.

This will mean awkward questions and likely threats of contract cancellations should an opposition leader succeed in replacing Kabila. ● Gregory Mthembu-Salter in Kinshasa

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country focus

Finance

Civil servants head to the banks The move to pay public sector workers via bank accounts has already saved the government $29m. But what’s in it for the banks?

John Bompengo/Radio okapi

52

T

he government’s drive to pay civil is indispensable. Our goal is to get a servants through banks is shakgrip on the number of workers in oring up the industry, with a few der to remove ghost workers from the financial institutions ramping up their list and to control salary payments in customer bases and taking in small but order to avoid fraudulent leakages.” rapidly rising deposits. The process is Since 2012, the government has saved not without its pitfalls, as working with 27bn Congolese francs ($29m), which the government poses challenges and corresponds to thousands of salaries the country’s lack of infrastructure leads for fake employees. to high operating costs.

The process of forcing civil servants deep roots to open bank accounts started in late This reform was not universally pop2011, and about a million public secular because it shook up corrupt nettor workers now have access to an acworks that have deep roots in governcount where they receive their salaries. ment offices. “We were threatened. The Today, the DRC’s central bank estimprime minister, who championed the ates that 74% of bureaucrats are paid reform, was, too. We had to improve through banks. our security,” explains It is the case for Darlose Kayembe. Three years after the launch of the bank paySoheranda and her husment programme, the sysband, both of whom are teachers in Eringeti in easttem remains “laborious”, according to prime minisern DRC. “We prefer to go of the population get our salary at the bank. ter Augustin Matata Ponyo: had a bank account There are no delays and at “We are putting in place a in 2013 (estimate) modern system based on least we are sure to get our Source: Finance MiniStry 2013 entire salary,” she says. Bethe existence of the banking fore 2012, workers would network, yet the DRC was only get about half of their salaries beunbanked 15 years ago. So, yes, there cause unscrupulous agents took cuts are still some difficulties.” here and there throughout its transit Among the problems are the state’s payments to banks. Fifteen banks distribto its destination. ute civil service salaries and are paid $3.6 Bankers initially welcomed the govper transfer in well-served urban zones ernment’s initiative, but all of the hard and $5.8 in areas with weak infrastrucwork has not been completed. JeanLouis Kayembe, the director of the civil ture. Michel Losembe (see page 54), chief service salary programme at the central executive officer (CEO) of the Banque bank, explains the importance of the Internationale pour l’Afrique au Congo project: “This reform was necessary and president of the Association Conbecause the public sector wage bill repgolaise des Banques, explains the banks’ resents 40% of government spending, complaints: “The last fees we received and having control of public spending cover payments for the month of August

5%

Pay-day queues at banks are a necessary evil of the drive to clean up civil servants’ pay

2014. This creates a heavy burden for the banks because, despite the salary payments, payments in cash remain high.”

Another obstacle in the payment process is that the state has not finalised the list of public servants. Patrick Kabisi, Ecobank’s director of high-street banking, says: “One of the preliminary conditions for us to be able to provide banking facilities to civil servants is for the lists furnished by the government to be stable. We cannot afford to take the risk of giving a one-year loan to a worker if in three months he will no longer be on the lists.”

With cars stuck in the mud and convoys attacked, one of the largest challenges is simply reaching workers. Many of them work in zones that are difficult to access. The DRC is as large as Western Europe, has few practicable roads and has a low rate of electricity provision, raising costs for banks. With ongoing conflict in the east, banks face problems of insecurity in transporting salaries to bank branches.

Some sites are so isolated that civil servants have to travel 200km each month in order to receive their salaries. “For those workers, we have decided to pay them outside of the banking system until we can find other solutions. For the moment, they are paid through the Catholic charity Caritas,” explains the central bank’s Kayembe.

In view of these problems, what is in it for the banks, which, after all, have the goal of making profits? Ecobank’s Kabisi explains: “We will maximise our ● ● ● the africa report

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ENGEN DRC

Making a difference

ENGEN DRC is a private company with objectives ives to distribute and commercialize petroleum products ducts such as fuel, gasoil, kerosene, heavy fuel and lubricants.

Given the widest network of 60 service stations in the DRC, ENGEN DRC has become the market leader lead eader for distributing petroleum products.

Thanks to an electronic ENGEN 1-CARD and top-end station shops, ENGEN secures ecures its clients with an increased autonomy, y, a better control of fuel consumption as well as safe and reliable transactions.

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country focus | democratic republic of congo

profitability when we are able to add other products and services to the simple execution of paying into an account – things like pay-day advances.

Profitability will also be maximised when bureaucrats leave their money in their accounts. Banks base their loans on customer deposits.”

