October 2018 / South Africa

October 10 2018

In Nigeria, plans for the world’s largest refinery

LAGOS, Nigeria
On any given weekday, commuters in Lagos, Nigeria’s commercial capital, are snarled in traffic for hours.
Container trucks and tankers take up several lanes of traffic on the major thoroughfares close to the city’s ports. Often these trucks have been parked on the highways overnight.
Cars and minivans snake along the remaining single lane, sharing it with pedestrians fighting off early-morning road rage as they slowly make their way from one end of the city to another. There is a palpable fear of accidents, or a spill. Much of Lagos is an environmental disaster waiting to happen.
It is here in this vibrant metropolis of 21 million people that Africa’s richest person, Aliko Dangote, is undertaking his most audacious gamble yet. Dangote is building a $12 billion oil refinery on 6,180 acres of swampland that, if successful, could transform Nigeria’s corrupt and underperforming petroleum industry. It is an entrenched system that some say has contributed to millions languishing in poverty and bled the “giant of Africa” for decades.
Planned as the world’s largest refinery, Dangote’s project is set in a free-trade zone between the Atlantic Ocean and the Lekki Lagoon, an hour outside the city center. The site employs thousands, and upon completion — Dangote says in 2020; some analysts suggest more likely in 2022 — should process 650,000 barrels of crude oil daily.
That’s enough oil to supply gasoline and kerosene to all 190 million Nigerians and still have plenty to export. By the end of this year, the facility is expected to churn out 3 million tons of fertilizer. The production of diesel, aviation fuel and plastics will then follow.
“The construction site is already a huge beehive of activities, with workers, local and foreign, hard at work. It is going to be the largest manufacturing plant of any sort in Lagos,” said Kayode Ogunbunmi, the publisher of City Voice, a Lagos daily newspaper and lifelong Lagos resident.
Private ferry
Indeed, some 7,000 employees are working around the clock on the site, many arriving by private ferry from the city centre. Another 900 Nigerian engineers and technicians are being trained abroad for jobs at the refinery.
Dangote, whose net worth is estimated at $11.2 billion, has had to build a port, jetty and roads to accommodate this project, along with new energy plants to power it all.
Nigeria’s government, despite being a longtime crude oil exporter, has four underperforming and frequently broken down refineries with a combined capacity of 445,000 barrels daily. Those refineries — two in the oil hub of Port Harcourt, one in Warri in the Niger Delta, and the other in the northern city of Kaduna — are all operating at less than 50 per cent of capacity.
Which means that even though Nigeria is Africa’s largest oil producer, petroleum for everyday use must be imported. This has spawned fuel importers and diesel traders who have grown extremely wealthy.
Nigeria’s government subsidises fuel imports to keep pump prices low, and this has contributed to Nigeria’s well-documented culture of petroleum industry corruption.
“The failure to produce refined products over the last 25 years has created a huge architecture of graft and corruption around everything,” said Antony Goldman, the co-founder of the London-based Nigeria specialists ProMedia Consulting.
Political risk
Goldman does political risk analysis in West Africa and has worked in and out of Nigeria for two decades. Corruption, he explained, stems from illegal refineries and the local criminal network that helps transport illegal crude out of the country. Both elements, he said, have not been sufficiently challenged by the government or law enforcement agencies, which has further contributed to Nigeria’s entrenched oil industry corruption.
