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Adams & Adams Africa Focus Featured Article: Infrastructure opportunities in East Africa’s oil sector: Overcoming politics

Region in Focus...

November 2013 Key updates on economic, political and industry-specific developments

The East African Community (EAC):

Reshaping East Africa through economic and political diplomacy

Adams & Adams Africa Insights

Proudly produced by Consultancy Africa Intelligence Your African partner in superior research and analysis

Consultancy Africa Intelligence Your African partner in superior research and analysis


Nairobi TABLE of CONTENTS

Skyline of Nairobi, Kenya, a member of the East African Community (EAC) 1

INTRODUCTION

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Economic, Political and Industry Updates Featured Article Infrastructure opportunities in East Africa’s oil sector: Overcoming politics Region in Focus – The East African Community (EAC): Reshaping East Africa through economic and political diplomacy Adams & Adams Africa Insights Africa Event Picks Closing Words

Welcome to the latest edition of the Adams & Adams Africa Focus – our quarterly publication that is produced exclusively for and tailored to the specific interests of you, our valued clients and team members. In this edition, we begin as usual with updates on key economic, political and industry-specific developments across the African continent. The featured article in this edition examines infrastructure opportunities in East Africa’s oil sector and the political hindrances that the region and its international partners must overcome. We then stay in East Africa with an insightful and informative overview of the East African Community (EAC), an intergovernmental organisation with a focus on regional cooperation and economic integration in East Africa. As with every edition of the Africa Focus, we also provide our readers with recent Adams & Adams press releases and other news (see ‘Adams & Adams Africa Insights’), followed by our African event picks for the remainder of 2013. The featured event is an upcoming conference entitled “Creating and Leveraging Intellectual Property in Developing Countries: A Power Tool for Social and Economic Growth”, co-sponsored by the Companies and IP Commission (CIPC) and the National IP Management Office (NIPMO) of South Africa. The Conference will take place between 17-20 November at the Southern Sun Elangeni in Durban. On the cover of this November 2013 edition are the delegates who attended our 2nd annual IP seminar, photographed outside the Adams & Adams offices in Pretoria, South Africa. The seminar is the biggest of its kind on the African continent and it brought together 61 top IP practitioners and administrators from various parts of the continent. The event continues to grow in stature and this year saw an increase in the number of attendees and a varied offering which included an inspiring presentation by Nicky Wiemar, senior economist at Nedbank Group, on economic progress in Africa and the consequent role played by IP practitioners in harnessing that development.

IImage courtesy: //blog.marhaba.com.qa

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INTRODUCTION

The presentation highlighted the alignment of the Adams & Adams’ Africa strategy, to continue, through its network of partners across Africa, to be the lawyers of choice in providing services of the highest level in an industry that is essential for economic growth. The Chairman of Adams & Adams, South Africa, Gérard du Plessis, welcomed the guests and emphasised the need to continue to provide a quality service to our clients. The guests were entertained by the Adams & Adams Choir before the keynote address was delivered by Ms. Nicky Wiemar who gave an informative and well researched overview of the prevailing economic climate in Africa and how more still needed to be done by African governments to fully capitalise on current favourable developments. She also touched on the economic factors in the developed countries which have an impact on Africa’s economic projection and highlighted the importance of the development of intellectual property to this economic development.

Before breaking for lunch, the delegates participated in various ‘breakout’ sessions, covering topical IP issues such as the effects of the Madrid Protocol in Africa. The purpose of the ‘breakout’ sessions was to stimulate debate and discussion on these issues and to learn the practical experiences of each country. The sessions were moderated by lawyers within Adams & Adams assisted by partners from different countries, acting as panellists. The sessions proved to be very popular with suggestions being made to increase the time set aside for the sessions next year. And with that, we invite you to sit back and enjoy browsing through the latest edition of the Adams & Adams Africa Focus. We trust that you will find its contents useful and relevant to your growing interest in the African continent!

“...the Network Meeting is a highlight of the Adams & Adams calendar and the increased support from our partners and IP administrators across Africa bodes well for the future of IP in Africa and underpin our continued commitment to the development of IP law in Africa.” - Gérard du Plessis, Adams & Adams Chairman

Adams & Adams Chairman, Gérard du Plessis, welcoming guests to the 2nd annual IP seminar held at the Adams & Adams offices in Pretoria

Delegates listening attentively during Adams & Adams’ 2nd annual IP seminar

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ECONOMIC, POLITICAL AND INDUSTRY UPDATES

Africa Economic, Political and Industry Updates Africa | Oil and gas industry sees increase in jobs: According to the Hays Oil & Gas Global Job Index, Africa’s oil and gas market saw a consistent rise in the number of jobs within the sector for the second quarter of 2013. In the report, Hays Oil & Gas suggested that the rise in jobs across Africa was due to the significant influence from Western Europe, as many operators and contractors involved in projects were listed on their exchanges.