It is generally difficult for workers, who earn about $100 per month, to have access to loans or savings accounts. Hassan Wazni, CEO of Sofibanque, explains: “Our external auditor complained because this process is not bringing us enough money. We do not have any direct profitability from this, but of the 100,000 civil servant accounts that we have, 2,000 to 3,000 have received a loan, so that will earn for us in terms of the interest rate.” ●●●

fixed and mobile banking

Trust Merchant Bank (TMB) and Bank of Africa (BOA) have benefited from the civil service’s contribution to the growth of the sector. The number of public servants who bank with TMB rose 120-fold from 2011 to 2013, from 1,500 to more than 170,000. The bank’s deposits more than tripled over that period, and its total customer base rose to more than 460,000 as TMB managed the accounts of 29% of the DRC’s civil servants by December 2013. BOA reported in 2014 that the savings it manages rose 2.2 times during the government’s programme roll-out.

However, BOA has been losing money since 2011 and the new customers have not led the bank into profit. However, they helped reduce the bank’s net loss to 1bn Congolese francs in 2013. On the other hand, TMB’s annual net income rose more than six-fold to over 6bn Congolese francs in 2013.

It is not just the banks that want in on the game. Telecommunications operators are pushing mobile banking where banks do not or cannot go. “It is a process that will bear fruit in the long term.

We hope to reach bureaucrats with the other products that we are offering, explains Samuel Brawerman, the head of Tigo Cash in the DRC. Mobile operators first went after the most remote areas where there are no bank branches but there are mobile networks. Banks have also welcomed the growing competition in bigger cities so that they can avoid the long queues that form each month in front of the country’s banks. ● Aurélie Fontaine in Kinshasa

interview

BAUDoUIN MoUANDA foR JA

54

Michel Losembe

President, Association Congolaise des Banques

Room for improvement TAR: How has the banking sector codes. Another problem is the taxation changed over the past 10 years? on provisions for bad debts. The DRC It has progressed strongly. It was is one of the only countries in the world the Sun City accords – which laid where once you make a provision the foundation for the political and for a non-performing loan you have economic reunification of the country to pay tax on it. That certainly in 2002 – that led to the financial discourages risk taking. sector’s renaissance. At the time, there were six banks and most of the big Interest rates are really high in the public banks no longer existed or were DRC, between 10% and 15%. Why hardly functioning. Their total balance is that? sheets hardly reached $200m-$300m, Normally, interest rates are tied with more than half coming from special to the cost of money. Here, banks accounts opened by donors. have to invest in very expensive Today we have 18 banks in the DRC infrastructure in order to get access with balance sheets totalling $4bn. to liquidity. In the DRC there are fewer Up until 2012, the banking sector than 300 branches, in which banks recorded annual growth of 30-40% had to invest massive sums in order from one year to the next and there to get deposits that turn out to was economic growth of 7-8%. In be relatively small. If a bank wants spite of these numbers, activity in the to open a branch in an isolated city, sector remains very weak and in most it is difficult to transport the cases is lower than the levels in neighbouring “Here, banks have to invest countries. in very expensive infrastructure There is a lot of room for improvement and to get access to liquidity” that is something that makes the Congolese banking sector construction materials because of the attractive. Today there are 3m bank state of the roads. They have to invest accounts. If you add microfinance in security systems, in generators and mobile banking, you get 5-6m because there is no electricity accounts. It is impressive compared and in satellite dishes to communicate. to the 50,000 bank accounts a decade Nonetheless, the informal economy ago, but it is very weak in relation to is strong and economic clusters the 70 million inhabitants in the country. are spread throughout the country.

That makes it difficult to benefit from What are the difficulties that the economies of scale. industry faces?

Public-private partnerships are Why do small businesses suffer complicated, legislation is complex, from a lack of access to credit? the tax system is inappropriate and Today, backed by international there are a multitude of administrations donors, banks are interested in this. to adapt to. This phenomenon will But for this to work, it is necessary only become more convoluted when to educate the bankers themselves. the number of provinces passes from Ten years ago there were not any 11 to 26, producing more governments banks, so no bankers. Today, in order and more taxes. to supervise small companies, banks Moreover, the government does have to create specialised departments not offer incentives for the banking that have enough technical knowledge sector – there are no fiscal advantages to be useful to the market. ● given and no benefits in the investment Interview by A. F. in Kinshasa the africa report

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Unleashing DRC’s Agriculture Potential IFDC (International fertilizer Development Centre) works on three main aspects; Agriculture inputs, production inrease and sthrengthening agriculture markets.

This work, through various projects, is done in close collaboration with governments, the private sector and small scale farmers.

IFDC’s projects in DRC promote and support the development of agricultural production chains that are vibrant, the intensification of competitive production, the increase and improvement of the efficiency of agricultural input markets and agricultural products and the creation of favorable policies.

Before the arrival of IFDCs CATALIST-1 project in South and North Kivu in 2007, consumption of inputs was limited to a few direct imports by industrial plantations (especially tea and quina ) and a few opportunistic imports from “big traders” in Bukavu and Butembo from Rwanda and Uganda.

