Tar71 bus mining power

MININg Dealing in the downturn

NANA AkufO-AddO “Ghana is bankrupt”

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

SOuTh AfRIcA The DA’s Maimane comes out fighting

N ° 71 • j u N e 2 015

nigeria

What can buhari do for africa?

The new poster boy for democracy can inspire and influence beyond the border – if he can overcome domestic troubles

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 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

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NIGERIA What can Buhari do for Africa?

MINING Dealing in the downturn

SOUTH AFRICA The DA’s Maimane comes out fighting

w w w.the af ric arepor t.com

N ° 71 • JU NE 2015

KENYA Monica Juma, Kenyatta’s brain

NIGERIA What can Buhari do for Africa?

UGANDA Patrick Bitature takes on the region

w w w.the af ric arepor t.com

MINING Dealing in the downturn

N ° 71 • JU NE 2015

NIGERIA What can Buhari do for Africa?

MAURITIUS Putting out the bank fire

w w w.the af ric arepor t.com

N ° 71 • JU NE 2015

MINING Dealing in the downturn

NANA AKUFO-ADDO “Ghana is bankrupt”

w w w.the af ric arepor t.com

contents

SOUTH AFRICA The DA’s Maimane comes out fighting

N ° 71 • JU NE 2015

THE AFRICA REPORT

Nigeria EXCLUSIVE INTERVIEW

Nana Akufo-Addo

“Ghana is bankrupt”

South Africa

EXCLUSIVE INTERVIEW

Maimane comes out

“Africa must stop subsidising the West!”

The Chairman of Centum on how Kenya needs to fight for its farmers

GROUPE JEUNE AFRIQUE

GROUPE JEUNE AFRIQUE

MONTHLY • N° 71 • JUNE 2015

Chris Kirubi

The leader of the opposition says the government has brought the country to its knees, and offers his own economic remedies

fighting

The Democratic Alliance’s first black leader takes on ANC corruption GROUPE JEUNE AFRIQUE

WHAT CAN BUHARI DO FOR AFRICA?

The new poster boy for democracy can inspire and influence beyond the border – if he can overcome domestic troubles

The AfricA reporT # 71 - June 2015

GROUPE JEUNE AFRIQUE

GHANA EDITION

EASTERN AFRICA

SOUTHERN AFRICA EDITION

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 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

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 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

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 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

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 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

Business

4 Editorial Springtime for soldiers

60 mining Dealing in the downturn The gold price plunge is putting the squeeze on miners’ bottom lines, forcing them to sell their non-essential assets

6 lEttErs

cover crediTs: inTernATionAl: BAyo omoBoriowo/Ap/sipA - souTh AfricA: JAco mArAis/foTo24/GAllo imAGes/GeTTy imAGes - wesT AfricA: frAncis KoKoroKo for TAr - eAsT AfricA:sieGfried modolA for TAr

8 thE QuEstion

Briefing 10 signposts

22

12 opinion Pumla Dineo Gqola and Lindiwe Mthembu-Salter 16 intErnational 18 pEoplE

68 lEadErs Chris Kirubi, chairman of Centum Investment 70 lEadErs Patrick Bitature, founder and chairman of Simba Group

20 calEndar

frontLine 22 north africa A dream deferred As the old cronies re-emerge, is burying the hatchet the way to get economies moving?

poLitics 28 ElEctions 2015 What can Buhari do for Nigeria?

Soldiers, young people and bankers outline what they want from the new government

72 financE Ecobank benefits from its pan-African platform 73 hannibal

28

powEr dossiEr 74 Dakar out of the dark The electricity blackouts that plagued Senegal in 2011 are long gone but customers are wary of Senelec’s power strategy 78 ghana Slow progress on privatisation 80 rEnEwablEs Green today, cheap tomorrow

32 intErviEw Nana Akufo-Addo, Ghanaian presidential candidate

Art & Life

36 intErviEw Mmusi Maimane, leader of the Democratic Alliance

36

38 sEnEgal Karim’s comeback 39 morocco Abortion outrage

82 nollywood A house divided and standing Nigerian directors are ditching their trademark genre in favour of a grittier filmmaking style 86 briEfs Malian musician Ben Zabo and community radio in Tanzania

39 rwanda-tanzania Kagame vs. Kikwete

88 travEl Cape Town

40 anansi

country focus 45 mauritius The great clean-up The new cabinet flexes its muscles against corruption and problems in the banking sector the africa report

64 aviation In Somaliland, the hopeful look skyward

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45

90 day in thE lifE Mohamed Hussein, Somali refugee and writer

This issue carries an insert between pages 34-35 for selected countries

3

4

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

Springtime for soldiers

T

he armed forces are back at the centre of politics. Be they serving professionals, retired generals, jihadists trained in the Sahel or crew-cut wearing South African mercenaries, the men – and a smattering of women – in khaki are calling the shots again. In Nigeria, General (retired) Muhammadu Buhari captured the imagination in the country’s most credible elections for 50 years. And six months ago in Burkina Faso, the military took its cue from mass protests against long-standing President Blaise Compaoré’s bid to change the constitution and get another term; he was driven into exile within a week.

Activists’ hopes were raised again in mid-May in Burundi when a group of generals around former intelligence chief Godefroid Niyombare tried to stop President Pierre Nkurunziza’s campaign to secure a third term. That time, Nkurunziza’s presidential guard defeated the putsch.

But events in Ouagadougou and Bujumbura raise the question of a ‘good coup’. That was the argument of General Abdel Fattah alSisi in Egypt after he overthrew the Muslim Brotherhood government in 2013. The military campaign

by Libya’s General Khalifa Haftar against a band of Tripoli-based Islamists who also claim an electoral mandate follows the same lines.

Both Sisi and Haftar get tacit backing from the West but a nuanced ticking-off from the African Union.

Soldiers will be getting stuck into more of such battles in the next few years. After two decades of high-octane growth in Africa, the World Bank has announced that this century’s first commodity supercycle has ended as China cuts copper, iron and gold im-

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

ports. It also cites a report from the Armed Conflict Location and Event Data Project tracking riots, violence against civilians and military battles since 2000. Although the number of fatalities from such clashes dipped to about 1,000 per year in 2006 when economic growth levels were hitting new peaks, it was more than 12,000 by the beginning of this year.

That number does not include those chased from their homes who might die of starvation or disease. The United Nations reckons that there are more than 12 million people displaced by conflict in Africa.This is The military a challenge as much to Africa’s armies as to its remains politicians. Though the the strongest military’s record is at institution, best uneven, in many countries it remains with a range the strongest and most of ethnicities representative national institution, including a and classes range of ethnicities and in its ranks classes in its ranks.

Part of the aura that surrounds Nigeria’s Buhari is that he is regarded as an ascetic soldier who fought in Nigeria’s civil war and then made a genuine attempt to fight corruption as a military leader in the 1980s.

Comments such as ‘this country needs some military discipline’ emanate from some of the unlikeliest quarters in Abuja.

Politics holds the answers to the governance crises that plague Africa. But solutions must include the capacity to reform Africa’s militaries so they can defend constitutionalism and democratic rights.

The image of a general standing up for democracy need no longer be an optical illusion. ●

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 (niGeriA) Billie AdwOA McternAn (GhAnA) 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 AnAÏs QuérOn 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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IntERnAtIonAl 1

2 1

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US

$5bn

In late April, the New York State Common Retirement Fund announced plans to invest up to 3% of its pension assets in Africa by 2020 as part of a strategy to increase returns.

The pension fund manages around $180bn.

4

SAUDI ARABIA

Royal family sheikh up

2

Uk

Last man standing

British election pollsters were left scratching their heads after Britain’s Conservative Party sprinted to victory in the general election on 7 May by a narrow but clear margin. Until the last minute widely-published polls put Conservatives and Labour neck and neck and predicted a hung parliament.

The election was followed by a slew of resignations as Labour and Liberal Democrat leaders Ed Miliband and Nick Clegg fell on their swords after embarrassing losses in parliament. Nigel Farage, leader of the right-wing UKIP party, failed to win a seat though his party did not accept his resignation.

Nicola Sturgeon’s Scottish National Party was the election’s big winner, turning its modest six seats into 56 in the 650-seat parliament, effectively making Scotland a one-party state. Cameron’s joy at the Conservative victory is likely to be tempered by the problem of how to continue Britain’s fragile economic recovery while avoiding being held to ransom by an anti-European right wing ahead of a referendum on EU membership due before the end of 2017. ● 3

GREECE

Robbing Petros to pay Pavlos Fraught talks between Greece and a troika of international lenders rumbled on as Athens only narrowly avoided default on its International Monetary Fund (IMF) repayments in early May through some nifty financial footwork.

Greece transferred cash out of one IMF holding account and into an IMF deposit account. This move, combined with borrowing cash from the government of the city of Thessalonica, allowed it to repay its $750m debt 24 hours ahead of time. It only buys the government a few weeks until more payments are due. Although talks are making progress on releasing previously agreed bailout funds, both sides remain divided on key issues. ●

Saudi king Salman bin Abdulaziz ushered in a new era of political transformation in the kingdom by appointing a new heir to the throne from the next generation of the ruling family. Salman ended the 60-year tradition of naming an heir from the many children of Saudi Arabia’s founder, Abdulaziz Ibn Saud, his father. In late April, he named his nephew Mohammad bin Naif, 55, as crown prince – the next in line to the throne. The move aims to combat the growing generational divide between rulers and ruled. About 70% of Saudi Arabians are under 30, but the country’s recent leaders have been in their 70s and 80s. ●

5

SyRIA

“Psychological defeat is the final defeat and we are not worried ” Syria’s President Bashar al-Assad speaking in early May ahead of a UN push to restart peace talks in Geneva between the government and opposition

ABR

GeoFF PuGh/ReX ShuTTeRS/SIPA

16

the africa report

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AFRICAN YOUTH IN PHILANTHROPY CONFERENCE 29-30 June

MINING ON TOP: AFRICA-LONDON SUMMIT 24-26 June

ARUSHA | TANZANIA 100 young Africans get to put forward their views ahead of the African Grantmakers Network AGM. aypconference.org

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Côte d’Ivoire

2020

© RENAUD VANDERMEEREN /LES ÉDITIONS DU JAGUAR

MAJOR CHALLENGES TO BE MET

Abidjan, modern city of more than 4 million people.