“A refinery that actually works and can meet Nigeria’s refined product requirement? It’s a game-changer,” Goldman added. But change, no matter how positive, is potentially destabilising. “These are not people who relinquish things without a fight,” Goldman said of Nigeria’s fuel import merchants.
When Dangote initially unveiled his refinery plans in 2016, he said its aim was to challenge the status quo, which had seen the government spend about $5.8 billion to import petroleum products over the past year.
“This refinery is attacking the entire system,” he said. “You export jobs and create poverty here, so that’s what we are stopping,” he told reporters at the time.
Despite creating thousands of jobs, Dangote’s refinery hasn’t been universally applauded in Nigeria. The biggest issue is its Lagos location: The refinery is being built hundreds of miles from the impoverished Niger Delta, where the bulk of Nigeria’s oil is extracted.
Two undersea pipelines are under construction in the Delta and will carry petroleum about 340 miles to the refinery in Lagos. Costly pipelines
The pipelines will be costly; but also far harder to sabotage than conventional aboveground systems. And security is key in the Delta region, where local rebel groups like the Delta Avengers have kidnapped foreign oil workers and blown up pipelines to protest regional pollution and poverty.
Amid Nigeria’s complex regional tensions, Dangote — a northerner by birth and Lagosian by decades of residence — is the one person, industry experts say, who could achieve a measure of détente in the region.
Yet critics — and Dangote has many — worry that his new refinery will allow him to essentially take over Nigeria’s oil and gas industry. “Why would a nation leave an entire industry in the hands of one company?” they ask.
The “monopoly” question has swirled around Dangote for decades. Twice divorced and currently (and vocally) looking for a third wife, Dangote made his initial fortune operating near-monopolies in cement, flour and commodities across Nigeria, where regulatory oversight is relatively lax. Dangote’s companies, including pasta producers and property management, are found across Africa.
A decade ago, Dangote and other private investors tried and failed to buy the government-owned refineries. He was unavailable for comment, but previously told Reuters he does not apologize for his expansionist desires. “If you don’t have ambition,” he said, “you shouldn’t be alive.”
Tough environment And for some in a tough business environment like Nigeria, a well-run monopoly is better than the current situation, where getting fuel remains an uncertainty. Indeed, despite oligarchy concerns, Goldman says he believes that Dangote’s past success actually bodes well for the refinery and Nigeria. “He has a record of success and delivery, and he doesn’t make mistakes on things like this,” Goldman said.
And Nigerians are tired of power cuts and overpriced gasoline.
“Most Nigerians see Aliko as a doer,” Ogunbunmi, the publisher, said. “Many quietly hope the refinery will help reduce uncertainties. Gasoline will be available, and possibly power.”
Beyond solidifying his own legacy, Dangote hopes his refinery will help diversify Nigeria’s economy while reducing its dependence on imported oil.
“We have other opportunities,” he said at the plant’s unveiling. “Agriculture is there. Petrochemicals are there, Nigeria has more arable land than China. If we finish our gas pipeline, it can generate 12,000 megahertz of power. That’s huge. That’s more than what we are looking for in Nigeria and we can supply the rest of West Africa.”
As his refinery nears completion, Dangote says he will soon focus on his next dream, owning Britain’s Arsenal football team.
“Once I have finished with that headache, I will take on football,” he said. “I love Arsenal, and I will definitely go for it.”
October 10 2018