The latest Hays Oil & Gas Global Job Index states that “the African market saw a consistent rise in jobs being advertised, reflecting the activity across the continent” 2

Egypt | Military crackdown on Morsi camps: In a violent demonstration of martial law, Egypt’s military cleared two protest camps housing supporters of deposed President Mohamed Morsi in the country’s capital of Cairo on 14 August 2013. The crackdown left 235 people dead, with more than 2,000 people injured after the onslaught inflamed violent outbreaks between citizens and security forces across the country. The result of the attack prompted a dusk-to-dawn curfew in Cairo and the resignation of Egyptian Vice President, Mohamed ElBaradei. ElBaradei, a former United Nations (UN) diplomat and chief supporter of the recent Morsi overthrow, cited that the six-week standoff could have been resolved in a peaceful manner. Eritrea | Rebel groups join forces to overthrow Asmara regime: Leaders of the Red Sea Afar Democratic Organisation (RSADO) and the Saho Peoples Democratic Movement (SPDM) have agreed to join forces and carry out attacks on the country’s Asmara regime. The goal of both exiled rebel groups is to topple one of the world’s most oppressive regimes and restore democracy.

Guinea | Opposition parties contest Legislative election results: After numerous delays and postponements, legislative elections were held in Guinea on 28 September 2013. The Ruling Rally of the Guinean People (RPG) won 53 seats in the National Assembly. Alpha Conde, who became Guinea’s first democratically elected President, heads the RPG. Opposition parties have contested the results, stating that they will take their argument to the Supreme Court. Opposition parties won collectively 53 seats in the polls. Kenya | al-Shabaab target upmarket mall in mass shooting: On 21 September 2013, gunmen attacked the upmarket Westgate shopping mall in the country’s capital of Nairobi. The mass shooting claimed the lives of 61 civilians, 6 Kenyan soldiers and 5 attackers and wounded an estimated 200 people. The assault lasted until 24 September 2013. The Islamist militant group known as alShabaab claimed responsibility for the attack citing that it was in retaliation for Kenya deploying military troops in Somalia. Notable victims of the attack include Kenyan President Uhuru Kenyatta’s nephew and his fiancé as well as Kofi Awoonor, a Ghanaian poet and diplomat. On 1 October 2013, President Kenyatta stated that Kenya would keep its troops in Somalia until it had achieved stability. Kenya | Microsoft launches MSN: Kagiso Media (based in South Africa), on behalf of Microsoft, has launched the Microsoft Network (MSN) in Kenya. The new venture is aimed at providing local content on news, sports and lifestyle to Kenyans. Kenya’s new transition into digital publishing will see MSN Kenya broadcast breaking news in 52 minutes to 25 MSN portals globally. Kenya | CfC Stanbic Bank and ICBC in deal for heavy fuel oil plant: CfC Stanbic Bank and the Industrial and Commercial Bank of China (ICBC) have agreed to a US$ 108 million debt financing package with Triumph Kenya for the construction of an 83 MW heavy fuel oil plant. Kenya has signed a 20-year agreement with Triumph to purchase power generated from the plant.

Hays Oil & Gas Global Job Index, Quarter 2 2013. Download the full report at: http://www.hays.com.

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ECONOMIC, POLITICAL AND INDUSTRY UPDATES

Kenya/South Africa | Volvo Trucks expands into Kenya:: Swedish truck company Volvo Trucks has announced its interest in establishing an assembly plant in Kenya. The new plant would supply trucks to all of East Africa. Volvo Trucks President, Cleas Nilsson, has explained the company’s interest in Kenya as an attempt to work around custom duties and open assembly plants where Volvo Trucks has a reasonable market share. Volvo Trucks has also agreed to work closely with the South African Government in order to increase the use of local parts for locally assembled trucks.

South Africa | CSIR launches digital laser: On 17 September 2013, the Council for Industrial and Scientific Research (CSIR) revealed the completion of the world’s first ever digital laser. The laser was developed by the Mathematical Optics Research Group. By producing holograms using Liquid Crystal Display (LCD) technology (as opposed to a normal laser that uses mirrors), the benefits of the digital laser will be seen in many different fields, including medicine, manufacturing and photonicsbased communications.