O

n Saturday, 25 April, the majority coalition nominated the president of Côte d’Ivoire for a second term in office. “I am announcing the nomination of the only candidate of the Rassemblement des Houphouëtistes pour la démocratie et

la paix (RHDP) for president,” his main ally, Henri Konan Bédié, said during a ceremony

at Abidjan’s biggest stadium. In a white hat and shirt, Alassane Ouattara gave his first campaign speech before tens of thousands of supporters six months prior to election day.

ADVERTORIAL - June 2015 - I

Côte d’Ivoire

In unity there is strength “Our party is Côte d’Ivoire’s only chance for long-term stability and development,” Mr. Ouattara told the convention after thanking the five parties making up his coalition.1 Addressing his supporters in Abidjan’s biggest stadium, he spoke, based on the governing party’s

President Alassane Ouattara arrives at the Félix Houphouët Boigny stadium in Abidjan on April 25, 2015

record, about his vision of “a hard-working Côte d’Ivoire that believes in its bright future” while acknowledging that “major challenges remain, especially in the social sphere, the only guarantor

© YOURI LENQUETTE/ JA

of lasting peace and national unity.”

Booming public and private investment fuel vibrant economic growth — approximately 9% a year between 2012 and 2014.

The country is back to work The word “record” came up several times during the nomination ceremony: Côte d’Ivoire has made noteworthy strides in the past four years. Booming public and private investment fuel vibrant economic growth — approximately 9% a year between 2012 and 2014. Infrastructure tells a big part of the story. Since 2012, Côte d’Ivoire has built roads, motorways and bridges to bring people closer together and increase economic exchanges. At least 50,000 classrooms and 1,000 health centres have been constructed or refurbished nationwide. Progress has also been made in the areas of water and electricity: new power stations and lines have brought light to Ivoirians and enabled Côte d’Ivoire to export electricity to neighbouring countries.

Sococe shopping center in Abidjan.

1

Five parties make up the Rassemblement des Houphouëtistes pour la démocratie et la paix (RHDP), which was founded in May 2005: Mr. Bédié’s Parti démocratique de Côte d’Ivoire (PDCI-RCA), the Rassemblement des républicains (RDR Ouattara’s party), the Union pour la démocratie et la paix (UDPCI), the Union pour la Côte d’Ivoire (UPCI) and the Mouvement des forces d’avenir (MFA).

ADVERTORIAL - June 2015 - II

© VINCENT FOURNIER/ JA

The containers terminal at Abidjan’s Port.

© KAMBOU SIA / AFP

2020: major challenges to be met © KAMBOU SIA / JA

Boosting agricultural production Agriculture will always be a priority for Mr. Ouattara, who thanked his “brother farmers” for making Côte d’Ivoire “a champion in many fields”.

Two-thirds of the country’s households earn their living from agriculture, which accounts for 70% of export revenues. A total of $4 billion have been invested in the sector since 2012. Côte d’Ivoire

The unit against high technology crime.

has strengthened its position as the world’s leading cocoa producer with an annual output of 1.5 million tonnes today (40% of the world total). It is

“LASTING PEACE AND NATIONAL UNITY”

the world’s second-leading grower of cashew nuts (450,000t/year) and Africa’s top rubber producer (305,450t/year). The output of these cash crops rose by 14% and of subsistence crops by 28%

Created on 24 March, the National

between 2012 and 2014. The agricultural sector has

Commission for Reconciliation and

created over 650,000 jobs. © RENAUD VANDERMEEREN / LES ÉDITIONS DU JAGUAR

the Compensation of Victims (Conariv) is a new step towards narrowing the deep social divide that opened up with the socio-political crises of the 2000s.

Peace, security and the rule of law have been restored in the past four years. The State has redeployed its administration and reasserted its authority throughout the country, which had been cut in half. Conariv continues the work of the Truth and Reconciliation Commission, which had been created in the events’ aftermath, but in a more peaceful

New food crops in the Bouaké area.

political context. It has set specific goals: caring for victims and paying out the reparations they are due. To achieve

Businessmen are confident again The country’s entire economy is back on track. The international

those aims, this year Conariv has a 10-billion-FCFA ($20 million) budget. It has already gathered information from

community broadly backs the National Development Plan (PND),

all the stakeholders and gives itself three

which has invested $20 billion in the economy since 2012. The

months to compile a consolidated list of

investment opportunities it offers, and the president’s and his min-

victims to compensate.

isters’ many trips abroad, have burnished the country’s international image. In a sign of restored confidence, businessmen are flocking back to Côte d’Ivoire. Private investment now accounts for 62% of the total. Several public-private projects tapping a total of nearly $15 billion are under way in energy, transport, agro-industry, ICT,

Over 650,000 jobs created in the agricultural sector in four years.

the environment, urban planning, health and education.

ADVERTORIAL - June 2015 - III

2020: major challenges to be met © NABIL ZORKOT / JA

Côte d’Ivoire

MEETING THE CHALLENGES OF HEALTH AND EDUCATION Côte d’Ivoire has nearly 23 million people, 40% of them under 14 years old. These figures alone sum up the country’s health and education challenges. Much has been accomplished since 2012.

Côte d’Ivoire’s 85 hospitals, as well as 600 local health centres, have been refurbished and re-equipped, and an additional 450 are under

Testing laboratory at Cipharm’s pharmaceutical production facility.

construction. The rehabilitation of 30,000 primary school classrooms, and the building of 25,000 more, will

What remains to be done Many challenges still lie ahead. The country is at peace, but “reconciliation is still the priority” said candidate Ouattara, recalling the recent creation of the National

help to reach the goal of universal enrolment in 2015-2016. The building and equipping of 40 middle schools and four regional universities, as well as the rehabilitation of the © NABIL ZORKOT / JA

Commission for Reconciliation and the Compensation of Victims (CONARIV, see box). He is aware that the man in the street has not seen the fruits of growth trickle down to him. Increasing prices paid to farmers by an average of 40%, doubling the minimum wage and raising over half the civil servants’ salaries have not benefitted everybody.

That is why social issues are at the heart of Mr. Ouattara’s second campaign programme. Doing more for youth, providing education and better-quality teaching for all universal health care, are the commitments he made on 25 April “to strengthen what has been achieved, improve everyday life and increase buying power.”

The University of Abidjan. country’s four main universities and two graduate schools, offer a rising number of students a chance to contribute to their country’s economic development.

Providing education for all and facilitating access to basic social services, including universal health care.

The earliest results are encouraging, but it will take much more work and energy to give Côte d’Ivoire the social infrastructure it needs to satisfy youth and fulfil their desires for economic development. “We will give our children quality education, for they are our future,” candidate Ouattara said on 25 April.

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and facilitating access to basic social services, including

Kross Border benefits as Mauritius lures “business with substance” the Mauritian government’s attempts to diversify the economy from its reliance on sugar started to bear fruit. 21 years later, its financial services industry is well established, and the island is positioning itself as a hub for investment into Africa.

Kross Border, which originally formed part of KPMG Mauritius but was spun off and rebranded in 2003 to comply with the Sarbanes-Oxley Act, has shared in the Mauritian success story: its staff complement has doubled to 120, and revenue jumped 82% over the past five years in US dollar terms.

“We are increasingly seeing business with substance coming here, and I think it is a trend that will continue,” said Jaye Jingree, managing director of Kross Border and one of its founders.

An increasing number of Australian mining companies, for example, are establishing offices in Mauritius to manage investments in Africa. Setting up a base in Mauritius offers a stable environment and helps to manage the time difference between the continent and Australia, said Jingree.

Gone are the early days of working from 9 to 4 – with global clients to serve, office hours and weekends are no longer set in stone.

“We are focused on our service delivery. We respond fairly rapidly to clients, and we’re available 24/7. This, along with the long-term relationships we have with our clients and a low turnover of staff help to give us a competitive advantage. Many of our employees have been with us from the start, and it gives clients some comfort to deal with the same people over many years,” said Jingree.

Kross Border currently manages 650 structures, including multinational companies, high net worth individuals, investors, fund managers and financial institutions. The firm has a branch in Singapore and is looking to set up offices in London, Hong Kong and Mumbai.

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It has representatives in a number of countries around the world and is affiliated with Russell Bedford International, a global network of independent firms of accountants, auditors, tax advisers and business consultants Kross Border’s main service offerings include fund administration, tax advisory and compliance, asset protection, company formation, re-domiciliation and statutory compliance, accounting and payroll, ship and yacht registration, trade support, fiduciary services and occupation and permanent residence permits.

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Mauritius has double taxation treaties with 37 countries, with many more under negotiation or awaiting ratification, offering investors greater opportunities to plan their investments. It also has investment promotion and protection agreements in place with 22 countries, including China, Singapore, India, South Africa, Germany, the UK and Switzerland.

With uncertainty surrounding the future of a doubletaxation agreement with India, a big business driver for the Mauritian financial services sector, there is a major focus on Africa.

“At the moment, everyone is focused on Africa. It is a difficult market to enter – you’re dealing with different countries, different languages. There are many challenges. Mauritius offers a stable platform from where to do business,” Jingree said.

Clients are particularly interested in East and West Africa, with investments going into mining, oil & gas, agri-business, infrastructure development and trading, he said.

“Mauritius has been a very important point for Indian companies to channel foreign direct investment through Mauritius. Now we’re seeing companies from across the globe using Mauritius as a hub for investment worldwide.”

M. JAYE C.JINGREE MANAGING DIRECTOR

Kross Border

St Louis Business Centre, Cnr Desroches & St Louis Streets, Port Louis, Mauritius www.krossborder.com

DIFCOM/CDS - PHOTOS : DR.

Back in 1993 when Kross Border was established,

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Mining

Dealing in

The dramatic fall in the gold price has exposed just how many miners did not save enough during the boom years.

They are now looking to sell off non-essential assets, while new tax regimes and community activism add to their pressures

By Gregory Mthembu-Salter in Cape Town

A

prolonged, steep drop in the price of most minerals has hit African mining operations hard, coming at a time when many are already heavily debt-laden. At the same time, firms have to respond to demands for a rising share of their proceeds from African governments and communities.