Turkey, African countries sign trade pacts in Istanbul

Turkey-Africa Economy and Business Forum sees 3 trade agreements between African countries, Turkish government and businesses.


A Turkish-African business meeting in Istanbul bore fruit Wednesday in the form of three new pacts with both private and public concerns.

Zimbabwe, Senegal, and the African Union all signed deals with parties in Turkey during the 2nd Turkey-Africa Economy and Business Forum in Turkey's economic hub.

The first agreement -- a memorandum of understanding (MoU) -- was signed by Senegal’s Mines and Geology Ministry and Turkey’s Tosyali Holding for the company to invest in iron and steel in the West African country.

Another MoU was signed between Turkey's Trade Ministry and the African Union Commission for collaboration on trade and investment.

The last trade cooperation pact was signed by the Turkish and Zimbabwean governments.

The two-day forum, which started on Wednesday in Istanbul, is bringing together 3,000 African and Turkish businesspeople.

The forum was organized by Turkey’s Foreign Economic Relations Board in coordination with Turkey’s Trade Ministry and the African Union.

October 11 2018

Kenya to commence construction on the second largest dam in Africa

Construction works on US $2bn High Grand Falls Dam in Kenya, Africa’s second largest dam is set to commence following a resolved procurement dispute which threatened to delay the project. According to Irrigation Principal Secretary Fred Segor, Public Procurement Review Board (PPRB) — the state agency that handles disputes arising from government tendering — upheld an earlier ruling that the British firm that won the multi billion contract be allowed to undertake the project. The dispute over tender number NIB/T/018/2016-2017 arose on May 29 when NIB cancelled the tender after it emerged that only GBM Consortium had met the preliminary conditions set out in the request for proposals, including a mandatory site visit.
High Grand Falls Dam
Construction of the High Grand Falls Dam, which is also one of the largest undertaking by the government after the Standard Gauge Railway project, and is among President Uhuru Kenyatta’s legacy projects, conceived in 2009 during former President Mwai Kibaki’s regime as part of an ambitious effort to build 1,000 water reservoirs across the country in an attempt to revolutionize irrigation-based farming. The dam is set to produce 700MW of hydropower and facilitate irrigation in more than 250,000ha of land Kitui, Garissa and Tana River counties. It is also part of the Sh1.5 trillion Lamu Port and Southern Sudan-Ethiopia Transport Corridor (Lapsset) projects and will be built downstream the Seven Folks dams along River Tana. “The benefit to the region is enormous. Because first, it is going to form a large man made lake, where it will be easy introducing fishing and tourism activities to the communities around it,” said Prof Fred Segor.
Perennial flooding
Mr Fred further added that the dam will also address the perennial flooding at the Kenya’s Coast region while also serving 1.5 million people living downstream. The dam will hold more than 5.6 billion cubic metres of water with construction expected to take six years. Plans to roll out the project will begin in earnest after the Treasury agrees with the contractor on the timelines in implementing the project.The ruling also paves the way for the next phase of land acquisition where affected persons will be relocated.
October 16 2018

Financiers pledge $125M to Botswana trade

NEW YORK. – Three financial institutions have agreed to guarantee a $125 million loan to Botswana’s diamond-manufacturing industry to strengthen the nation’s economic growth. The US government’s Overseas Private Investment Corporation (OPIC) has partnered with Botswana Finance – a subsidiary of diamond-manufacturing company Lazare Kaplan International (LKI) – and Stanbic Bank to provide the loan. It’s the second portion of a $250 million OPIC loan guarantee that will establish a revolving facility in which OPIC will share the credit risk, the organizations said recently. Barclays Bank of Botswana provided the first instalment in 2016. The trio’s objective is to help diversify Botswana’s economy, drive the development of the local financial sector, and give local companies access to financing. “With the support of OPIC financing, this project will keep the value-adding process of the diamond-supply chain in Botswana, promoting local job creation, diversifying economic growth and bringing global trade opportunities,” said OPIC CEO Ray Washburne. “The project will have a significant impact in local communities and further the country’s economic development.”
October 17 2018

World Bank agrees on $3bn loan to Egypt

Egypt has reached an agreement on a new $3 billion financing deal with the World Bank, the country’s investment and international cooperation announced yesterday.

Sahar Nasr said that she had agreed with the World Bank officials on the final arrangements for a new loan for Egypt.

Nasr’s statement neither provided details on whether the loan will be offered on one tranche nor its interest rate. However, she stressed that the funding would be secured in “the next few months.”

The Egyptian minister noted that the new funding “comes within the framework of the World Bank’s confidence in Egypt’s economic reform measures and its keenness to continue to support the implementation of the nation-wide economic and social reform programme.”

The new loan, Nasr pointed out, is expected to raise the country’s total external debt, which was reported to have registered $92.64 billion at the end of last June.

In March, Egypt announced that it had received the third and final $1 billion tranche of a World Bank $3 billion loans, which was aiming to support the government budget and the country’s economic reform programme.

Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolution and to ease a dollar shortage that has crippled import activity and hampered recovery.

In November 2015, Egypt won a three-year $12 billion International Monetary Fund (IMF) loan, which aimed at reviving the country’s struggling economy, bringing down public debt and controlling inflation while seeking to protect the poor.