Liberia | Danish timber giant accused of purchasing conflict timber: One of the world’s leading international timber and wood product wholesalers Dalhoff Larsen and Horneman (DLH) has been accused of purchasing illegal timber worth US$ 305,000 from Liberia in 2012. Investigations conducted by Global Witness show that DLH purchased 1,281 m³ of timber from two Liberian companies in 2012 that was cut under logging contracts called Private Use Permits (PUP’s) and exported to Bangladesh, China and France. PUP’s have been ruled as illegal due to their misuse by companies and Liberian officials. In 2011, the United Nations (UN) stated that timber from PUPs could also be misused to finance conflict and threatened Liberia’s sustainability and efforts to curb corruption. Mali | UN envoy calls for more troops in Mali: The United Nations (UN) envoy to Mail, Albert Koenders, has called for the UN Security Council to increase the number of UN troops in the country. Currently, the UN force known as MINUSMA has 5,200 men on the ground, less than half of the 12,600 UN mandated number. While MINUSMA has been in control since 1 July 2013, the mission still needs equipment and men to destabilise the on-going conflict and pre-empt any retaliatory attacks by the rebels following the country’s peaceful Presidential elections in August 2013. Nigeria | Manufacturers Association of Nigeria accuses government of anti-manufacturing: The Manufacturers Association of Nigeria (MAN) has issued a warning on behalf of its members to the Nigerian Government over the possible negative impact of the government’s eagerness to enter into trade agreements that see substandard and smuggled products flood the market and hinder local businesses. MAN has called for dialogue between the government and itself to discuss solutions to repair the current state of the manufacturing sector in Nigeria.

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Doctoral student Sandile Ngcobo conducts a laser experiment at the CSIR 3

South Africa | Saldanha to receive new oil terminal, to be the largest in Africa: German based Oiltanking Gmbh has entered into a joint venture with a number of local companies, including Mining, Oil and Gas Services (MOGS), to build a commercial crude oil storage and blending terminal at the port of Saldanha. The crude oil terminal will comprise 12 large concrete tanks, each capable of holding more than 1 million barrels of crude oil and will cost approximately US$ 202,500 to build. Once complete, the new facility will be the largest oil blending facility in Africa and one of the largest in the world.

Image courtesy CSIR.

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ECONOMIC, POLITICAL AND INDUSTRY UPDATES

South Africa | Aspen Pharma’s fiscal earnings rise by a quarter: South Africa’s Aspen Pharmacare Holdings has recorded an increase in revenue of 27%, with a 25% increase in net income. The increase of ZAR 19.3 billion (US$ 195 million) and ZAR 3.52 billion (US$ 356 million) respectively, was for its year ending 30 June 2013. Aspen made its largest profit from Asian Pacific and Latin American markets. Aspen Pharmacare is Africa’s largest maker of generic drugs. South Africa | Marikana Commission of Enquiry accuses SAPS of lying: The Marikana Commission of Enquiry has accused the South African Police Service (SAPS) of lying, withholding information and tampering with evidence following a government appointed investigation into the deaths of 34 striking miners. The miners were killed during the Lonmin strike of 2012. The Commission, which has been plagued with delays and funding shortfalls, has stated that over a thousand pages of new evidence has been uncovered, including documents that were previously said to be non-existent and other information that should have been disclosed earlier. South Africa | Vodacom announces intentions to purchase Neotel: On 30 September 2013, Vodacom announced its intention to purchase Neotel, a unit of India’s Tata Communications. The ZAR 5.9 billion deal (US$ 583 million) would give Vodacom the ability to grow its data business by way of large fibre optic networks for high-speed internet connectivity. Fixed-line and fibre optic services are essential for growing a business orientated client base. Neotel has access to more than 15,000km of fibre optic cable with over half of its cable in urban areas.