The origin and quality of the products were not known in most cases. The distribution network was nonexistent and the few inputs available were distributed through the network of retailers of veterinary products.

This type of large scale, by IFDC supported, interventions related to agriculture input markets, have been highly successsful in the region. In Burundi, where after the introduction of a national fertilizer subsidy programme, the private sector bought 11.000 T. of subsidized fertilizer instead of the normal 4000 Tons and in Rwanda where, with the introduction of the CIP(crop intensification Programme) programme by the national government the sector now has access to 30.000 Tons a year instead of the 6000 tons.

IFDC can support the Government of the Democratic Republic of Congo through in the development of national fertilizer/input market policies. Through its CATALIST02 project, IFDC is currently piloting a subsidy programme in North and South Kivu in close collaboration with the local governments.

For more information on IFDC strategies on agriculture inputs visit www.ifdc.org

Since then, Importers/distributors have emerged and work within the formal sector and imported truckloads of good quality fertilizer from suppliers that meet international standards as MEA YARA in Kenya and Tanzania. Retailers have emerged (there are about forty around Bukavu and the Ruzizi plain) and a number of smallholder farmers now purchase and use fertilizers, improved seeds and pesticides.

Nevertheless, the amounts used does not even cover 1% of the cultivated area; So it is urgent to make inputs available on a larger scale through an ambitious and dynamic strategy.

There is great potential to work side by side with (local) governments, other stakeholders and small holder farmers to develop input markets. The IFDC approach of building national fertilizer subsidy schemes, aims to improve the status of the value chain, but also benifits those at the provincial level (exporters, processors, tax collectors, etc ...) and at national level.

Expected results of increasing access to these inputs are increased production, increase in exports, job creation, increased purchasing power for farmers and vibrant markets.

IFDC (International Fertilizer Development Center) is an international public organization working to increase agriculture food security. CATALIST-2, IFDC’s project in North and South Kivu is funded by the Netherlands Directorate-General for Development Cooperation (DGIS) and the Swiss Agency for Development and Cooperation (SDC)

country focus | democratic republic of congo

La Cité du Fleuve, one of the new, upmarket residential complexes springing up around Kinshasa

Gwenn Dubourthoumieu/ja

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Nonetheless, housing and office buildings – built mainly by Congolese, Lebanese and Chinese companies – are largely too expensive for locals. This is pushing middle-class and poorer people farther and farther away from Kinshasa’s central business district. In less central areas like Route de l’Aéroport, residents can rent a house for $400-$500 per month, but even that price is too expensive for many Congolese, as civil servants earn about $100 per month. low-cost lack

There is almost no social or low-cost housing in the capital. The government launched a programme in 2012 to build 4,100 low-cost units, with 1,000 of them to be located in Kinshasa. The project quickly collapsed, with some suggesting that the money was misappropriated.

“Donors were discouraged. I do not know why,” says Bob Kadima, the innowhere is the wealth gap more visible than spection director at the ministry of urban in property: prices continue to be sky-high in upmarket planning and housing. “We relaunched construction a couple of months ago neighbourhoods while affordable housing is scarce and experts are now on the ground to evaluate the costs,” adds Kadima. long the principal avenues of high. Then there were new construcOther low-cost projects have faced the chic and expensive neightions, but prices did not drop because their own delays. A Chinese company bourhood of Gombe, there are people were ready to pay those rates announced its plans to work with the government to construct 10,000 housing countless high-end buildings under – international organisations, foreign units in the neighbourhood of Kinkole construction. However, this prolifercompanies and the UN mission in the in September 2013, but the project has ation of new apartments for rent and DRC,” explains Youssef Mansour, a finbeen slow to advance. The governfor sale are not pushing housing prices ance director for real-estate developer ment has had trouble attracting seridown. Kinshasa is one of the top 10 Achour. Those are organisations with ous investors, and previous low-cost most expensive African cities to live means and which prefer to have their housing projects in Kinshasa – like the in according to a 2014 study by the US employees live close to their offices, as Cité du Millenium project research firm Mercer. political stability is still launched in 2005 – have The Gombe neighbourhood of Kinvolatile in the country. failed to materialise. shasa, the capital of the DRC, is home Other factors influIn order to regulate the to rich locals and expatriates. Rents encing the high rents Estimated rental market, the govfor apartments vary from $1,200 to in about three wellhousing deficit ernment has created a $5,000 per month, while a villa can off regions of the capin Kinshasa new policy so that propcost anywhere from $2,500 to $10,000. ital are the huge traffic To purchase an apartment, you will erty owners cannot ask jams in this city of 14 Source: Agence nAtionAle pour lA promotion deS inveStiSSementS need somewhere between $200,000 for more than three million people and the and $450,000, depending on the size months’ rent in advance. Landlords frequent power and electricity cuts in had typically requested the payment of of the unit. other neighbourhoods. In Kinshasa, six months’ rent for new renters. Kadima So why are prices so high in a counrenters argue that prices will drop with says that the measure has been effective: try that is amongst the poorest in the the planned departure in six months of “For two years, 70% of complaints have world? A first factor is that the mara large number of officials from the UN concluded with penalties imposed on mission. For Achour’s Mansour, prices ket for medium and top-end houslandlords.” The government also tried should decline soon: “Economically, ing was extremely weak before 2006. to set up a price spectrum per square the country is stable. What remains to “Before that date, it was difficult to find beautiful apartments in Kinshasa. be known is what will happen with the metre for allowable rents, but failed. ● Aurélie Fontaine in Kinshasa The supply was weak, so prices were next presidential elections.”

