Spotlight falls on renewable energy, ICT, mining, political risk and security developments across the region
There have been a number of noteworthy investment agreements in the region. Tanzania Ports Authority and the China Harbor Engineering Company have signed a USD154 million contract for the upgrading of seven berths and the construction of a new terminal at the port of Dar Es Salaam. The aim is to increase throughput from 20 million tons to 28 million tons by 2020 and acting as an entry point for goods destined for landlocked neighbours in East and Southern Africa (in competition with the Port of Mombasa, Kenya). Consequently, this development will be complemented by the strengthening of rail and road infrastructure (e.g. the upgrade of the 1.8km Tanzania-Zambia railway) and a decision in May to cancel an 18% VAT introduced in 2015 for ancillary transit services.
East African telecoms behemoth Safaricom is reportedly mulling over expanding its mPesa mobile money service into Angola and Nigeria following changes to its shareholding structure. It is expected to collaborate with its competitors through a platform-sharing agreement with MTN, such as it has done in other African countries.
In Ghana, French and UK energy giants, ENGIE and eleQtra signed a USD120million agreement to develop Ghana’s first wind farm with a 50MW capacity which will be operational by 2019. The project fits into the government’s stated goal of increasing renewable energy from 1% to 10% of the power mix by 2030. At the same time, the market is waiting to see if the government will approve the 225MW NEK Umwelttechnik (Sweden) – Lekela (UK) wind farm project announced under the last government. Should it do so, work will commence in 2018, according to the firm.
In the Democratic Republic of Congo (DRC), confusion surrounding the long-awaited 40,000 MW Grand Inga hydroelectric power project continues (as will delays). In 2014, the World Bank agreed to finance technical aspects to the tune of USD76 million and the following year, the government invited bids to develop the project. However, in 2016 the World Bank suspended its financing and on Tues, 13 June the government called on the two remaining bidders – consortia led by China Three Gorges Corporation and Spain’s ACS Group respectively – to form a joint bid. No explanation has been given; making this only the latest unilateral decision surrounding a project already complicated by elevated political and reputational risks, a lack of information and the withdrawal of World Bank support.
In Tanzania, London-listed Acacia Mining hopes to come to an accommodation with President Magufuli’s government. At present, foreign mining companies including Acacia are accused of evading taxes by underreporting exports. They have also been hurt by the March 2017 ban on gold and copper exports to promote local value addition. John Thorton, Executive Chairman of Barrick Gold, which owns 63.9% of Acacia Mining, is quoted in the press expressing his optimism that the matter will soon be resolved. However, local sources across a range of sectors have argued that the government’s current mining policy is strongly backed by the public and civil society.
The Public Coffers
Nigeria’s Acting President Yemi Osinbajo has finally signed the 2017 budget bill into law. Doing so, he has resolved some of the uncertainty about the extent of his authority. Other tests sit on the horizon – for example, his ability to oversee privatisation and other envisaged economic reforms while President Muhammudu Buhari remains absent on medical leave.
In our view Osinbajo’s powers to implement reforms are somewhat circumscribed. But even abstracting from this, the economic plan faces severe challenges. For example, current revenue projections rest on heroic assumptions about the government’s ability to raise USD10 billion in non-oil revenue, representing 62% of total revenue. Since 2014, government forecasts of non-oil revenue on the back of fiscal reforms have consistently failed to materialise. In 2016 for instance, actual non-oil revenue was about half the amount assumed in the year’s budget. Going by the recently released official figures of Q1 VAT revenue, similar revenue performance is likely with the 2017 budget, putting ambitious infrastructure development projects (e.g. 3,000MW Mambilla hydropower plant) at risk.
Meanwhile, the government’s job creation goals face criticism on two fronts at least. According to the Nigeria Labour Congress, the aim of creating 1.5 million jobs by 2020 is overambitious. The National Bureau of Statistics in a recent report puts the unemployment rate in 14.2%, meaning that even if the 1.5 million target is achieved, it would leave significant numbers out of work.
In Cote d’Ivoire by contrast, the sale of some USD2 billion worth of bonds (five times oversubscribed) signals sustained investor confidence despite cocoa price falls (primary export) and unrest in the military. Evidently, the government’s tactic of sending a high-level delegation (including Prime Minister Amadou Gon Coulibaly and Finance Minister Adama Koné) on a world tour to drum up support for the sale as well as promoting the country as an investment destination seem to have paid dividends. A financial services worker in Abidjan told Songhai “it is good that the money is being spent on debt restructuring and not wasted on [President Alassane] Ouattara’s vain infrastructure projects.” There are some in the country that are worried that, in an attempt to leave a legacy during his final term in office, Ouattara may go on an unfettered infrastructural spending spree, saddling the country with unmanageable long-term debt.
Cameroonian president, Paul Biya and the head of the Centre Interregional de Coordination (CIC) have called for a donor conference to raise USD 50 million towards harmonising regional efforts against piracy. This comes shortly after Nigeria announced a USD186 million investment in naval hardware to tackle the menace. Recent attacks have had the aim of kidnapping crew members for ransom rather than seizing ships, primarily off the coast of Nigeria.
In Nigeria, prosecutors are struggling to secure convictions against politicians and government officials accused of corruption. The latest examples are the acquittal of Senate President Bukola Saraki and opposition politician Godsday Orubebe. Saraki and Orubebe had been separately accused of falsely declaring their assets, but this week both politicians were cleared of all charges by a code of conduct tribunal and an appeal court respectively. Last month, top judges suspended for alleged corruption in September 2016 were also reinstated by the judicial council as there were no longer cases against them. Authorities are yet to win a major conviction since President Buhari, who is now away on medical leave, launched a crackdown in 2015.
In the DRC, justice is under the spotlight again. Motions of no confidence in the Deputy Prime Minister in charge of Interior & Security Emmanuel Ramazani Shadari and the Minister of Justice Alexis Thambwe Mwamba were filed in the National Assembly by 50 MPs. They are respectively accused of fomenting unrest in the troubled Kasai region and of facilitating recent prison breaks. There is likely to be little real debate over the motion which was not heard before the Assembly closed for a three-month break on Thursday. However, Belgian authorities opened an investigation into the same Justice Minister, having received a complaint of crimes against humanity – putting already strained relations between Kinshasa and the West further to the test.
Songhai Advisory's raison d'etre is to provide local knowledge in support of investment in Sub-Saharan Africa.
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