Neotel’s +15,000km fibre optic infrastructure 4

South Africa | GUG initiates legal review of Nersa’s gas pricing: The Gas User Group (GUG) which represents 13 large domestic manufacturers, has initiated a legal review of the National Energy Regulator of South Africa’s (Nersa’s) decision on maximum piped-gas prices. GUG has argued that the new formula will result in a surge in prices and undermine existing levels of strained competitiveness. Gas consumers, whose prices are benchmarked against the use of coal as an alternative, face steep price increases as a result of Nersa’s new price determination. South Africa | French Development Agency finances CSP project: France will loan South Africa’s public utility Eskom ZAR 1.3 billion (approximately US$ 130 million) to help finance a 100 MW concentrating solar power (CSP) plant near Upington in the Northern Cape. CSP collects the sun’s energy through large mirrors and uses this concentrated thermal energy to produce steam in order to drive a conventional steam turbine for electricity generation. The Upington CSP project is expected to deliver an annual energy production of 525 GWh and will be sufficient to power 200,000 homes. Zimbabwe | Legitimacy of ZANU-PF win questionable: The two-third majority win by Robert Mugabe’s Zimbabwe African National Union – Patriotic Front (ZANU–PF) during the 31 July 2013 election has been hotly contested, both at a local and international level. From its onset, the election was declared illegal by opposition leader Morgan Tsvangirai and other supporting members of Parliament. Irregularities at polling stations, accusations of media bias and intimidation of the electorate followed suit. Regional bodies such as the African Union (AU), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) endorsed the elections. The European Union (EU) and the United States (US) however have resolved to not remove their sanctions placed on the Southern African country in light of the election’s questionable credibility. On 10 September 2013 President Mugabe officially announced the names of his new cabinet following his contested win. Zimbabwe | Econet Wireless launches 4G service: Econet Wireless, a Zimbabwean mobile operator, has become one of the first mobile operators to launch 4G mobile services in the country. The new 4G service will first be made available in the country’s central business districts of Harare, Bulawayo and the town of Victoria Falls where the UN World Tourism Organisation (UNWTO) General Assembly is being held later this year.

Map courtesy Neotel.

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Infrastructure opportunities in East Africa’s oil sector: Overcoming politics By Keri Leicher

Keri Leicher is a CAI consultant and a freelance political risk analyst for companies wishing to invest in Africa. She is widely published on a wide range of Africa-related topics and specialises in natural resources and their associated risks. Excitement surrounding the oil and gas industry in Africa has been confined to the continent’s western coasts following nearly half a century of production in countries such as Angola, Equatorial Guinea, Gabon and Nigeria. While oil and gas exploration has been on-going in East Africa for decades, it was only after significant discoveries were made around Uganda’s Lake Albert in the 21st century that perceptions surrounding this region changed. Today, industry players are dotted across eastern Africa, bringing with them the promise of a resource boom along with significant infrastructure spinoffs. The realisation of these promises faces significant hurdles - with local and regional politics serving as the primary hindrance.

The next frontier: Oil and gas discoveries in East Africa Oil exploration in East Africa dates back nearly a century as industry players first began searching for oil in Uganda in the 1920s.6 It was not until 2006, however, that the first commercial oil discovery was made in the Lake Albert Rift basin by Heritage Oil, which in turn spurred on a host of activity in the country and region at large. 6 Since then, onshore oil discoveries in Uganda have been followed by promising discoveries in Kenya, whilst sizeable offshore discoveries of gas have been made throughout the region. According to Deloitte, senior executives in the industry have remarked that in the last two years, more hydrocarbons have been discovered in East Africa than anywhere else in the world.9

East Africa’s vastly under-explored, proven petroleum system 5 ‘East Africa: Vastly under-explored proven petroleum system’, Africa Oil Corp, http://crossedcrocodiles.wordpress.com 6 ‘Emerging East Africa energy’, United States Energy Information Administration, 2013, http://www.eia.gov 5

Ibid. ‘The Deloitte guide to oil and gas in East Africa: Where potential lies’, Deloitte, 2013, http://www.deloitte.com 9 Table compiled by CAI with data sourced from ‘Emerging East Africa energy’, United States Energy Information Administration, 2013, http://www.eia.gov 7 8

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FEATURED ARTICLE

Country

Notable oil and gas discovery

Planned infrastructure

Companies

Kenya

In 2012, Ngamia-1 and Twiga South-1 oil wells discovered

New reversible product pipeline to Uganda; replace Mombasa-Nairobi product pipeline; increase capacity at Mombasa Port

Tullow

Tanzania

More than 20 trillion cubic feet (Tcf) of recoverable gas resources in Blocks 1-4

LNG plant and supporting infrastructure

British Petroleum (BP) Group, Statoil, Ophir Energy, ExxonMobil, Aminex

Uganda

From 2006-2011, 18 commercially viable oil and gas fields discovered

Oil refinery in Uganda and exporting pipeline possibly via Kenya

Tullow, Total, China National Offshore Oil Exploration (CNOOC)