Housing

Kinshasa is for the rich

a

1.6m

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country focus | democratic republic of congo

opinion

Muzong W. Kodi Associate fellow, Chatham House

Post-election DRC: expecting change or more of the same?

a

lthough their expectations have not been met in the past, the desperate citizens of the Democratic Republic of Congo (DRC) will hope against all hope that the 2016 elections will usher in long-awaited change for the better. Out of myriad daunting obstacles, what are some of the key challenges that need to be overcome to make such a change a reality?

Over the past few years, macroeconomic indicators have steadily improved, with average growth rates at around 6%. Substantial efforts have been made to improve the business climate and reforms have been undertaken in public financial management. Some progress has been achieved in enforcing transparency in the mining sector through the Extractive Industries Transparency Initiative. However, as the government has admitted, these improvements have not been parlayed into socio-economic benefits for the population. Extreme poverty is widespread, with the majority of the people eking out a miserable living on less than $2 per day. Food insecurity and malnutrition are rampant, not only in the conflict-affected eastern provinces but throughout the country.

The most affected people are, ironically, in the agricultural sector. Less than 30% of Congolese citizens have access to potable water in rural areas, and less than 15% to electricity throughout the country. An estimated 70% of the youth is unemployed. The protracted violence in the eastern provinces has created a humanitarian catastrophe, with close to three million internally displaced people living in very precarious conditions.

For the Congolese people’s dream of a better future to come true, a number of important changes in governance will have to be made. This will only be possible if the elections bring forth a core of committed and dedicated leaders with a long-term vision for harnessing the country’s vast resources and using them for inclusive and sustainable development. To this end, appropriate measures will

need to be taken to promote good governance and long-term economic planning and budgeting. In sectors such as mining, oil, gas and forestry, which have the potential to provide substantial and badly needed revenue, reforms will need to be enacted with a view to promoting and enforcing transparency and accountability. A local-content policy should be implemented with a view to developing new sets of skills and providing employment. Revenue from natural resource sectors should be used to diversify the economy.

Foreconomicgrowth to become pro-poor, corruption should be relentlessly fought, people’s access to services should be improved, infrastructure should be built or rehabilitated and stability should be restored. Spending on human capital, health, education and infrastructure should be increased. The agricultural sector – which accountsforanestimated40%ofgrossdomestic product and employs more than 80% of the female workforce – should be prioritised, with an emphasis on smallholder farmers rather than agribusiness.

Political stability will be key to the success of any remedial measures taken. It will, therefore, be important to continue the efforts made by the army and the UN mission to disarm militia groups in the east. To this end, the international community will need to continue to exert pressure on the DRC’s meddlesome neighbours to the east to abide by their commitment not to support militias. In parallel, the implementation of security-sector reform and the disarmament, demobilisation and reintegration of former rebels should be accelerated. Appropriate measures will also need to be taken to address issues related to land conflicts, sexual violence, psychological trauma and displacement. If, at the forthcoming elections, the people do not wake up and elect visionary and committed leaders who will put the well-being of their fellow citizens before their own selfish interests, there will be no change for the long-suffering people of the DRC. ● the africa report

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74

dossier oil & gas

Oil

Big winners and Exporting countries and producers large and small are reeling from the impact of the oil price’s vertiginous drop over the past six months. The Africa Report looks at who is benefiting from the turmoil and who will be hurt the most

By Jon Marks in Casablanca

T

he extent of the big wins and painful losses experienced by governments, international oil companies (IOCs) and other stakeholders as oil prices have plunged is becoming clear across Africa. Even though prices spiked upwards in late February from their sub-$50per-barrellows,fewanalystsexpect a sustained increase during 2015, meaning importer governments, thermal-power producers and refiners will continue to benefit.

The IOCs have moved ruthlessly

to make big spending cuts, but a number of national oil companies have yet to respond as quickly.

Morocco’s recent fortunes highlight the roller-coaster ride. “The government had already made somebravemovesonsubsidies,but thearrivalofthesub-$50-per-barrel oil is still a real benefit for this oil importer,” World Bank Middle East and North Africa chief economist Shanta Devarajan said in Casablanca on 4 February. “It is worth at least 0.5% of GDP [gross domestic product] this year, and it could be 1%”.Butwhilecheaperimportshave

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needs to produce more from its fieldsin Ghana,UgandaandKenya to provide what Heavey has called “a dramatic change to cash flow”.