The gold price has fallen steeply, driven down by expectations of a hike in interest rates in the US. This istemptinginvestorsandemerging economies to stop hedging in gold and put their money in US stocks, bonds and currency. In late April, the gold price was $1,183/oz, down from $1,679.50 on 3 January 2013.

Copper and iron ore prices have

also dropped substantially from their 2011 highs.

Any company producing 500,000oz (14.2tn) of gold per year or more – preferably at costs of less than $800/oz – is still attracting investor interest. One such company is Jersey-based Randgold Resources, which mines gold in Mali, Côte d’Ivoire and the DRC. Randgold’s total annual production was a record 1.1m ounces in 2014, up from 920,428oz in 2013, and was produced at an average cost of $637/oz.

Randgold’s strong results encourage outspoken chief executive Mark Bristow to berate his industry peers: “We enjoyed an unprecedented boom up till 2011, and what value have we managed

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Everyone knew the gold price bonanza would not be a bottomless lake – and now it’s sink or swim

to store? Not enough. At the peak of the boom, the mining sector was valued at $2.3trn. Today it is less than half of that. A golden opportunity to create lasting value has been missed.”

According to Mark Tyler, an investment banker at Nedbank Capital, more value destruction is coming as markets work out which of the mining projects at which they blindly threw money during the boom years were duds. Tyler notes that the 2014 decline in the gold index, which tracks the value of gold mining companies, was far more marked than the fall in the price of gold. “For years, equity markets masked the underlying value of stocks, just going up and up,whethertheyshouldhavedone

$300m Mining firm Endeavour plans to drastically cut capital from previous 2013/2014 highs to just $20m in 2015

t h e a f r i c a r e p o r t • n ° 71 • j u n e 2 015

or not. That meant many projects werefinanced that should not have been financed, and all this will take a long time to unwind,” Tyler says.

The bearish sentiment is making the going tough for all the juniors. Toronto and Australia-listed Endeavour Mining Corporation minesgoldinGhana,Mali,Burkina Faso and Côte d’Ivoire, with output totalling 466,000oz in 2014. It projects that production will rise to 500,000oz in 2015. parity danger

Endeavour’s senior vice-president Doug Reddy tells The Africa Report that the company, though still a junior, has risen to become West Africa’s “number two or three” gold producer. Its Agbaou gold

mine in Côte d’Ivoire produces gold at just $650/oz, but Endeavour’s average production cost for 2015 is projected to be $930-$980/ oz – uncomfortably near the current global gold price and one of the factors causing the company’s share price to languish at around Canadian $0.6 ($0.5). “We are looking for investors. Given what we are producing, our market cap is too low. Our share price is too low,” says Reddy.

Seeking to reassure potential investors, Endeavour chief executive Neil Woodyer says that the company will slash capital expenditure in 2015, from $300m during 2013/2014 to just $20m. Woodyer also promises that the company will reduce its net debt of $250m.

Photo12 /AlAmy

the downturn

John Stanmeyer/VII

business | companies & markets

A big exception to the negative trend is the Switzerland-based trading and mining giant Glencore. While the company’s mining divisions are less profitable than in previous years due to falling prices, and Glencore caused a stir in February by announcing the sale of its 23.9% holding in beleaguered platinum producer Lonmin, Glencore is doing better than its competitors.

According to Wickus Botha, leader of the Africa mining and metalssectorforglobalconsultants Ernst&Young:“Evenwhenmineral prices are down, Glencore’s trading division still makes money on arbitrage – all the more so, in fact, because it is the only trader that actually owns its own mines. All the othertraders just have minority stakes in other people’s.” big boys can choose

ProfitablecompanieslikeGlencore and Randgold are now well placed to consider acquisitions, but only if the assets on offer and their price are right. Struggling companies are frantically signalling their willingness to offload non-essential assets, but these are not necessarily the assets those with stronger bottom lines wish to acquire. “Everyone wants to sell their non-core,” says Botha, “but who wants to buy them? Why bother at these com-

modity prices unless you really can achieve synergies? Of all the potential deals that come across our desk, only 10% are actually getting done.”

Companies have cut back on their exploration budgets, and less exploration now means fewer mines later to replace the ones that are currently in operation. When productionfalls,commodityprices will surely pick up once more. Investors’moneywillthenonceagain pour–viaequitymarkets–intonew mining ventures, some of which analysts like Tyler will later condemn for their poor quality. Such is the commodity cycle.

But that is for the future. Right now, mining companies are focused on how to be profitable when costs are rising, revenues areshrinkingandtheirAfricanhost governments are busy changing the rules to ensure a bigger slice of the pie for themselves.

The most notable case is Zambia, where the government of the late President Michael Sata radically changed the mining taxation regime in 2014, scrapping the corporation tax and dramatically hiking taxes on revenue.

Leading the case for higher government revenue from mining, Zambian commerce minister Margaret Mwanakatwe says: “We are a well-meaning government, open

Konkola Copper Mines in Zambia has been hit by President Lungu’s new tax regime at just the wrong time

to well-meaning investors. But we are under pressure to respond to popular concerns.” After battling with companies, President Edgar Lungu’s government reached a compromise in April and decided to increase mining royalties to 9% across the board instead of implementing the planned 20% rate for underground mines.

The higher taxes in the new regime will not help companies already facing problems.

Konkola Copper Mines (KCM) vice-president David Paterson tells The Africa Report: “KCM is at a crucial point. We have had declining profit for the past few years due to falling production. Our unit costs have gone up. Vedanta [Resources] hasbeenlendingtousand wehave debt with the bank. We have also paid a lot of tax, $830m over the past 10 years […] but the situation now is that you can be making losses and still have to pay tax.”

Other countries are following suit. In South Africa, the government is conducting a drawn-out review of its mining charter that will see a rise in the share of mining companies that must be owned by black South Africans. In the DRC, the government is set to relaunch talkswithcompaniesoverarevised mining code that would impose higher royalty taxes for minerals and larger shares of mining projects for the government.

African mining companies are also under growing pressure from localcommunitiesdirectlyaffected by mining, who are increasingly organised and pressing for better deals. Coinciding with the February Mining Indaba in Cape Town was the much livelier Alternative

Gold loses a little shine (US$/oz) 1,800 1,600 1,400 1,200 1,000 800 Source: Gold Price

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opinion

Mining Indaba, which featured community organisations, lobby groups, trade unions and churches fromalloverthecontinent.Theyall argued that miners should spend more on communities affected by their activities and that they should pay more tax. greed, or just deserts?

There was discussion at the mainstream Indaba, too, about how mining can contribute to socio-economic development.

The few mining companies that participated in the debate seemed to accept that they can do more and better.

But mining companies are generallymorehostiletowardsgovernments’ changes to mining legislation. “There is a creeping resource nationalism,” Randgold’s Bristow argues. Governments, he says, “are wanting to cash in quickly and to reap what they have not sown.”

Côte d’Ivoire’s mines minister Jean-Claude Brou, meanwhile, has bucked the continental trend, introducing a new mining code in early 2014 that is very favourable to mining companies. According to Brou: “Our new law is investment friendly. We know there is competition for foreign capital […] so we did not modify the fiscal regime. Instead, we added tax exemptions. The World Bank thought it too generous, but we believe you have to look at the whole package: what will be the impact of the investment on the economy, how much tax will be generated? The private sector is happy, and we are seeing rising investment in Côte d’Ivoire.”

But a mining operator in Zimbabwe, who spoke to The Africa Report on condition of anonymity, argues that Brou was needlessly bending over backwards to please foreign investors: “I operate in Zimbabwe, and 51% of my company is in local hands. I don’t care.

The mine is not going anywhere, and they need it to work as much as I do. In the oil sector, none of the majors have more than 20-30% of the big fields in Saudi Arabia or Kuwait or wherever. And no one bats an eyelid. Why should mining be different?” ● t h e a f r i c a r e p o r t • n ° 71 • j u n e 2 015

Patrick Smith

Editor in chief, The Africa Report

Smart thinking in a crisis

C

risis, what commodity crisis? Such a question is understandable from a banker on Wall Street. The 50% fall in oil prices in the last six months of 2014, or even the 63% fall in iron ore prices and 38% drop in copper prices over the past three years, do not look threatening if your trade is moving and investing other people’s money.

But it is more complex for Africa’s finance ministers. The events of last year have wreaked havoc with the budgets of Africa’s 11 oil-exporting economies. Partly because of the free-fall in oil prices, Nigeria’s new government faces a financial crisis.

In oil-importing countries, especially those with local refineries, lower oil prices will help. But almost all of Africa’s economies, which are strongly tied to the export of primary commodities, will take a hit. The World Bank warns that the commodity super cycle – fuelled

by China’s urbanisation and industrialisation – is petering Governments out after some 20 years of boom. According to Francisco Ferreira, the Bank’s chief economist for Africa, export inshould use come will fall by an average of 18% across the region this lower prices year. Governments should treat the price shock as permanto cut fuel ent, advises Ferreira, as Africa’s economies are much more vulnerable than other regions to commodity price shifts. subsidies For Antoinette Sayeh, Africa director for the International in favour Monetary Fund, the bigger issue “is the need to make more of a targeted rapid progress towards economic diversification and structural transformation to ensure strong and durable growth”. approach The difficulty here is how governments – under tougher financial conditions – will raise the investment they need.

What should be the response? First, governments should tackle the illicit financial flows – conducted through transfer pricing, tax avoidance and grand corruption in procurement – linked to resource projects.

Africa is losing well over $50bn per year from these outflows according to the high-level panel that reported to the African Union in January.

Second, governments must sharpen their public investment and trade policies. As countries face downward pressure on their currencies, their farmers and manufacturers could benefit from more competitive export prices, lower fuel costs and more competition among contractors.

Third, oil and gas producers should use the lower world prices to cut blanket fuel subsidies – which have generally enriched oil traders – in favour of a targeted programme of cash transfers to help the poorest.

Fourth, those energy producers should step up efforts to use those resources for local projects, especially to generate electricity. Richer governments could go further and expand exploration for resources whose prices are more likely to rebound in the near future.