Notable hydrocarbon discoveries in East Africa. 9

Notable hydrocarbon discoveries in East Africa East Africa remains one of the poorest and most unstable regions in the world, where the majority of locals live on less than US$ 1 a day, in addition to being burdened by disease (malaria, tuberculosis and HIV/AIDS), famine and war. Governments are therefore looking to the oil and gas industry with its influx of revenues to serve as a stimulus for local economies and to help build and upgrade regional infrastructure after years of neglect. Although promising on paper, local and regional politics serve as hindrances to this boom.

Political hindrances to infrastructure development in Uganda Political hurdles are most evident in Uganda where President Yoweri Museveni’s personal control over the country’s oil and gas industry is unparalleled. Museveni has played a hand in the development of the oil industry since oil was first discovered in Uganda. The President personally negotiated initial production sharing agreements, for example, and continues to call for greater parliamentary scrutiny over contracts. Museveni’s reach has even extended into anticipated infrastructure spinoff projects.

faced numerous delays due to Museveni, Total and CNOOC being at loggerheads over the proposed capacity of the refinery and pipe ine routes. Museveni proposed a rate of production of a massive and unrealistic 180,000 bbl/d, an amount which Total and CNOOC maintained there is insufficient local demand to warrant. However, after a two year impasse, the consortium recently agreed upon a refinery capacity of 30,000 bbl/d. A parliamentary law was eventually passed in February 2013, which allows for the Ugandan Government to retain a 40% stake in the refinery – estimated to cost up to US$ 12 billion - that it eventually wants ramped to a capacity of 60,000 bbl/d once production picks up.11 The construction of the oil refinery is not the only infra structure project that has faced political delays in Uganda, as the consortium has still not decided on the best pipeline route out of Uganda. Three possible routes are being considered by the consortium via Kenya’s Mombasa Terminal, Kenya’s Lamu terminal and Tanzania’s Dar es Salaam Port.

In an attempt to maximise the Lake Albert success story, Museveni’s government has been working with Total and CNOOC to tap into the downstream sector with the construction of a local oil refinery and export pipeline.10 While the very start of oil production in Uganda is dependent on these facilities, their establishment has

Museveni’s interference in Uganda’s oil and gas industry has therefore pushed back the development of the country’s petroleum sector not by months but by years. Key industry role-players now note that full-scale production is only realisable in 2017/2018 - more than a decade after the first commercial oil discovery was made.12 While some level of agreement has been reached, Museveni shows little sign of relinquishing his grip on Uganda’s hydrocarbons sector, especially considering his ambition to stand for another presidential term in 2016, which would mark his 30th year in power. Going forward,

Table compiled by CAI with data sourced from ‘Emerging East Africa energy’, United States Energy Information Administration, 2013, http://www.eia.gov

11 Elias Biryabarema, ‘Uganda says agrees on 30 000 bpd oil refinery with Total, CNOOC’, Reuters, 15 April 2013, http://www.reuters.com

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‘A new frontier: Oil and gas in East Africa’, Control Risks, 2012, http://www.controlrisks.com

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12 ‘Emerging East Africa energy’, United States Energy Information Administration, 2013, http://www.eia.gov

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investors will have to navigate this territory carefully with a constant awareness of the heavy-handed role of politics in Uganda.