Even the biggest plays, such as the major offshore gas developments planned by Mozambique and Tanzania, could be delayed, restructuredor stalled. Super-indie Anadarko and Italy’s Eni are still expected to develop liquefied natural gas exports from Mozambique, but the timetables for these schemes are being pushed back.

Delays, restructuring and stalling are expected as oil producers cut back

sore losers redressedthebalance-of-payments deficit and cut a huge subsidy bill –downtozeroin2015from12.5%of governmentspendingin2015–the Office National des Hydrocarbures etdes Minesislookingonnervously as dozens of IOCs that entered the under-exploredMoroccanoffshore andonshorein2013and2014revise their budgets. Several have already announcedcutsanddelaystotheir exploration plans.

IOCs will continue to invest but only in the most attractive projects.

Even before the price crash, many IOCs had been cutting back on the africa report

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their ambitious offshore drilling plans to look for quick wins in onshore and shallow waters.

Key players impacted by the reversal of fortunes include Tullow. Saddled with $3.1bn in outstanding loans in late 2014, it cut its global exploration budget for 2015 to $200m – 80% lower than in 2014 – and announced $500m in spending cuts. Chief executive Aidan Heavey announced the company’s first loss in 15 years – a massive $2bn – while the company’s share value has more than halved in one year. Tullow urgently

Kevin M. Law/aLL Canada Photos/Corbis

nigeria on hold

There have been persistent delays to a majority of Nigerian projects.

They have largely been caused by IOCs’doubts overarangeof policy, governance and security concerns and the government’s failure to pass the 2008 Petroleum Industry Bill. Many projects planned years ago that might have been expected to be developed during the lowprice period have never reached their final investment decision stage and will be further stalled.

Plans for the $12bn Bonga South West offshore project have stalled despite operator Shell receiving bids last year for major engineering contracts.

It is not just IOCs that must cut back. In Nigeria and frontier markets, indigenous companies have been growing into serious players, in some cases buying assets relinquished by IOCs. That is a path trodden by internationally listed Oando and Seplat in Nigeria.

Oando is the only one of its cohort that has hedged its oil for the next coupleofyears,puttingitinabetter position with guaranteed higher prices for its oil sales.

Smaller players, which in Nigeria have purchased marginal fields and other assets by borrowing locally, are expected to come under real pressure. Ecobank reports that Nigerian banks financed more than 80% of oil and gas asset purchases concluded in the country over the past five years.

Speaking during International Petroleum Week 2015 in London, EcobankCapitaloiland gasanalyst Dolapo Oni commented that firms “who are largely reliant on debt funding are very exposed to ● ● ●

dossier | oil & gas

Brent crude: a seven-year roller-coaster ride July 2008

The price of Brent crude, the international benchmark, peaks at a record US$145.75 in July on the London-based ICE Futures exchange.

June 2014

NICHOLLS PETER/THE TIMES/SIPA

76

Brent crude trades as high as US$115.71 per barrel.

31 January 2011

Brent price hits the US$100 mark for the first time since October 2008, due to political upheavals in Egypt and Libya, and amid traders’ fears of unrest disrupting oil supplies.

2009-2010

London Brent crude oil price sharply rebounds after the crisis and climbs back to US$90 a barrel in December 2010.

December 2008

Price plummets to US$30.28 a barrel, the lowest since the financial crisis began in 2007.

● ● ● high costs. They have smaller resources, smaller production.

They have borrowed a lot so are very vulnerable.”

Hard-pressed producers can no longer count on the Organisation of Petroleum Exporting Countries

(OPEC)toprotectpricesatanycost.

Saudi Arabia pushed the divided cartel to let prices drift to preserve market share at OPEC’s critical ministerial meeting in Vienna on 27November.Accordingtoveteran Saudi petroleum minister Ali bin Ibrahim Al-Naimi, Riyadh’s support for the decision to let prices fall was driven by a reaction to production from ‘marginal areas’ that was biting into more ‘efficient’ producers’ market share. These included Brazil’s pre-salt zones and offshore West Africa, as well as US shale and Russian competition.

While the Gulf producers have very low production costs – of-

ten quoted at $3-$4 per barrel in Saudi Arabia – companies in the Gulf of Guinea and other rivals whose industries have boomed in recent years work on very different economics. A February 2015 report by the South African arm of consultancy firm PwC quoted US EnergyInformationAdministration data to observe that “Africa has one of the highest average finding costs in theworldat amassive $35.01 per barrel in 2009, surpassed only by the US offshore fields which came in at $41.51 per barrel.”

In this high-cost environment, PwC observed: “Frontier areas around the world will potentially

Oil and Luanda’s best-laid plans The Angolan government has had to slash its spending by 25% but claims its infrastructure plans remain intact

T

he Angolan authorities are scrambling to adapt to the lower oil price, but it may be a case of too little, too late. Oil accounts for two-thirds of government revenue and 98% of exports.