October 17 2018

Govt, AfDB sign $269m loan to increase power supply

The concessional loan will be disbursed under the second phase of the Scale up Electricity Access Program (SEAPII), which is expected to increase on-grid access for households and productive usages, and increase off-grid access to renewable energy.
The Government has borrowed $269 million (Rwf237 billion) from the African Development Bank (AfDB) to invest in sustainable, affordable and reliable electricity services. The loan agreement was signed on Tuesday. The concessional loan will be disbursed under the second phase of the Scale up Electricity Access Program (SEAPII), which is expected to increase on-grid access for households and productive usages, and increase off-grid access to renewable energy. The Minister of Finance and Economic Planning, Dr Uzziel Ndagijimana, said the programme will boost the country’s efforts to achieve universal electricity access by 2024. He said: “This project will be a key milestone in improving reliability of electricity supply, which will positively impact our economic growth, promote our private-sector-led job creating growth, particularly for the youth, and reduce poverty.” The new loan is aligned to AfDB’s 10-year strategy (2013-2022) and current Country Strategy Paper for Rwanda. It also comes to support three of the Bank’s High 5 priorities, which include the industrialisation of Africa and improving the quality of life for people on the continent. “The Bank’s energy portfolio in Rwanda will increase from €158.95 million to €388.74 million, supporting eight operations, three of which are being implemented jointly with neighbouring states,” said Martha Phiri, the Bank’s Country Manager. Phiri said she was very delighted to be signing the agreement. “This is our single biggest operation in the country impacting on on-grid and off-grid power solutions. It seeks to ensure that Rwanda has reliable electricity in homes, health centres, businesses and everywhere else.” She added; “Thanks to its strong record of performance and a results culture, Rwanda is the first country on the continent to pilot this project.” The Bank, Phiri said, recognises electricity as a strong catalyst for inclusively and general economic growth. The first SEAP project between Rwanda and the Bank worth $46 million (Approximately Rwf40.4 billion) was signed in 2013. According to the Ministry of Finance, funds were used to upgrade two major distribution substations and also constructed 1,365 km of medium and low volt networks for on-grid access to 30,636 households, 32 health centres, 210 schools and 52 sector administrative facilities in six districts. The initial project was implemented over a six-year period. As noted, the effective cost of each additional connection is $1,400. By utilising REG’S in-house skills, and local contractors, and use of country systems, the SEAP II is expected to deliver, among others, 193,366 on-grid connections within three years at an average cost of around $900 per connection. This, officials said, demonstrates the cost effectiveness of the RBF instrument and the reason it has become the instrument of choice for Government financing in various sectors including energy.
October 18 2018

Turkish firm to start building Sudan’s biggest airport


A Turkish construction company will start building Sudan's biggest airport early next year, according to the firm's chairman.

"We will lay the foundation for the Khartoum International Airport in the first quarter of 2019 and complete it in less than 36 months," Selim Bora, the chairman of construction firm Summa, told Anadolu Agency.

Bora stated that the three-phase project is worth $1.15 billion.

"First we will built a terminal with a 6 million-person [annual] capacity along with all infrastructure services, runways, and airport aprons," he said.

Bora added the airport's annual capacity will reach 9 million in the second phase and 12 million in the third phase.

The project, developed on the build-operate-transfer model, is currently in the design phase, he said.

Saying that Sudan has the largest surface area in Africa, Bora added the airport will also serve other countries in the region.

"Currently airports in Cairo and Addis Ababa are the most important and effective ones on the continent," he noted.

Investing in Africa since 2007

Bora said he hoped the air passenger traffic in those airports will shift to Khartoum International Airport, which enjoys geographical advantages.

He said Summa entered the African market in 2007 by doing several projects in Libya and then in Equatorial Guinea.

The company has continued African projects in such countries as Senegal, Rwanda, Congo, Niger, Sudan, and Benin, he added.

"Niger will host next year's African Union Summit next July, so the country needs infrastructure services and investments," Bora said.

He said the renovation of an airport and construction of a five-star hotel in Niger will be completed in July 2019.

This March Summa signed the deal with Sudan’s Finance Ministry to build the new Khartoum airport.

October 18 2018

EU and Bill & Melinda Gates Foundation join forces to support health services in Africa