Yet the volatility of commodity prices means governments will try to build in a margin for manoeuvre, even if reserves are much lower – and debt higher – than at the time of the 2008 financial crisis. There is a final warning on commodities that might also concentrate minds on Wall Street. Gloomier market analysts argue that forecasts of continuing low prices for copper could presage a wider economic slowdown. ●

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Photo12/AlAmy

Hargeisa’s Egal airport is strategically placed for air links to the Gulf States

aviation

In Somaliland, the hopeful look skyward

While governments do not recognise Somaliland’s independence from Somalia, the region’s investment in airport improvements could have far-reaching effects

T

hetaleoftwogoatsandtheir untimely deaths at Somaliland’s Hargeisa Egal Airport is part of aviation lore in the Horn of Africa. In the early 2000s, a Beechcraft King Air turboprop ran over the luckless goats, and – as the oft-told story goes – their owner was handsomely compensated for his loss. As news of the compensation spread, more herders headed towards the airport in the hope that their flocks might succumb on the runway and bring them untold riches.

If the airport seemed better at attracting goat herders than passengers not too long ago, all that is set to change. Egal reopened in 2013 after a major renovation which, along with the new terminal at Berbera airport, could help to establish Somaliland as a regionalaviationhubandassistthe breakaway state in building its case for independence from Somalia.

Today, Egal is powered by renewable energy and the United Arab Emirates-based carrier flydubai is set to launch a service totheairportthisyear.Aconsultant based in Hargeisa said the news could be transformational: “The interest shown by flydubai in expanding routes could indicate that Hargeisa is now well placed to take advantage of its geographical position as a strategic link between growing East African economies and the commercial and financial clout of the Gulf States.” While flydubai is set to join Ethiopian Airlines as an international carrier flying to Egal, Djibouti’s Warsan Airlines is also discussing the idea of providing a service to the capital.

Under President Ahmed Mohamed Mohamoud, who was elected in 2010, Somaliland has taken strides in improving its aviation infrastructure and, the government hopes, in gaining greater interna-

64.3 million Somaliland Development Fund

$64.3 million

European donor contributions to the Somaliland Development Fund cover only 5% of the money needed for the National Development Plan

tional acceptance. He attended the inauguration of the upgraded Berbera Airport in March, The international community does not recognise Somaliland as an independent state; it is recognised as an autonomous region in Somalia’s federal system. This lack of recognition precludes Somaliland from signing bilateral trade deals and also hinders its ability to attract aid and investment. “[Airports] are very important.

They are the main hubs that link us with the rest of the world,” says Saad Shire, Somaliland’s minister of national planning and development. “Land, air and maritime transport infrastructure are some of the key parameters every investor weighs [up] in their investment considerations.”

However, the source of the funding for the airport refurbishments underscores the challenges Somaliland faces. The cash-strapped government received $6.7m, predominately from the Kuwait Fund for Arab Economic Development and the US Agency for International Development, to expand the terminal, extend the runway and install wind-powered turbines at Egal. The Kuwait fund also paid for the construction of the new passenger terminal and perimeter fence at Berbera, on Somaliland’s north-west coast on the Gulf of Aden. friends in need

Without international recognition, Somaliland depends heavily on external assistance from friendly governments, such as those of the UK, Denmark, Norway and the Netherlands, which contribute to the Somaliland Development Fund. The $64.3m in the fund coversasmallpercentageofthe$1.2bn required to finance Somaliland’s 2012-2016 National Development Plan (see box).

Margaret Viola, a former consultant for the Somali-owned Daallo Airlines, highlights another challenge for Somaliland: “The government sees ● ● ● the africa report

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A sharp eye for new investment opportunities.

Asset Management • Trust Services Wealth Management • Corporate Advisory www.rogerscapital.mu

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business | companies & markets

Contributions to the Fund

$20.6m

$33.5m

$5.2m

Norway

$5m Total pledged for the Somaliland Development Fund:

Denmark

$64.3m

Great Britain

Netherlands

Source: Somaliland national planning and development miniStry

aviation as very important, but has little power to really influence it without control of their own airspace.” The International Civil Aviation Organisation transferred control of the airspace to Somalia in December 2014, bypassing Somaliland. On the political front, Turkey-brokered talks on relations between Somalia and Somaliland broke down in March because of disagreements about Somalia’s representatives in the discussions.

●●●

safety credentials

Somaliland faces stiff headwinds.

While the secessionist region struggles to draw international support, donors pledged $2.3bn in aid to Somalia in 2013. Unlike the country from which it seeks independence, Somaliland has many of the institutions of state, has held five elections judged free and fair since 2000 and has established itself as a relatively stable and peaceful territory.

“Egal airport is considered the safest airport in Somalia,” says Cabdilaahi Abokor, Somaliland’s former deputy security minister.

“Without its modernisation the international airlines would never have operated out of Egal airport – and that includes Ethiopian Airlines, which sees security as the number one issue.”

AnumberofSomalicommercial airlines operate out of Egal, including Jubba, Daallo and African Express. Hargeisa, in north-western Somaliland, is home to 750,000

people and is the de facto capital.

Aviation ministry records show that traffic through Egal was up even before the refurbishment.

Passenger numbers increased by 18% and air cargo by almost 29% between between 2010 and 2012, according to the ministry.

A total of 83,000 passengers passed through Egal and Berbera in 2013, according to planning minister Shire. With traffic at that level, Somaliland’s airports do not make it into Africa’s top 100 busiest airports. Before the Egal renovation, the airport served about 48,000 passengers per year.

Although the government has not released newer figures, local media claim that record numbers of passengers passed through Egal in 2014 and its new connection to the Gulf is expected to increase traffic further.

Civil aviation minister Mohamoud Hashi Abdi is hopeful that Ethiopian Airlines, Africa’s largest aviation company, will start flights to Berbera. Africa Express is currently the only airline to use the airport. The government wants to promote Berbera as a tourist destination. “[Ethiopian Airlines’] Berbera flight is also expected to serve our eastern Somaliland passengers well, on top of potential tourists from Ethiopia,” Abdi told local media. Moreover, Berbera port could be of strategic value to Somaliland’s landlocked neighbour Ethiopia, which could use Berbera as an alternative to Djibouti, its current outlet to the Gulf of Aden.

In a bid to attract investment, Somaliland passed a law in 2008 to protect foreign investors. CocaCola and Western Union are already operating in the autonomous region, while several international companies – Genel Energy, DNO International, and RAK Gas – are exploring for oil and gas. Somaliland’sbudgetfor2014was$220m, the largest in its history. The government relies heavily on the livestock sector, which accounts for 60%ofgrossdomesticproduct,and international donors. But Somaliland’s geography – at the nexus of the lucrative East African and Middle East markets – offers reasonsfortheSomalilandgovernment to be optimistic, especially in light of the modernisation of the country’s infrastructure. ● Richard Ferraris

Development without many dollars Faced with donors’ reluctance to commit Funds, the somaliland government is seeking new ways to strengthen the economy as it approaches the deadline for its 2012-2016 national development Plan (ndP). chief among concerns is the fact that, according to the world Bank, somaliland has the fourth-lowest gross domestic product per capita in the world. somaliland is locked out of the international system because it is not recognised as a sovereign state, and its economy relies heavily on the diaspora, which provides about $400m in remittances per year. of the $1.2bn required to fund the ndP, somaliland planned for $980m to come from external sources. donors have not provided anywhere near that sum. nonetheless, the ndP focuses on five pillars: the economy; infrastructure; governance; social spending; and the environment. the government planned to set aside about $175m of the budget for the economy pillar, and the ndP offers a roadmap for somaliland to diversify beyond agriculture by trying to encourage growth in manufacturing, commerce, tourism and mining. at $487m, by far the most money is devoted to the infrastructure pillar. ● R.F. the africa report

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business | leaders

inTErviEw

Chris Kirubi

Chairman, Centum Investment Company, Kenya

Africa must stop subsidising the West The Africa CEO of the Year’s conglomerate reported 291% growth in the five years to 2014. He says discriminatory export tariffs are to blame for keeping Africans in poverty TAR: Is it true that you turned down an invite from United States President Barack Obama last year?

ChRIS KIRUBI: Yes. [The US delegation] invited me to join them in Tanzania for dinner, but I felt it was the wrong place. Now that he’s coming to Kenya, I’m excited and very happy. If anybody invites me for dinner with him now, I will run. I will go. Maybe they’ll be too busy for me, but it’s OK. At least, he’ll have dinner with somebody in Kenya.

Obama is going to Kenya for a global summit on entrepreneurs. how can a new generation of business leaders be nurtured?

I personally think one of the major things we need to do is enhance the rule of law – make sure the courts are efficient and working to resolve any dispute of a commercial nature so that people are confident that if they have a dispute they can have it resolved fairly.

Secondly, I feel we need to make sure there are fair opportunities for everybody from any part of the world and we are willing to work with people from many countries, not just a narrow focus on the East or West.

You say Africa should do value addition and not just sell raw materials.

I am totally opposed to Africa continuing to be a raw-materials producer for everything. Our farmers continue to wallow in poverty, and yet they produce the best tea, the best coffee – which are drunk by very wealthy nations in the West. They also produce vegetables, and they are not getting enough returns. They are [also] buying raw materials from the Western world, like chemicals at very high costs. Why should Africa continue to subsidise the West?

Climbing the value chain is hard. how do you get farmers to rise up the technology ladder?

Technology is easy to come by. But when you want to export coffee in a packaged form, transformed into finished goods, the tariffs in the Western world are totally discriminating. They have different tariffs which discourage people from transforming their own products. That happens with coffee, cocoa, tea and many other products. Obviously, the West would like to encourage us to continue to be producers of raw materials and they [will] continue to add value to our goods and sell to the rest of the world and make

A kenyAn success story 1941 Born in Kenya 1960s Administrator at Kenatco transport company 1970s Launches property business 1998 Buys extra holdings in ICDCI, which becomes Centum 2008 Kirubi’s Haco Industries partners with Tiger Brands 2014 Centum wins Lamu coal power plant bid

their money. This is a conspiracy, and it should come to an end. If the World Trade Organisation means anything to Africa, it must see that our products are transformed in their home base and exported to other parts of the world.

Your businesses run across a range of sectors – property, consumergoods,mediaandfinance.