In a revised 2015 budget on 26 February the government slashed its spending forecast

by K1.8trn ($17bn), but it is still optimistic that it will be able to attract new investment

and that projects will be finished on time. In February, thegovernmentinLuandaannounced its plan for a licensing round for 25 oil blocks.

Spendingcutswillnotaffect infrastructure projects at this stage, according to Antoon de Klerk, portfolio manager at Investec Asset Management. “Recent comments by the government suggest infrastructure spending will be

maintained. The government has also reiterated its commitment to doubling power output by 2017 through upgrades to the Cambambe and Lauca dams in Kwanza Norte Province and a new facility in Zaire Province. Additionally, multiple water provision and logistics projects, such as the $3.9bn national network of logistical platforms, are still underway. But under the cur-

rentoilpriceenvironment,the Angolan authorities will not be able to sustain investment unless large foreign direct investment inflows help ease some of the burdens.” Some projects have been delayed, such as the $10bn education investment programme.

A collapse in export revenue usually results in massive currency depreciation, which Angola cannot afford. William Jackson, a senioremerging-marketseconomist at research company Capital Economics explains that “externally denominated debts are equal to 35% of GDP

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oil & gas | dossier

16 October 2014

Brent crude sinks from the US$115 peak in mid-June to US$82.60 a barrel, a four-year low, as increased US shale production adds to a global glut.

8 December 2014

Brent continues falling and reaches US$66.90, the lowest since October 2009, as a result of sluggish demand from China and Europe, and OPEC’s refusal to curtail production to boost prices.

suffer from delayed development in the near term. These include technically difficult projects that require more spend than conventional production, such as deepwater, sub-salt, shale gas and enhanced oil recovery ventures.” Among the frontier projects where delays could be expected, PwC cited offshore exploration and shale gas in South Africa, subsalt projects in the Republic of Congo and Angola, and offshore acreage in Tanzania. cOFFERS RUnnInG DRy

For now, there is little that OPEC members who find themselves in a precarious situation – including Algeria, Angola and Nigeria – can do. Big-spending governments

[gross domestic product], so devaluing the kwanza would notbeeasy.Inaddition,athird of domestic credit is denominated in foreign currencies, so banks might face larger non-performing loans, and this could create strains in the banking sector.”

GOOD FOR SUBSIDIES

The lower oil price has helped the government to cut fuel subsidies, which currently account for 4.5% of GDP. “The government wants to decrease this to 1% of GDP in the medium term, and this has already resulted in a signithe africa report

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Angola, Africa’s secondbiggest crude producer, approves a 5.4trn kwanza ($51bn) revised 2015 budget cut, reducing expenditure by 25% due to a drop in oil prices from the $81 previously forecasted to $40 per barrel (see below).

2 March 2015

Brent crude for April settlement trades at US$61.36 on the Londonbased ICE Futures exchange.

are fast running out of money.

A government official tells The Africa Report that Algeria’s muchvaunted foreign reserves fell from around $200bn in mid-2014 to about $130bn by January.

Observers heard Naimi and Algerian energy minister Youcef Yousfi shouting at each other in Vienna shortly before OPEC came to its decision in November. Since then, anxious diplomacy by ‘loser’ governments has failed to budge the ‘market share’ hardliners. London think tank Chatham House’s Paul Stevens advises analysts to “look at the body language […] there is still no sign of an emergency OPEC meeting being announced” that might signal any change of direction.

ficant rise in fuel prices,” says Rand Merchant Bank.

With the brakes being be applied to a range of social programmes, some analysts argue that the political fallout could be huge. Ricardo Soares de Oliveira a political scientist at Oxford University, says “none of these developments strengthen [President José Eduardo] Dos Santos and the MPLA [Movimento Popular de Libertação de Angola], so there is no doubt that this createsaconsiderableamount of turbulence, unpredictability and social dissatisfaction.

But he is a powerful and well-

26 February 2015

Jerome SeSSini/edit by Getty imaGeS

15 August 2014

EIA announces that US total crude oil production averaged an estimated 8.5 million barrels per day in July, the highest monthly level of production since April 1987.

With many oil producers’ chanceries advocating meaningful spending cuts, governments’ normal default position – buying their way out of trouble – becomes all the harder. Oil buyers took advantageofrisingproductionworldwide to build stocks. Sellers now have cargoes of crude oil stranded in storage. Oni observes that despite the Nigerian National Petroleum Corporation offering extra discounts to push sales, Nigeria has faced considerable difficulties in selling its crude since December.

As huge crude stocks build up in the US, Europe and other key economies, futures markets suggest the lower price environment will persist and that producers’ woes will mount accordingly. ●

entrenched incumbent, who has been around for 36 years and has weathered many difficult moments, and the opposition is weak.”

Angolaisthesecond-largest oil producer in sub-Saharan Africa and has estimated gross reserves of 9bn barrels.