The Bill & Melinda Gates Foundation will contribute €54 million ($62.5 million) to EU efforts to strengthen diagnostic health services in Sub-Saharan Africa under the External Investment Plan.
This cooperation will help to mobilise private investment in laboratory facilities providing timely, cost-effective and accurate diagnostic services for diseases such as tuberculosis, HIV, and malaria, as well as support maternal and child healthcare. This will allow doctors to detect diseases earlier, respond faster and better targeting treatments.  Under this collaboration between the EU and the Bill & Melinda Gates Foundation, poorer people in low-income African countries will have better access to higher quality testing and, therefore, better chances of proper treatment. The articulation of this programme followed the announcement of President Juncker and Bill Gates earlier in the year on the Gates Foundation's intention to contribute to the EU's External Investment Plan. Commissioner for International Cooperation and Development Neven Mimica said: "Together with the Bill and Melinda Gates Foundation, we are showcasing the EU's engagement in Africa. Through the Gates Foundation's contribution of €54 million to our External Investment Plan, we will unlock private investment in a sector where additional investments in state-of-the-art testing facilities are urgently needed in order to meet the health needs of ample sectors of the population. This also shows that our approach under the 'Africa – Europe Alliance' works and is attractive to other stakeholders." Bill Gates, co-chair of the Bill & Melinda Gates Foundation, said: "Our foundation is delighted to partner with the European Commission to strengthen diagnostic services across Africa for the infectious diseases that still kill and harm the highest numbers of the world's poorest people. By having better tools to more accurately identify these diseases, we can provide the right treatments at the right time and, ultimately, ensure more people across sub-Saharan Africa are able to live healthy and productive lives." The majority of the Gates Foundation's contribution – €43.2 million or $50 million – will support the European Fund for Sustainable Development Guarantee, which is an important pillar of the EU's External Investment Plan. It will be used to help leverage private investment, which will in turn promote inclusive growth and job creation in Africa and the European Neighbourhood countries. €10.8 million ($12.5 million) will be invested in technical assistance under the European Health Guarantee Platform for Africa – one of twelve innovative guarantee programs under the EU's External Investment Plan. It will incentivise research and innovation in e-health in less developed and fragile environments, leading to cheaper healthcare services for people on low incomes and saving lives. Background This contribution from the Bill & Melinda Gates Foundation follows on from the announcement at last December's One Planet Summit in Paris that the Foundation would be joining forces on the EIP with the EU and several Member States, as well as in the DeSIRA initiative (Development-Smart Innovation through Research in Agriculture).
October 22 2018

Moi Referral to build Africa’s largest hospital

Eldoret-based Moi Teaching and Referral Hospital has sought approval to build Africa’s largest hospital with 4,000 beds to service western Kenya’s 24 million people.
South Africa’s Chris Hani Baragwanath Hospital with, 3,400 beds is currently the largest.
According to regulatory filings, the Sh28 billion project, earmarked for construction on 200 acres at Kiplombe on the outskirts of Eldoret town, will complement services offered at its current multi-specialty 1,000-bed centre on Nandi Road.
The report says the 4,000 beds will be accommodated in six multi-storeyed buildings and an accompanying 36 nursing units. It adds that 22 new general outpatient clinics will be hosted in a three-floor complex that will also accommodate a paediatric clinic, thereby easing congestion and fast-tracking dispensation of services to residents.
The notice contained in the Kenya Gazette said a five-floor medical technology block will be put up as well as a separate administration office block with new staff apartments. The plan includes a research development and innovation building on a separate block.
The announcement indicates an end to a raging ownership row with a group of squatters that hampered commencement of the project last year.
The new project dwarfs the biggest referral and regional hospital, Kenyatta National Hospital, that currently has 1,800 beds and 6,000 members of staff.
On Monday, National Environmental Management Authority said it would make its decision known in the next 30 days.
There had been a long-standing legal battle between the hospital and the Kenya Prison Service over ownership of a section of the land. But the dispute was resolved after the National Land Commission permitted the use of the property for the hospital project.
October 24 2018

Here’s What Markets Made of South Africa’s Budget

South Africa’s rand snapped three days of gains and fell the most among emerging-market peers on Wednesday after Finance Minister Tito Mboweni blindsided markets with a speech in Cape Town that outlined higher fiscal deficits and warned that state revenue will continue to undershoot. The currency was little changed as of 11:03 a.m. in Johannesburg, while the government’s benchmark rand bonds maturing in December 2026 dropped, with the yield climbing to an 11-month high of 9.38 percent. Here’s the reaction from traders, analysts and economists:

Piotr Matys, analyst with Rabobank:

  • Mboweni’s budget was “the opposite of what the market was hoping” for
  • “It’s also a timely reminder that the country faces tremendous fiscal challenges amid weak economic activity constrained by structural issues”

Win Thin, strategist at Brown Brothers Harriman:

  • “I was clearly too optimistic that Mboweni would announce enough fiscal tightening to keep the ratings agencies at bay”
  • “Risks of downgrades have gone up significantly”