Is that diversity intentional?

It’s very intentional, simply because we don’t have a very huge space in one sector where we can develop. We have to create small companies operating in various sectors. When you put them together in one house, then you can have a big conglomerate. It’s unlike in the Western world where one company specialises in something and becomes a very big corporation. In Africa, if you want to grow, you just have to play a role in the africa report

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SIegfrIed Modola for tar

Kenyan engineers be included in the project so that they can learn from it?

We’re going to be training a lot of people. We don’t want to be lumped with Chinese labour forever. We are going to train our own people. Kenyans are being trained in the energy sector and the petroleum sector. You’ll be amazed at how many Kenyans are abroad studying all these subjects to be able to replace any foreign needs that we may have on a temporary basis.

several sectors to be able to cover most of the markets. The markets are still developing. They’re not that highly developed. We don’t have the middle class. We’re creating the middle class, and none of these classes on their own can sustain a lot of development.

In a column on healthcare recently, you wrote that the National Hospital Insurance Fund (NHIF) could perhaps provide better service.

I have totally voiced my distaste of what is happening in the NHIF because they are collecting people’s money and they are desktop officials who have never run a business. Healthcare is a big business, and they should be working with hospitals and other private-sector institutions in order to provide cheaper, efficient and quality medical care. Today, the africa report

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they take money and offer nothing. There is a lot of corruption in the sector and the wastage is so huge it’s unimaginable.

What parts of the healthcare business would you like to expand into?

We’re looking into building private hospitals with an emphasis

“We’re training our own people.

We don’t want to be lumped with Chinese labour forever” on the higher-quality diagnostic area where we use the latest technology. Our people are going to places like India, Malaysia, Dubai and many other places.

There’s a Chinese company in your consortium that will build a power plant at Lamu. Will

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I know there have been issues with people doing some land speculation in Lamu. Have you managed to secure the land that you need?

We have all the land we require, about 800ha of land that has been surveyed and that has been given to us by the government. We have no issues. These issues were there before, but everyone who needed to be relocated or made false claims, the government is dealing with all that. And it’s not just our project. The Lamu Port-Southern Sudan-Ethiopia Transport corridor is a big project that requires land in many areas. It has the port and various other terminals for oil. There are many, many areas that will come into play. This is going to be one of the biggest centres of activity for Kenya.

In Ethiopia, the state is taking a leading role. How do you rate its progress?

I think Ethiopia has a huge potential, but at the same time Ethiopia is a mixed bag because they still control foreign exchange. As far as I’m concerned, when you control foreign exchange you are limiting the way the private sector operates.

And therefore if you want people to bring in foreign currency or their own money, you can’t gain control when they make profits or when they want to import raw materials. It is not possible. They have to depend on the goodwill of civil servants. It is not the best way to attract business. ● Interview by Nicholas Norbrook

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Profile

Patrick Bitature

Founder and chairman, Simba Group

I was like a child in a supermarket The consummate entrepreneur with investments in real estate, telecoms, mining and energy sees opportunity in the kick-off of Uganda’s oil industry

P

atrick Bitature, the chairman of Simba Group, is a panAfrican entrepreneur.

“All countries are open for opportunity in Africa, the way I see it. I left a lot of business opportunities here when going to Nigeria [in 2000],” Bitature says of his first venture in Nigeria after MTN Nigeria signed him up as one of its retail dealers.

“When I went to Nigeria, there were so many opportunities I didn’t know where to start,” he continues. “I was like a child in a supermarket looking at all these sweets and chocolate. But you can’t be greedy and just go for everything.” Around 2003 Bitature decided to spend more time running his telecoms and property businesses in East Africa so he scaled down his operations in Nigeria and left them in the hands of his partners.

His entrepreneurial skills were born of necessity. As a 13-year-old, he boarded a bus to Kenya to get sugar because he could not stand

the loss of dignity that came with his family’s riches-to-rags story.

This was during the poitical upheaval of the early 1970s and his father had just been murdered by officials of the Idi Amin regime.

With that gruesome act, the luxury in which Bitature had been raised vanished. From his short trip to Kenya, Bitature returned to a hero’s welcome with 15kg of sugar. A trader had been born. variety show

A slew of businesses ensued, which ranged from selling women’s clothes and milk, bread and ice cream to running a forex bureau and even a night club. He also became a wrestling promoter, bringing competitors from the United States to fight in Uganda.

“I have tried everything. People think the journey is easy, but it’s not,” he says.

He seems, however, to have the old entrepreneurial knack of getting out of situations at the right time. Take, for example, his business of dealing in used cars

from Japan around 1978. “I used to bring cars from Japan. And I had to drive the cars from Mombasa.

People did not know where Japan was. There was little communication. Very few people knew how to send money, but I managed to start all that way before anyone had started. Then everybody got wind of Nagoya and Japan. As soon as more people got into it, I jumped out and said let me do something else.”

He then started his regional telecoms drive. Simba Telecom became a dealer for MTN in Uganda and Safaricom in Kenya.

It is now the biggest dealer in both countries. In Uganda, Bitature says that Simba, which deals in airtime and phones, reports a turnover of about $100m a year.

He says the Kenyan operations make about the same amount. In East Africa, Simba Telecom now records turnover of more than $500m per year.

When asked about his net worth, he says: “That I don’t talk about. I have shares in listed comthe africa report

BItature In BusIness 1980 Dropped out of university where he was studying business 1986 Launched his first company, Bita & Guma, to sell cars and textiles 1998 Founded Simba Telecom 2007 Became chairman of Umeme, the national electricity utility

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leaders | business

FrEDErIc NOY/cOSMOS FOr JA

going underground

One of the newest companies in that portfolio is Simba Mining, through which Bitature has ventured into gold mining in his village in Ibanda. “As a young boy, I used to think I will own a gold mine. You want to own a gold mine and not a bank,” he explains with the excitement of a teenager.

He says he ventured into mining because when he was the chairman of the Uganda Investment Authority – from which he stepped down early last year – he used to sell Uganda as a destination for investment in natural resources.

“Me, as a local investor, I have not invested in mining. So how do I sell the country to other people?” he asked. Simba Mining began its exploration programme in 2013 and has not found commercially exploitable reserves. Bitature is working with two Chinese firms on the project.

Bitature has substantially invested in his property businesses. His firms built the office blocks that house the headquarters of the China National Offshore Oil Corporation, one of three upstream oil firmsinUganda,andAirtelUganda, the second-largest telecom firm in the country. He says he also owns morethan30apartmentsin Kenya.

“As a boy, I used to think I’ll own a gold mine. You want to own a gold mine, not a bank” Whereas some of Bitature’s apartment blocks have highprofile residents, other real estate owners have not had as much luck. Uganda’s property market is depressed at the moment. A number of real estate businesses are struggling to get clients, and a walk through Kampala reveals empty office spaces and To-let signs all over the place.

“The property market is pretty flat in Uganda at the moment. the africa report

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There are no takers. You must have the capacity and alternative revenues to service loans,” says Bitature, who owns the franchise for Protea Hotels in Uganda, South Sudan, Rwanda and Burundi. He blames the sluggish oil market and says that this will soon change. The government argues that the oil sector is worth $150bn.

Bitature says investors should be looking at how to fit into the nascent oil and gas value chain.

Protea, for example, is building a hotel in Hoima, a town at the heart of Uganda’s oil industry.

He predicts that by the middle of next year Uganda’s oil industry will have a different outlook and lure more investors to the country. “As soon as the elections are over [in early 2016] and when the refinery work starts, then there will be sudden demand for property,” he says.

appointments

Freda Duplan Duplan is the first Ghanaian and the first woman to scale Nestlé Ghana’s hierarchy to the level of managing director. She joined the company as its information technology manager and worked her way up through positions including head of business services in Accra.

power surge

Bitature expects a similar rise in the demand for electricity where business has been bad. With the government having financed the construction of a series of hydropower plants, expensive thermal power plants such Bitature’s Electro-Maxxwereswitchedoffforover a year. Today the plant produces just 7MW of its 70MW capacity.

The businessman has spread his wealth to other parts of the country. In the north, when peace returned following the petering out of insurgencies like the Lord’s Resistance Army, local chiefs in the area gave Bitature more than 10,000 acres of land, where he has investing in growing maize.

He says there are about 5,000 out-growers working on the land, and he targets increasing that figure to 20,000.

Bitature has bigger plans too.

“We are going to put up a plant there in the next couple of months so that they can process the maize.

We also plan to build warehouses for post-harvest management so that there is food security in the region.” This is a long way for a man who started it all with a bus ride to Nairobi for sugar. ● Interview by Jeff Mbanga in Kampala

Huda Al Lawati In April, private-equity group Abraaj appointed Al Lawati as partner and chief investment officer for the Middle East and North Africa. She was previously a managing director for the region, leading investments in oil and gas, healthcare and food and beverages.

Bruce Hemphill The choice of Hemphill – a veteran of South Africa’s Standard Bank – as Old Mutual’s chief executive in April suggests the insurance giant’s future is in Africa. The group has set aside $500m for investment in the continent and has a stake in Nedbank.

NESTLé; ALL rIGHTS rESErvED; BONGIwE GuMEDE/GALLO IMAGES/FOTO24/GETTY

panies in London, Johannesburg and here. The share prices keep changing. All I know is that I have a portfolio of different companies.”

He says Simba Group employs more than 1,700 people.

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business | finance

The New York Times/reA

From kigali to Cape Town in seconds: Ecobank’s Omni platform is simple to use

Banks

Ecobank benefits from its pan-African platform The bank present in the largest number of African countries is gaining strength from its new online payment platform that links its clients all over the continent

T

ogo-based Ecobank has stolen a march on its continental banking rivals with the launch of its Omni platform, which allows clients in 32 countries to use a single online platform to oversee their operations. Being able to make and receive payments, as well as manage a pan-African treasury, has proved challenging across Africa’s fragmented business environments.

The need for these capabilities has been growing as foreign investors and African multinationals have expanded across the continent. “In essence, what we have created is an online banking portal that allows our clients to access all their bank accounts, perform real-time transactional reporting and allow them to make local and offshore payments,” says Patrick Gutmann, group head of transaction services at Ecobank.