Kenya leading the way and spurring competition from neighbouring countries Moving across the border, Kenya stands in stark contrast to its neighbour as it is determined to rapidly capitalise on recent oil discoveries made in the country just last year (2012), recently announcing that it intends to start shipments in 2016. Kenya is able to fast track its own development in this regard, as it has already-established infrastructure for the refining and transport of oil. Mombasa port, for example, has two oil terminals as well as a refinery to receive and process crude. Kenya also has a product pipeline system that transports petroleum products inland from Mombasa to Nairobi, which serves as a regional lifeline for countries such as Rwanda, Burundi and the Democratic Republic of Congo (DRC). Kenya is therefore looking to use its new discoveries to both revamp and enhance its existing infrastructure network to strengthen its dominance in the sector as well as build new pipelines westwards to tap into new oil markets.13 Although Kenyan politicians are behind this initiative, the country’s strong ambitions may result in a regional backlash. Even before Kenya announced the discovery of commercially viable oil last year, the country had been acknowledged as the go-to market for investment in East Africa. Despite its dominance, there remains stiff competition between Kenya and Uganda to establish themselves as regional commercial hubs. Kenya’s desire to dominate the petroleum sector in East Africa and supply the region with its own oil, even though Uganda discovered more significant oil reserves nearly a decade ago, may drive Uganda to look to Tanzania as an export route and directly compete with Kenya for the Central African oil market.14 Tanzania is further expected to side itself with Uganda in this regard as it is frequently outmatched by better educated and more technically skilled workers from Kenya when attracting foreign investors.15 Bearing in mind that Tullow Oil is exploring for oil reserves in both Kenya and Uganda, Ugandans are further concerned that following their own political hiccups back home, the British multinational might eventually move its assets into Kenya.16 13 Eduard Gismatullin, ‘Kenya from nowhere plans East Africa’s first oil exports: Energy’, Bloomberg, 20 August 2013, http://www.bloomberg.com; ‘Emerging East Africa energy’, United States Energy Information Administration, 2013, http://www.eia.gov 14 ‘A new frontier: Oil and gas in East Africa’, Control Risks, 2012, http://www.controlrisks.com

Implications for the EAC This rivalry may have larger implications for the success of the East African Community (EAC), an economic bloc consisting of Burundi, Kenya, Rwanda, Tanzania and Uganda, that looks to implement a common market and custom union for greater regional economic and infrastructural integration. Established in 1967 – and later revived in 2000 – the EAC has been slow to realise these initiatives. Throwing additional political rivalries into the mix may further derail the EAC’s progress, which in turn will impede economic and infrastructural developments in the East African oil and gas sector. Despite these challenges, East Africa cannot be overlooked when it comes to infrastructure development, given the promising prospects of the oil and gas boom. Over the course of the next decade, numerous infrastructure sectors are expected to receive a boost once oil begins to flow - the very nature of the industry demands better transport (rail/road/ports), more energy (power stations) and even retail given the anticipated influx of expatriates working in hydrocarbons. When comparing opportunities however, Kenya remains the better market for investment as it is less hostile to foreigners. While opportunities in Uganda certainly exist – Museveni recently announced plans to launch a resources-for-infrastructure deal based on the DRC model – the current government tends to favour Chinese investors over westerners. Should political hurdles be overcome however, a regional infrastructure boom from the petroleum industry is not off the cards.

Concluding Remarks The discovery of oil and gas in East Africa has been met with much excitement by both local governments and multinational companies. These discoveries have promised to enhance economic growth in the region with the creation of a dense network of oil and gas infrastructure consisting of upstream and downstream facilities. Local and regional politics remain the primary hindrances to realising this future however, where Uganda serves as its own worst enemy in this regard whilst Kenya faces the risk of a regional derailing of its own developmental plans. Despite these concerns, investors are encouraged to watch the region with a keen interest.

Ibid.

15

Angelo Izama, ‘Kenya’s oil –Uganda’s dilemmas’, African Arguments, 30 March 2012, http://africanarguments.org 16

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REGION IN FOCUS

The East African Community (EAC): Reshaping East Africa through economic and political diplomacy The East African Community (EAC) is an intergovernmental organisation with a focus on regional cooperation and economic integration in East Africa (EA). Not only does the EAC encourage trade and investment between its member states, it has also expanded its free trade area to include the Southern Africa Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). The EAC has therefore become an essential component to the African Economic Community (AEC).

Building the East African model Apart from its overall economic, political and social associations, the EAC has furthered its objectives to include joint defence and security, research and technology, as well as legal and judicial affiliations (for example, the East African Court of Justice), all for the constituency’s mutual and, ideally, sovereign benefit. It is with the founding of the Customs Union and Common Market that the EAC aims to achieve a single Monetary Union and ultimately a Political Federation. To date, the goals for a common currency by 2013 and a federal government by 2015 seem unlikely, due in part to the planned accession of South Sudan as a member state and other economic and political disagreements.18

Map of the East African Community (EAC) 17

Almost a century old: Inter-state cooperation between the countries of East Africa is almost a century old. In 1917, Uganda and Kenya founded the region’s first Customs Union. In 1927, the alliance added a new member, namely Tanzania (then Tanganyika). It was only in 1967 that the three member states founded the first adaptation of the EAC, but a decade later the organisation was dissolved due to disagreements around central economic and political issues. After renewed attempts by the organisation’s founding members to consolidate the organisation, the Treaty for the Establishment of the EAC was signed in November 1999 and came into effect in July 2000. Seven years later, Burundi and Rwanda joined the alliance.