Bernd Berg, strategist at Woodman Asset Management:

  • “South Africa remains stuck in a low growth, high-debt environment and it is difficult to get euphoric about the outlook for the rand at this juncture”
  • “With little positive domestic drivers and a challenging external environment, especially for South Africa’s main export partner China, it is hard to see the ZAR outperform its EM peers in the short run”

Razia Khan, chief Africa economist at Standard Chartered:

  • “The initial, knee-jerk reaction of the market to the budget was understandably negative” and investors started to price in less benign ratings reviews
  • Still, “we believe that the tax-buoyancy assumptions in the medium term are deliberately conservative”
  • “Even the revenue ‘miss’ in the current year is arguably due more to VAT rebates -- a good thing, which ultimately strengthens tax compliance -- rather than just the growth slowdown”
  • “Although the higher debt path outlined may trigger some concern, this is no justification for a downgrade in itself” from Moody’s

Hans Gustafson, strategist at Swedbank

  • It will be a “very challenging” for South Africa with “a higher borrowing requirement in an environment with tight U.S. liquidity and weaker growth globally”
  • “The rand needs to incorporate a higher risk premium”

Mehul Daya, analyst at Nedbank:

  • It’s a “double whammy” for the rand and local-currency bonds as the budget was disappointing and a weaker euro is strengthening the dollar
  • This means South African assets face internal as well as external headwinds

Kevin Daly, money manager with Aberdeen Standard Investments:

  • South Africa’s budget was “somewhat of a disappointment” given that the deficit target for 2018-19 was increased to 4 percent from around 3.5 percent
  • “But we don’t think this is enough to prompt action by Moody’s to change the outlook to negative”

Marek Drimal, analyst at Societe Generale:

  • “The headline figures are discouraging, but they will not necessarily lead to a Moody’s downgrade to non-investment grade”
  • “That being said, South Africa is facing a prolonged period of weak growth, elevated inflation, sizeable current-account deficits, and longer-term risks of a downgrade”
  • Reserve Bank should raise rates in November
  • Rand will probably fall to 16 per dollar by the end of the year and 17 by the end of September 2019
  • The land-reform debate will “periodically stress financial markets”
October 25 2018

Sri Lankan giant investor enters Africa’s fastest economy

Sri Lankan and Ethiopian entrepreneurs have been urged to work closely to strengthen the economic cooperation between the two countries.

Venora Lanka Power Panels (Pvt) Ltd launched its manufacturing products in the Horn of Africa, with Ethiopia the targeted market. The Sri Lankan firm continued to attest the faith in Africa’s fastest growing economy that continues to lure foreign investments to aid in economic growth and development. The new investor joins Isebella Socks Manufacturing Plc and Hirdaramani Garments Plc, already existing Sri Lankan firms in Africa’s oldest independent country. The foreign companies not only seek to expand their market in Africa with greener pastures but look to tap in the industrial potential available in the country. Foreign investors have ventured into the industrial sector, that offers a variety of business investment opportunities. The construction of industrial parks has opened new doors of opportunities for companies with a view of creating jobs.
The country looks to increase its GDP by 11 percent annually in the next ten years with the manufacturing sector growing by about 25 percent every year. Ethiopia’s target by 2025 is to be the leading manufacturing hub in Africa. The country counts on inflows of foreign investments to catapult the ambitious goal while creating a conducive business environment for businesses. Export-oriented manufacturer Venora Lanka Power Panels which works with world-renowned brands such as Schneider Electric, ABB, and Rexton has partnered with Ethiopian firms namely Eulogia Electromechanical PLC and Horra Trading PLC. Ambassador of Sri Lanka to Ethiopia Sumith Dassanayake has encouraged Sri Lankan and Ethiopian business people to work together to strengthen the bilateral ties between their respective countries through trade and investment. Venora Lanka’ was recognized by the National Chamber of Exporters (NCE) at the 25th Export Awards held at Colombo Hilton for its excellent performance clinching the Bronze category Award in the industrial sector last year. Other accolades the firm has scooped include the award for Quality and Business Prestige in November 2005 in Geneva Switzerland, Arch of Europe for Quality and Technology- Frankfurt in 2012.