Without doubt, the effort to implement a system on this scale has strengthened Ecobank. From the time the system was launched in mid-2013 to the end of last year, Ecobank recorded a 22% increase in customer acquisition, the number of electronic payment and cash management transactions increased nearly 200 times and the value of transactions increased sixfold. In April, Ecobank also announced that its profit for 2014 rose by 167% to $395m on the back of a costcutting campaign. new leader due

Meanwhile, the bank’s chief executive, Albert Essien, is due to step down soon because he has reached the mandatory retirement age, and the bank is looking for a new leader to set out new growth targets for the bank. Bank executives are looking to move

The new Ecobank platform allows payments between

32

countries

Source: ecobank

72

beyond the management conflict that led to the ousting of chief executive Thierry Tanoh in March 2014. Tanoh and Ecobank are in court to resolve their disputes.

Ecobank is leading a drive to attract more corporate clients.

Omni allows corporate firms to create a central treasury function. “The client can integrate their operations directly with the bank. So they can link their enterprise resource planning systems with the bank and allow the bank to do the reporting for them,” adds Gutmann. tiered system

The system allows clients to marry the requirements of subsidiaries in individual countries with an overarching central treasury. “So you can have a finance director that has access to the bank account locally, with a chief financial officer sitting somewhere else that has control over all the accounts across the continent,” says Gutmann. The finance directors have permission to authorise payments in their host countries, while executives in the treasury department at head office can quickly execute cross-border transfers.

To do this, Ecobank partnered with privately owned software company Fundtech, which is based in the US. Fundtech has worked with top banks across the globe, but getting a system compliant with the regulations of 32 states was not a simple task. The language requirements alone were tricky, as the system caters for French and English speakers, with Portuguese, too, to be added shortly.

Ecobank had a few advantages for this project. “As a relatively young bank,” says Fundtech’s head of sales for Europe, the Middle East and Africa, Peter Reynolds, “they didn’t have a massive legacy of information technology [IT] infrastructure,

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hannibal and they operated their entire banking system on one platform.

This simplified IT environment was a great help.”

Many banks that have attempted to build transcontinental franchises – whether in Africa or anywhere else – have had to do so through a combination of organic growth and acquisitions. Combining a whole lot of different IT systems through acquisitions often relies on a ‘patchwork’ system, where companies spend development resources getting different systems to talk to one another, as opposed to spending money on developing functionality.

As Fundtech was building its system from scratch in each of the countries Ecobank operated in it did not have to spend an inordinate amount of time getting different systems to work together, as one of Ecobank’s largest competitors, South Africa’s Standard Bank, has had to do. Standard Bank is larger than Ecobank in terms of assets and operates in 20 African countries. The bank opened a representative office in Ethiopia earlier this year. not forgetting cash

But as advanced as the technology in the new platform is, the bank could not lose sight of the need to offer cash services. “Cash is still a means of payment in many of the countries we operate in. There are still certain client segments that deal only in cash,” says Gutmann. Through experience Ecobank realised that a generic cash management offering would not work for most companies.

Gutmann concludes: “For us it was about us being able to grow our share of wallet with clients, so besides providing the capability of managing banking and treasury, it supports our lending activities and speaks to the mission of Ecobank as being a truly pan-African banking group.” In the absence of any monetary or fiscal union on the continent, integrated banking platforms can fill the gap by increasing the velocity of money and enabling greater intra-continental trade. ● Warren Dick in Johannesburg

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Picking winners EVEN TINY SHIFTS in government policies can lead to major changes in who are the winners and losers in African economies. The South African government announced in early May that it is changing regulations on its Black Economic Empowerment (BEE) programme, a move that will strengthen the position of the business barons. The department of trade and industry changed the weighting of BEE deals that benefit communities and special interest groups. Now companies seeking business with government will have to turn to the country’s business elite to raise their empowerment scores. It is yet to be seen whether the usual suspects will benefit, or whether a fresh batch of ANC-approved business folk will get the largesse.

Winning friends NoT All goVErNMENTS have the same capacity to shape markets. President Macky Sall’s government in Senegal is going shopping with its Plan Sénégal Emergent, which includes a long list of structural projects needing investors.

A trio of senior officials were in Washington DC in late April to attract interest for the programme and its mining, port and tourism projects. US investors have not shown much interest and Washington’s most recent interest in Senegal has been in terms of food security and nutrition. Dakar attracted $7.8bn in pledges from donors, mainly for infrastructure, in February 2014. All of the projects in the plan will cost an estimated $21bn. Perhaps when those roads and business parks are built, the private sector will follow through with projects of its own.

Paying partners All THoSE IDEAS for big projects can be grand, but they do not mean much when you can hardly pay civil-servant salaries. Nigeria’s finance minister Ngozi okonjo-Iweala said in early May that Abuja is borrowing hundreds of billions of naira to pay workers and finance the 2015 national budget. Until the new government of Presidentelect Muhammadu Buhari sees the results of its audits of state governments and the national oil company, Nigeria will remain a country of vast and stifled potential.

Fighting fires WITH THE INSTABIlITY IN BUrUNDI due to President Pierre Nkurunziza’s attempts to run for a contested third term, other leaders in the region are left asking if they would face the same fate. rwanda’s President Paul Kagame, who has been coy about the possibility of a third term, might argue that he has delivered so much in government that he just might need to stay on. Perhaps the need to improve livelihoods is behind President Denis Sassou Nguesso’s quick announcement of an ‘Invest in Congo’ conference planned for later this year. He wants to hold a referendum to allow him to stay in power, but what will voters say when faced with power shortages in Brazzaville, Pointe-Noire and the interior? ●

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power

Dakar

out of the

dark

The power cuts of late 2011 have abated and the government is promoting a series of projects to boost production over the next few years.

But customers are not convinced about Senelec’s plans for smart meters and untried investors

By Sadibou Marone in Dakar

E

lectricity problems tend to cause people to pour out into the streets of Dakar. This was true of the regular and long power cuts leading up to elections in 2012 and the piloting of troublesome ‘smart’ meters in the neighbourhood of Grand Médine late last year. In the last months of 2011, angry residents of the Dakar neighbourhoods of Soprim and Patte d’Oie burned tyres, blocked roads and sacked government offices in the ‘electricity riots’ that spread to other parts of the country. Since then, a new government is in place

and the national electricity utility, the Société Nationale d’Electricité (Senelec), is now making profits rather than large losses. The company is still having trouble attracting investors to the sector and says that fraud is costing it 27bn CFA francs ($46.2m) per year.

To cement its reforms, President Macky Sall’s government wants to reduce its subsidies to the electricity sector from 123bn CFA francs in 2013 to 50bn this year. All the same, the International Monetary Fund estimates that the direct and indirect costs of the country’s electricity problems will total 250bn CFA francs or 2.8% of gross do-

mestic product this year, which is a major drain on the economy.

Reformsofthepowersectorplay akeyroleinthegovernment’slongtermdevelopmentprogramme,the Plan Sénégal Emergent. It seeks to banish the period of 12-hour daily power cuts to the history books through the installation of 600,000 smart meters and the setting up of a one-stop shop to make it easier and quicker for companies to get hooked up to the national grid.

Smart meters – which regularly communicate consumption levels to the electricity company – have not been a silver bullet to cutting down Senelec’s losses. The com-

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Youri Lenquette for ja

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pany rolled them out in the neighbourhood of Grand Médine late last year and faced protests reminiscent of 2011, with a wave of looting and arrests. Residents said Senelec was not communicative when it installed a series of defective meters that recorded vastly inflated usage. doubts remain

While blackouts are now shorter and less frequent, Senelec has not won over the Dakarois population. Amadou Touré, who lives in Dakar’s suburbs, says: “In the middleofMarchwehadsomelong power cuts that make us think that the africa report

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the coming months, especially the period from July to September, will be difficult.”

Momar Ndao, the president of the Association des Consommateurs du Sénégal, says that the often harsh judgment of the street must be put in context. He says that smart meters are a necessary element of measuring consumption and that Grand Médine was the only area to receive the problematic meters, which he says reported consumption levels that “were 1,200% to 1,800% higher” than the actual sums used.

Officials from companies in the private sector say that the electri-

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city supply has improved recently.

B. G. Gueye, the director of a company at the Sodida industrial zone in Dakar, tells The Africa Report: “The power cuts have dropped in intensity these last two years. It is helping our production to grow substantially.”

The government has organised major reforms at Senelec since it came into office in April 2012.During the crisis, Ndao estimates that the company lost 128m CFA francs per day “due to repeated rentals of power generators and production deficits, leading to a production cost of 190 CFA francs per kWh while consumers paid just 115.”

Keeping the lights on is paramount for Macky Sall’s government, as patience with power cuts has run out

dossier | power

diversifying sources

Senelec’s leadership wants to transform Senegal’s energy mix.

The country currently uses oil products for around 90% of its electricity generation, with most of the rest coming from hydro. Dieng is pushing for coal, gas and renewables to account for 52%, 17% and 7% of production by 2017. Since 2012, the government has added 100MW to output through expansion and rehabilitation projects.

Improvements in provision and the rapid drop in oil prices last year are not leading Dieng to make

Electricity production in Senegal (in billion kWh) 2.5 2.0 1.5 1.0 2000 01

02

03

04

05

06

07

08

09

10

11

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Source: cIA FActbook

Pape Dieng, Senelec’s director general, tells The Africa Report: “When Macky Sall came into power, the supply of electricity was insufficient and was supported by the expensive rental of 150MW of power capacity which represented 30% of demand. Production without the rental was 304MW. Senelec did not have any money to buy fuel to power its plants or to conduct maintenance.” He adds that the plants only functioned at 64% of capacity, that there were an average of 915 hours of blackouts per year and that disputes with two independent producers were in the courts.

In Senegal, appointments to important parastatals tend to be politicised. Dieng was a member of the Parti Socialiste, which ruled the country from 1960 to 2000, and made a late switch to support Sall’s Alliance pour la République. Dieng has a long history at Senelec and had retired to set up a business selling meters and services in the electricity sector. Dieng’s critics say he owes his appointment to his political connections, which also pushed him to make an unsuccessful bid for the mayor’s office of Pékesse, a rural town 120km north of Dakar last year.