Map courtesy The Habari Network.

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18 Since its independence, South Sudan has had to focus on developing its infrastructure. This includes the development of new oil pipelines that are independent to those of Khartoum’s. The scope of South Sudan joining the EAC is therefore considered to affect the regional body’s timelines.

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REGION IN FOCUS

Objectives

Achievements

Challenges

Product diversification

Poor revenue management

Improved market access

Customs administration

Higher trade volumes

Lack of human & capital resources

Common Market Protocol ratification

Continued nationalistic tendencies

Currency convertibility

Differing levels of economic development

Adopting common travel documents

Weak private sector

Approximation of banking rules

Disparities in political views & commitments

Merging fiscal & monetary policies

Fears of the impact of a single currency

Stock exchange trading practices & regulations

Weak frameworks to manage a robust

financial sector

Political Federation

Conflict prevention management

Lack of political will & commitment

Regional stability

Identifying & pursuing mutual interests

(After 2012)

Safeguarding democratic institutions

Slow implementation of policies

Customs Union (2005-2010) Common Market (2010 onwards)

Monetary Union (2012 onwards)

Roadmap of EAC Integration 19

Economic policy for the long-haul Economically, the EAC has been effective in becoming more than just an administrative authority. Economic development within and across its member states has improved the region’s business climate. Since 2005, a total of 74 institutional reforms have been implemented across the 5 economies in order to improve the EAC’s business climate. Despite individual differences with respect to the ease of doing business20 in each country, should all member states adopt economic policies that are aligned with one another, the EAC stands to hold a potential ranking of 26 out of 185 countries analysed (as opposed to its current position at 117 in the World Bank’s Doing Business Report). 21

Similarly, the tripartite arrangement between COMESA, SADC and the EAC will make the widening of a regional market more possible, resulting in the culmination of greater industrialisation and much needed infrastructure development.23 Hindrances to furthering economic integration do however exist. Some include challenges around divergent economic structures (for example, immigration and the free movement of labour, goods and capital), which have not been resolved under the EAC’s Customs Union to date, while collecting individual import duties does not align itself to the notion of a Common Market either.24 Small markets and inadequate infrastructure also remain key challenges to development in the region.25

Regional comparison of the World Bank’s ‘Doing Business’ rankings 22 *Average global ranking by topic (1-185) 19 Table compiled by CAI with data sourced from Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) website, http://www.eacgermany.org; EAC development strategy (2011/12 – 2015/16)’, East African Community, August 2011, http://www.eac.int

21 ‘Doing Business in the East African Community 2013’, International Bank for Reconstruction and Development and The World Bank, 2013, http://www.doingbusiness.org

20 The Ease of Doing Business is an index created by the World Bank that measures regulations that affect business in a country and or region each year. The overall ease of doing business in a country is measured by 10 sub-indexes, all of which relate to factors affecting the business climate.

22 Graphic compiled by CAI with data sourced from: Doing Business in the East African Community 2013’, International Bank for Reconstruction and Development and The World Bank, 2013, http://www.doingbusiness.org

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REGION IN FOCUS

Any isolated and short-term reforms by each of the member states will have to be managed should the EAC want its Common Market to operate at a regional level as planned and attract international investors as expected.26

Promoting regional stability through democratic legitimacy Improving the region’s investment climate is also closely correlated with the political risk associated with each member country. Strengthening government institutions, the rule of law and socio-economic issues in the region is a key objective of the EAC’s strategy aimed at attracting Foreign Direct Investment (FDI).27 Conflict zones that border the now relatively stable EAC member countries are closely monitored, while a Sectoral Council on Interstate Security serves to guard against the exchange of illicit weapons and drug trafficking between member borders – all of which make the credibility of the EAC’s economic and investment climate more vulnerable.28 Politically, the EAC has declared all member states’ democracies and enforces the practice of electoral observance, monitoring and documenting the legitimacy of all elections that take place within its jurisdiction.29 The EAC’s commitment towards democracy was further expressed in the State of the EAC Address, presented by Ugandan President Yoweri Museveni in April 2013. In an attempt to combat regional instability and weak democratic institutions, Museveni called for “political unity”30 and further engagement with citizens of the EAC to improve standards of living, thus building legitimacy for a Political Federation.31