According to Sonangol, the state-owned oil company, oil production is set to increase from 1.66m barrels per day in December 2014 to 1.83 in 2015 following the completion of expansion projects.

French company Total’s offshore Cravo-Lirio-OrquideaVioleta project in Block 17 is

January 2015

Brent drops 60% below its June high of $115 to settle at US$45 a barrel, its lowest since March 2009.

expected to increase productionbyanextra160,000barrels per day. After some teething problems last year, it is now fully operational. But how muchoftheproductionwould be uneconomical to pump at $50 per barrel? “The average cost of producing a barrel of oil in Angola is estimated at $30, with the range of the different production areas between $15 and $40 per barrel. The presalt area is more expensive to pump since the technology used is different,” says Tiago Dionisio, an assistant director at Eaglestone Securities. ● Warren Dick

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Uganda

From Russia with refining capacity

Uganda’s oil sector has been slow to lift off, but plans for a Russian-built refinery are crystallising and talks on other essential infrastructure could soon make progress

O

n 17 February, Russian state-run conglomerate RT Global Resources and its consortium partners won a $4bn bid to build an oil refinery in Uganda. It is a sign of Moscow’s growing interest in Africa as its companies face economic sanctions from Europe and the US because of Russia’s role in the Ukrainian conflict. RT Global – a subsidiary of the sanctions-hit Rostec group that manufactures the Kalashnikov rifle – and its partners beat off the South Korean competition.

As the conflict grinds on in eastern Ukraine, Russia’s pariah status in the West has contributed to a refocusing of Moscow’s economic partnerships with African countries. Moroccan fruit and vegetable cargoes, for example, are now pitching up in Russia in greater numbers to replace those usually imported from Europe.

GS Engineering and Construction Corporation. RT Global and parent company Rostec are no strangers to Uganda’s top officials.

The country struck an arms deal with Rostec for Sukhoi jets at a cost of $700m in 2011, which was a controversial outlay.

The parties have not agreed the shareholding of the refinery, but the Russian team can take up to 60%, with Uganda and other East African governments left to take up the remaining shares of

what is set to be the region’s only functioning refinery. In its initial stages, the refinery will be able to produce 30,000 barrels per day, with its capacity later rising to a projected 60,000.

“Tax is one of the main issues we shall be discussing,” says an official who will be part of the refinery negotiations. Denis Kakembo, a senior tax manager with Deloitte East Africa, explains: “Experts have in the recent past highlighted the need to review some aspects of Uganda’s tax policy – especially the VAT [Value-Added Tax] regime – that have the potential to derail project economics. The government must cede some ground, especiallyonthetax front,to facilitate a feasible commercial structure.”

The official who will be involved in the negotiations plays down the impact of economic sanctions on Russia, saying “they do not affect operations outside Russia.” That may be an optimistic reading of events. Speaking to reporters in

Infrastructure plans begin to take shape Tullow, Total and CNOOC are developing feeder pipelines to transport oil from oil fields to the central processing facilities and on to the refinery in Hoima. The combined length of this pipeline network is 143km.

Crude oil export pipeline.

To be built by Tullow, Total and CNOOC to transport products abroad.

Northern fields

kampala revs up

Uganda’s oil industry has been slowed by infrastructure deficits and long delays in government decision-making. But there are now signs that there could be an uptick in activity after the energy ministry announced on 24 February that it plans to award nine new exploration licences before the end of the year. A previous licensing round was held nine years ago.

Discussions between the Kampala government and the members of the Russian consortium were due to start in the second week of March. The consortium’s other members are Telconet Capital Limited Partnership, VTB Capital, Tatneft JSC and

Central processing

Central processing

Southern fields

m

00

$2

Southern fields (Kaiso-Tonya) the africa report

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late February, US ambassador to Uganda Scott DeLisi implied that financing and “other issues” could yet scuttle the refinery deal, saying: “I would suggest that you wait and see how that all plays out.” Some analysts saw that as an implied threat that the US could cut off its aid to Kampala – which reached $700m in 2012.

The government estimates that investment of $12bn will be needed before first oil can be produced by the target of 2018. However, the current international environment is not conducive to major investments in frontier oil territories like Uganda. With a barrel of Brent crude trading at about $60 in early March, a number of companies, including Tullow – one of the upstream companies operating in Uganda – have had their share prices battered. To ride through the storm of quick price changes, Tullow announced a cutback in capital expenditure early this year (see page 75).

RT Global Resources consortium

25 22.5 20 17.5 15 12.5 10 7.5 5 2.5 0

(000s bpd)

1985

1980

1990

1995

2000

$3

00

Refinery (under discussion)

m

RT Global Resources and the government of Uganda are constructing a 205km products pipeline and an oil terminal facility outside Kampala.

bn

$4

The Ugandan government is funding construction of a network of roads stretching some 92km around Hoima and the refinery. The work is being carried out by Turkish firm Kolin Insaat Turizm Sayani Ve Ticaret.