With a new team in place, Senelec cut costs, stopped renting diesel-powered generators and purchased power barges and containerised generators. Dieng says: “Werenegotiatedcertaincontracts.

We are now securing meters, and we started a big campaign to fight against fraud, which is costing us 27bn CFA francs per year.”

$213m

State subsidy to Senelec in 2012

$52m

Target for the 2015 state subsidy to Senelec

350MW

Jindal’s planned coal-fired power plant at Kayar would be the country’s largest

300MW

The Africa Energy plant under construction at Mboro will be powered by gas and coal

any rash promises about cutting tariffs. Dieng says: “Taking into account where the company is coming from, we have to reduce costs and diversify the sources of production […]. You know that the drop in the price of oil is something that is hard to manage over the long term. It would not be the sole factor in a [tariff] decision.”

If Senelec meets its targets over the next two years or so, then the government could consider a reduction, which Dieng says would make Senegal’s economy more attractive. For its industrial clients, Senelec has worked with the Agence de Promotion des Investissements to set up a body that centralises the process of providing new electricity connections in order to reduce delays.

Many projects have held the promise of rapidly increasing Senegal’s production, only to be slowed by delays and disputes.

In January 2012, a few months before President Abdoulaye Wade lost the presidential election, his

son and energy minister Karim signed a landmark deal for the construction of a 250MW coalfired power plant at Sendou with South Korea’s KEPCO at a cost of $600m. Sall’s government put Karim on trial for several cases of corruption and sentenced him to six years in prison in March. Since the agreement was signed, KEPCO has said that it is abandoning most of its international projects, including the one in Senegal. The government says it is looking for a new partner to pick up where KEPCO left off. It first launched a tender for a project there in 2005. indian investment

Source: Senelec

76

Another Asian company has come to Senegal’s aid in the form of India’s Jindal Steel and Power. It signed an accord in February with Senelec for the construction of a 350MW coal-fired plant at Kayar.

Officials said that the production cost will be 63.75 CFA francs per kWh, considerably lower than the 117 CFA francs per kWh that consumers now pay. The government says the project is going ahead and that the parties are working on technical studies and procuring the land needed to develop it.

Other plants due to be developed include local company Africa Energy’s 300MW coal- and gas-fired plant at Mboro. The project is a joint venture between the relatively unknown firm and Senelec, which signed the deal in August 2013. At the time, Senelec said that the private company was responsible for raising the money and managing construction. In March, the project was again in the news for its lack of progress and concerns about transparency.

Help has also come from neighbouring Mauritania, which is exporting its surplus power. Senegal began receiving 20MW of power from its interconnection in March.

The amount supplied is expected to rise to 80MW by the end of this year and 135MW by 2018 or 2019 as gas projects in Mauritania reach their full potential. If projects fail to deliver and production wavers, Sall’s government can be sure that the population will not shy away from saying what it thinks. ●

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L IA R R TO VE AD

LIGHTING UP AFRICA…

ONE COMMUNITY AT A TIME

The company has developed several thriving businesses in the energy sector of Africa, and is a market leader in the countries it operates. Genesis Energy has developed significant downstream oil supply foot prints through its oil trading associated company.

Formal signing ceremony on The company owns one of Afrijoint power project by Genesis ca’s sizeable capacity of Captive and Walter’s Power Texas, & Off-Grid installed power Gas USA. L-R: Governor David Walters Turbines assets. The company is President, Walters Power Int’l; driving substantial upstream inAkinwole Omoboriowo, CEO Genesis Energy. vestment activities in the Gulf of Guinea, and is structuring for growth some of the prolific Oil Blocks owned by one of Genesis Energy’s Partner and owner of some substantive oil assets.

POWER Genesis Electricity Limited is the group’s operating entity for its Power sector investment initiatives across several countries in Africa. Genesis Electricity currently has over 100MW of installed power plants under its ownership and the company is developing and building more generating capacities almost on quarterly basis. Genesis Electricity recently won the “African Utility Company of the Year 2013/2014” in Cape Town-South Africa, where it was selected the preferred power utility service providing company over other globally recognized Power companies. Genesis Electricity has also been nominated by the London based Capital Finance International (CFI) for the award of “Most Innovative Energy Solutions-Africa 2014”.

OIL & GAS Genesis Energy through its Affiliate Company Petroleum Project International “PPI” is engaged in high volume and diverse oil trading activities of Crude Oil, Petroleum Products and Gas supply on global scale with an extensive and well developed trading network across Africa, where the group has traded several million barrels of Crude Oil, and substantial volumes of Gasoline, Gasoil, LPG, Fuel Oil, Naphtha and Kerosene. The volumes traded or moved has been moved either directly or through joint ventures with globally recognized counter-parties such as: Glencore-Xtrata Plc, Oando Plc, Arcadia Petroleum UK, Vitol SA, Trafigura, British Petroleum, Sempra Trading, SHELL Trading, Setana Energy, ExxonMobil, T otal Trading – SA, Total Plc, SOTODEN; thereby enhancing the company’s competitive advantage in the oil trading segment of Genesis Energy’s business.

Contact Details: 42 Brook Street, London, W1K 5DB, United Kingdom Tel: +44 20 3709 6330 Fax: +44 20 7958 9090 www.genesisenergygroup.net

Difcom - F.C. Photos : DR

G

enesis Energy Limited (GEL) is an energy group with integrated operations across the industry value-chain of Oil, Gas and Power, with its global investment operations out of London from where compelling energy investment opportunities are conceptualized, designed, structured and supervised for implementation in the desired locations in Africa.

The group is engaged in various power businesses executed through its Special Purpose Vehicles (SPV) including but not limited to: “GEL Utility” - a project company with 84MW of gas-fired power plant ownership which is co-owned with General Electric- USA (GE) & ENGRO Corporation of Pakistan (the investment signifies GE’s first cash-funding investment in Africa), “GELMAK Power” - a company with over 75MW of structured distributed power projects under its mandate and recognized as market-leader for Embedded Generation solutions, “Genesis Electricity FZE” - the group’s business unit that pioneered the first fully integrated electric power operations in Calabar Free Trade Zone-Nigeria, where the company produces electricity, distributes to over 70 Industrial customers, and directly administer revenue collection activities within this “Island Mode” operations, and “Alliance Energy” brands with pioneering independent power project investment installations in Sao Tome & Principe, Guinea Bissau, Ghana, Guinea Conakry, amongst others: www.genesiselectricity.net

dossier | power

GhAnA

Slow progress on privatisation The government is relying on private power projects and help from the United States to turn around the electricity sector before elections in December 2016

A

midst chronic power cuts, Ghanaians are debating whether the private sector will do a better job than the gov­ ernment in providing stable sup­ plies of electricity. The failure to conduct regular maintenance and upgrading at energy plants has put additionalstrainonGhana’shydro­ electricdams,whichgeneratemost of the country’s electricity. Nature could bring a reprieve, as the dry and windy Harmattan season has goneandtherainyseasonwillsoon begin. Two of the country’s largest dams – Akosombo and Kpong – have been operating at low levels since last year.

The executive director of the Accra­based Africa Centre for En­ ergy Policy (ACEP), Mohammed Amin Adam, explains that Ghana has many other problems in addi­ tion to weak rainfall. He says that nationwide distribution losses, largely as a result of faulty equip­ ment and power theft, amount to about 21% of generated power.

Ghana currently generates roughly 2,125MW and has an approximate deficit of 500MW. President John Mahama prom­ isedtofixthecountry’spowerprob­ lems before 2017 in his February State of the Nation address. He lis­ tedaseriesofindependentprojects – including Cenpower’s 350MW project at Kpone and Jacobsen Elektro’s proposed 360MW power plant at Inchaban – that are set to boost production over the next few years. ACEP’s Adam says: “Between 25 and 30 companies have been given licences to pro­ duce power. Some of them have power purchasing agreements, but this is not being translated into power production.” He adds that only two private power plants are regularlyinservice:Asogli,withthe capacity to provide 200MW; and CENIT Energy’s plant, which can produce 126MW. However, on­

going repair works to the Asogli plant coupled with a low supply of gas have kept production down.

CENIT’s project is not operating at full capacity owing to the weak supply of light crude oil from the state­owned Volta River Authority.

US agreement

In August 2014, the government signed a $498.2m Millennium Challenge Corporation (MCC) compact with the US government to transform Ghana’s power sector.

Under its conditions, Ghana must encourage more efficiency in the sector, privatise some of the Elec­ tricity Company of Ghana’s (ECG) operations, collect outstanding debts, reduce some of the distri­ bution losses and improve gen­ eration. The government has not released details about the pro­ gramme, which has stifled public debate. Privatising another state asset just 18 months before a gen­ eral election is politically risky.

In March, deputy finance min­ ister Mona Quartey told The Africa Report that the government would only privatise the revenue and bill collection arm of the ECG, but

$4bn

Investment needed in Ghana’s power sector over the next decade to compensate for previous underfunding

Source: World Bank

The Akosombo dam, with a capacity for 1,020MW, has been operating at low levels because of poor rainfall

ACEP’s Adam suggests that sep­ arating units of the ECG would not be ideal due to the company’s relatively low customer base.

Adam says that Ghana could pursue three options. One is to float the ECG, allowing the gov­ ernment to be a minority share­ holder. Another is to arrange a lease agreement, and the third option would be for the govern­ ment to agree on a management contract with a private company.

Adam says the population might not support the latter possibility.

The government faced a furore over the management contract for the Ghana Water Company with the joint Dutch and South African venture Aqua Vitens Rand in 2006.

Although Washington was due to disburse the MCC funds at the beginning of this year, the Ghanaiangovernmenthasnotmet some of the provisions, including drawing up a plan for paying its debts to the ECG. It should also have published a call for propos­ als for the planned privatisation.

The MCC compact includes tax exemption for private­sector com­ panies involved in its activities in Ghana.Ghana’sPublicUtilityWork­ ers’ Union and the Public Services Workers Union estimate that the Accra government will lose $133m through that part of the deal. Un­ der the agreement, President John Mahama’s government will also have to put up $37.4m. ● Billie Adwoa McTernan in Accra

photo 12/AlAmy

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dossier | power

Renewables

Green today, cheap tomorrow Technical challenges and high costs have slowed the development of alternative energy projects in Africa, but the tides are now turning in favour of a green revolution

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s incomes rise and populations grow, Africa needs more power, and fast. More than half the population lacks access to electricity, leading to a spike in the use of polluting and inefficient diesel generators.

But while renewable energy is quicker to set up than coal or gas power plants – around 24 months for a wind farm versus at best four or five years for a coal-fired plant – it has long been seen as a luxury because of its prohibitive costs.

No longer. Green energy is getting cheaper through both technical innovation and economies of scale. “Solar photovoltaic (PV) modules in 2014 cost threequarters less than in 2009, while wind turbine prices declined by almost a third over the same period,” says a January 2015 report by the International Renewable Energy Agency (IRENA). A Deutsche Bank report says the cost of rooftop solar is approaching that of coal-fired power. “Over the next 20 years, we expect over 100 million new customers to deploy solar,” it says.

Africa could be the Saudi Arabia of green energy. Many African

countries receive an average of 325 days of sunlight per year. Areas such as the Horn of Africa have significant wind generation capacities, while countries along the East African Rift Valley hold massive geothermal potential.

Countries are capitalising on these advantages to meet their energy needs. “Nigeria, South Africa, Kenya – everyone is looking to generate more power to support theeconomicgrowthintheircountries,” says Dolapo Oni, head of energy research at Ecobank.

More than half of the 85 countries in the Sustainable Energy for All initiative, launched by UN secretary general Ban Ki-moon in

2011, are African. One of the initiative’s three objectives is to double the share of renewable energy in the global electricity mix. Green sources provided for an estimated 19% of global energy consumption in 2012, according to IRENA. keep it small

Predicted growth in renewable energy production in sub-Saharan Africa (SSA) Current % of total energy production

2014 2%

2040

Projection

40% source: IeA

Planned solar projects in West Africa Project GSC Solar Park

Size (MW) Developer

Location

500

GSC Consortium

Cameroon

Nzema Solar Park

155

Blue Energy

Ghana

Kaduna Solar Plant

100

Anjeed Innova Group

Nigeria Nigeria

Kaduna Solar Development Corridor

50

Synergent Group

Solar Capital Project

100

NSCP & Gigawatt Global

Nigeria

Katsina Solar Plant

30

Nigerian-German Energy Partnership

Nigeria

Scatec Solar PV Park

45

Scatec Solar

Côte d’Ivoire

Mali Solar Project

41

Akuo Energy

Mali

Scatec Solar PV Park

33

Scatec Solar

Mali

Gambia Solar PV Park

20

CAMAC

Gambia

Sheikh Zayed Solar Power Plant

15

Masdar

Mauritania

Prosolia Solar Power Plant

13

Prosolia Energie Solaire

Senegal

Mulk Solar Park

6

Masdar

Sierra Leone

source: ecoBANK reseArch

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The private sector has taken up the challenge. Clean energy is not easy though, and small may be beautiful in the short run (see right). The $400bn Desertec initiative, for example, sought to build solar farms in the Sahara Desert to provide about 15% of Europe’s electricity.Promoterslaunchedthe project in 2009, but in 2013 they put it on hold because it was too costly and over-ambitious.

Antony Karembu, a policy adviser for the African Development Bank’s Sustainable Energy Fund for Africa (SEFA), argues that governments need to learn from such cases. “We need solutions that are actionable for Africa. We need to stop looking at the big projects and start focusing on the small to medium-sized projects. The timelines for the big ones are too long and transaction costs are higher.”

SEFA launched the African Renewable Energy Fund in March 2014 with $100m to support small independent power producers.

It aims to unlock private-sector investment and is involved in an early-stage wave energy project in CaboVerdeandsupportingstudies for a project in Mauritius that seeks to use sea water to cool buildings.

Other smaller and more attainable projects are now taking the continent by storm. Britain-based Blue Energy is building Ghana’s 155MW Nzemasolarpark–Africa’s biggest solar PV plant – which will generate enough power when it launches this year to supply electrity to 100,000 households. ● Oheneba ama nti Osei

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power | dossier

Kenya

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Contractors built Africa’s first geothermal plant, Olkaria I, in 1981, and Kenya is now the eighthlargest geothermal producer in the world. Now joined

by Olkaria II and III, it is the continent’s largest geothermal project. The state-owned Kenya Electricity Generating Company (KenGen) operates the upgraded geothermal complex, which was commissioned in February 2015. It contributes 280MW to the national grid.

In January, KenGen, which produces about 80% of the country’s electricity, announced that geothermal’s share of power production had risen to 51% from 19% the previous year, making it the main

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power source in the country ahead of hydro. Experts estimate Kenya’s geothermal potential at 10,000MW, and the government is targeting the development of 5,000MW by 2030. To tackle the lack of local expertise that had curbed geothermal growth, Kenya opened the Geothermal Energy Training and Research Institute at Dedan Kimathi University of Technology in April.

The country is also harnessing its potential for wind energy. The KSh70bn ($742m) Lake Turkana Wind Power Project, which London-based Aldwych International began this year, is expected to produce 300MW and will be one of the largest wind projects in Africa when completed in 2017.

Renewables in Africa

Morocco The Moroccan government wants renewables to account for 42% of its electricity generation mix by 2020, with solar, wind and hydro each representing 14%. The 2020 target includes the Moroccan Solar Plan (MSP), launched in 2009 to generate 2,000MW of solar capacity across five power stations spread over the country at Ouarzazate, Ain Beni Mathar, Foum El Oued, Boujdour and Sebkha Tah, with an estimated total cost of $9bn.

The kingdom currently imports more than 90% of its energy, making it the largest importer of energy in North Africa.

According to a 2013 IRENA study, Morocco ‘is prioritising the manufacturing of components for PV solar (films, cells, panels, etc.), solar thermal (flat mirrors, control systems, condensers) and solar water heating (SWH)’ so that local companies are not left out of the green boom. Under the MSP, local content is a key criterion in the evaluation of bids.

The 160MW solar plant at Ouarzazate that the government awarded to ACWA Power includes 42% local content.

A series of wind projects are making progress, too. French company GDF Suez and its local partner Nareva developed the 300MW 2 in southern Morocco, a $610m project that began construction in June 2013 and started commercial operations at the end of 2014.

CABo vERdE Cabeolica 28 MW operational since 2011 Wind projects KEnyA Ngong Hills 5.1 MW operational since 2009 Lake Turkana 300 MW Planned 2016 source: ecoBANK

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iF-r

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South Africa

Ze

K/ C Pa

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EthiopiA Adama I 51MW operational since 2011 Ashegoda 120 MW operational since 2013 Adama II 120 MW operational since 2015

Heavily reliant on coal for power, South Africa is targeting 18,000MW of renewable power generation capacity by 2030. The country attracted the world’s largest clean-energy investment commitments for the first quarter of 2015, with planned investments totalling $3.1bn according to Bloomberg New Energy Finance. That was ahead of India’s $1.6bn.

The state-owned electricity utility Eskom – which generates about 95% of South Africa’s power and is the largest electricity producer in Africa – is taking steps to diversify its energy mix using the country’s solar and wind resources. The company announced in January that the Sere Wind Farm in Western Cape Province, its first large-scale renewable energy project, was running at its full 100MW capacity, which is enough to supply electricity to about 68,000 homes.

In April this year, the government selected bidders for a series of wind and solar projects during the fourth round of the Renewable Energy Independent Power Producer Procurement Programme. The projects are due to add more than 1,100MW to the grid and include the 140MW Roggeveld Wind Farm, the 4.7MW Kruisvallei hydro plant to be developed

by Italian firm Building Energy and a 25MW biomass project for paper-maker Sappi.

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day in the life Extraordinary storiEs of ordinary pEoplE

SIegfrIed Modola for The afrIca reporT

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Writing a way

Mohamed Hussein, 19, is a Somali refugee who was born in the Dadaab camps in Kenya. He is trying to use his passion for writing to achieve success

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always wake up at the crack of dawn. I love relishing the serene, tranquil moments of the morning, before the world around me gets hectic and strenuous. I think this has to do with the history of my family and how we got to the Dadaab refugee camps.

For decades, my family relocated from country to country, searching for better opportunities. My father left Ethiopia for Somalia before the civil war there forced him to flee with our family again to Kenya. After we lived in north-eastern Kenya for a while, the UN High Commission for Refugees moved us to Dadaab. That is where I was born, the first of my family to be born in a refugee camp.

I am also the first person in my family to finish high school. I worked hard throughout the years to achieve my dream. I have to admit that I quit school when I was in the third grade. I started seeing friends getting better in maths and English and instantly realised I had to go back.

From then onwards, I was always first among equals – especially in English literature. In high school, I read and wrote a lot. I wrote for two of Kenya’s biggest dailies: the Daily Nation and The Star. I also started a blog to tell the world about what it means to live in Dadaab. I wrote about Somali women and their strength, about education,

and about poverty in the camp. My most famous piece was a letter to the Saturday Nation about the waning reading culture in Kenya and how schools were to blame for not encouraging young people to read beyond the classroom textbooks. A Kenyan lawyer living in South Africa read my letter and donated over 1,000 books to my school. The school named the library after him and me.

I don’t know where I will go from here, or if I will join a university. Over the years, some of my colleagues in Dadaab got scholarships to study abroad and I would be very happy if I got the chance too. I don’t know what the future holds for me. I am a refugee in a country that wants us to go back to our war-torn nation. What people don’t understand is that refugees are themselves victims of insecurity. I don’t believe there’s any Somali refugee who wishes to stay in the camps for rest of their lives.

persistence is key

The closure of Dadaab will be a dilemma for my family.

Perhaps it would be good if Kenya offers us citizenship.

Kenya doesn’t know us. It actually sees us as the enemy.

A lot of people here still discriminate against Somalis. I have never been to Somalia but I would like to go and visit. I know I am from Somalia but Kenya is my first home and where I was born.

I believe persistence is key. Sometimes, I luxuriate in the thought of publishing my first novel or winning a major writing fellowship. I would do anything these days just to distance myself from the thought of war, the memory of displacement and the travails of living in a refugee camp. ● Interview by Abdi Latif Dahir the africa report

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