26

m The Ugandan government has announced plans to build an airport to transport equipment and manpower to develop the oil fields and refinery.

No cost estimate has yet been announced.

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Airport

source: the africa report

Terminal

$1

2010

2013

export pipeline

Uganda, Kenya and Rwanda are funding the construction of a 784km multi-product pipeline linking facilities in Kampala, Eldoret and Kigali.

40%

2005

spent more than a year waiting for production licences. “The government has so far only approved one production licence [to China National Offshore Oil Corporation (CNOOC)]. Progress with granting the others has been slow. Foreign investors will be aware of this,” says campaign group Global Witness’s George Boden, who covers Uganda’s oil industry.

Uganda’sCentralBankgovernor, Emmanuel Tumusiime-Mutebile, predicts companies might not be in a rush to commit huge funds.

“Most of the capital investments in the oil industry are irreversible, especially those involving large-scale infrastructure such as pipelines,” Mutebile said at a workshop a week after the refinery deal was announced.

There are reasons for continued worry about Uganda’s scheduled oil developments. Industry watchers point to companies such as Tullow and Total, which have

Uganda and regional governments

60%

Ugandan oil consumption

Electricity provision is also set to hold production back. The refinery and other infrastructure will require additional power supplies.

The government recently stopped accepting requests for licences to produce electricity using gas and crude until it has completed a study of prospects for the industry.

The government estimates that there are 173bn cubic feet of associated gas in the oil-rich Albertine Graben, which should be enough to power a 50MW power plant for three decades.

On another front, Tullow, Total and CNOOC are expected to push ahead with their plans for building a crude export pipeline – which will also need to be constantly heated as Uganda’s oil is waxy – to the Kenyan port of Lamu. In December, the government contracted Toyota Tsusho to carry out a feasibility study for the pipeline, with the Japanese company expected to hand over its report before June. The pipeline, which will stretch more than 1,300km, is expected to cost between $4bn and $5bn. With the government’s slow pace and the negative international price trends, the players in Uganda’s growing oil sector will require patience and deep pockets to see their projects through. ● Jeff Mbanga in Kampala

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source: us energy information administration

oil & gas | dossier

day in the life Extraordinary storiEs of ordinary pEoplE

PetterIk WIggers/Panos PIctures for tar

90

Ad-libbing it Tewodros Terefe is a comic, a poet, a musician and a bar manager all rolled into one. He keeps his customers laughing as the drinks flow, using nothing but a masenko and his razor-sharp wit

I

am an azmari (singer and musician), so my job is to make people happy. I love it. I usually work from 9pm until about 4am, depending on how long the customers stay, then I sleep until the afternoon. I perform songs all night, and they have to be funny and new. Sometimes I do a little preparation if I know who will be in the audience, but usually it’s all ad-libbed. If there is a couple in the bar, I might tell the man his girlfriend is too good-looking for him. Or if there is a single man, I might make fun of him because he doesn’t have a wife. Sometimes people get angry at my jokes, but I can always smooth it over by singing something a little nicer.

It’s an important job because it’s got a lot of history and it’s central to our culture. It goes back to Yared, a musician who lived in the sixth century and is now a saint in the Ethiopian Orthodox Church. But in the past, this wasn’t always considered an honourable profession.

I’m from the city of Gondar and my parents are farmers there. When I was young and working as a shepherd, my father taught me how to play the masenko, a traditional instrument. It’s like a violin with only one string. I used to make them myself out of wood and horsehair, but now

I have them made by professionals. It’s a difficult instrument to play, but as I got better I started touring around the country. I even went to play once in Juba, South Sudan.

I toured for eight years before settling in the capital, Addis Ababa, and I’ve been in the city for a decade now.

My best night ever was when I played for the richest man in Ethiopia, Sheikh Mohammed Al Amoudi. I sang some funny songs about how valuable he is, and at the end he tipped us 60,000 birr ($2,965), which we split between six performers. The worst night I can remember was when I performed for a crowd of musicians. They were professionals who did modern music. At one point I was so nervous that I couldn’t come up with any lyrics.

I froze and just stood there silently. I still get nervous sometimes, but mostly it’s easy.

profit-share

Now I work seven nights a week at a bar called Elilta Azmari Mishit in a neighbourhood called Haya Hulet in Addis. The other performers and I run the business, and we split the profits every month. This bar is profitable and the better we perform, the more money we make.

I’m working on other things too. I’ve recorded some songs for an album, and now I just need sponsors to promote it.

It’s difficult to make money that way, but the more prominent I become, the easier it will be.

I’m 32, and I think about getting married. Plenty of women come to the bar, but it’s hard to find the right one.

When I eventually have children, I wouldn’t want them to do the same work I do. Working through the night isn’t easy, so I hope they will be well educated and become professionals instead. ● Interview by Jacey Fortin the africa report

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