The current practice of top-level democratic values does mask certain underlying differences in the political culture of each member state and the challenges that the EAC faces as a whole. Kenya finds Uganda’s single-party dominance threatening while the ethnic discord in Kenya could arguably threaten Tanzania’s longstanding stability and Rwanda’s attempts at building a developmental state since its genocide in 1994.32 Similarly, if South Sudan becomes an EAC member, the regional body will be affiliated to one of the world’s least democratic states; a trend which, according to Freedomhouse, Uganda and Kenya are following.33 Together with “incoherent constitutions and weak institutions” that have evolved out of Africa’s post-independence narrative, the EAC has a long way to go before it betters its current democratic positioning.35

Concluding remarks Commitment towards the re-invention of East Africa is tangible, and while there are challenges facing the economic and political consolidation of the EAC, now is the time for the commercial sector to pay greater attention to the region. Member states share almost equal economic standing and stability in the region continues to be maintained through cooperative policy. These factors make the EAC a favourable business destination, allowing investors the opportunity to enjoy greater regional access to a diverse market, with numerous resources and one that is also not oil-based - for now.

EAC Member

Freedomhouse

Economist Intelligence Unit

Kenya

Partly free

Hybrid regime

Tanzania

Partly free

Hybrid regime

Uganda

Partly free

Hybrid regime

Burundi

Partly free

Authoritarian regime

Rwanda

Not free

Authoritarian regime

EAC members’ global democratic rankings 36 23 ‘EAC development strategy (2011/12 – 2015/16)’, East African Community, August 2011, http://www.eac.int 24 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) website, http://www.eacgermany.org; ‘EAC integration challenges as it enters into a common market’, Carter Centre, http://cartercentre.blogspot.com 25 East African Community website, http://www.eac.int 26 ‘Doing business in the East African Community 2013’, International Bank for Reconstruction and Development and The World Bank, 2013, http://www.doingbusiness.org 27 ‘EAC development strategy (2011/12 – 2015/16)’, East African Community, August 2011, http://www.eac.int 28 ‘The East African Community: Community effort is required to manage the risk of crime’, ACAMS Today, March-May 2010, http://www.business-risk-research.com 29 ‘EAC development strategy (2011/12 – 2015/16)’, East African Community, August 2011, http://www.eac.int

12

East African Community website, http://www.eac.int Ibid. 32 Erickson, A., 2012. Peace in Tanzania: An island of stability in Sub-Saharan Africa. Research Discourse, 3(1), pp. 18-31. 30 31

33 ‘Freedom in the world 2013: Democratic breakthroughs in the balance’, Freedomhouse, http://www.freedomhouse.org 34 ‘Rawlings: Democracy should reflect African culture’, Myjoyonline, 18 June 2013, http://politics.myjoyonline.com 35 ‘Democracy Index 2012: Democracy at a standstill’, The Economist intelligence Unit, http://www.eiu.com; ‘Freedom in the world 2013: Democratic breakthroughs in the balance’, Freedomhouse, http://www.freedomhouse.org 36 Table compiled by CAI with data sourced from: ‘Democracy Index 2012: Democracy at a standstill’, The Economist intelligence Unit, http://www.eiu.com; ‘Freedom in the world 2013: Democratic breakthroughs in the balance’, Freedomhouse, http://www.freedomhouse.org

Adams & Adams - Africa Focus November 2013

Consultancy Africa Intelligence Your African partner in superior research and analysis


ADAMS & ADAMS AFRICA INSIGHTS

Africa Insights

Insights from the largest IP law firm south of the equator 2nd Annual Adams & Adams Africa Network Seminar held on 12th September, 2013

Pouncing on Parallel Imports

Adams & Adams recently hosted its 2nd annual IP seminar, the biggest of its kind on the African continent, for its partners from across Africa. The meeting brought together 61 top IP practitioners and administrators from various parts of the continent. For more information, read here.

By now most of us are familiar with the grey hairs caused to companies all over the world by the importation of grey goods, also known as parallel imported goods. As a general rule of thumb, the importation and sale of grey goods is not unlawful in most African countries, albeit subject to certain conditions. For example, in South Africa persons dealing in grey goods are required to comply with the provisions of Section 25 of the Consumer Protection Act. For more information read here.

Angola – New industrial Property Act? Exciting developments appear to be in the offing in 2013 at the Angolan Industrial Property Institute (IAPI) with the announcement by the Director General, Dr Barros Licença, that IAPI intends to have its new IP laws approved, coupled with the construction of a new headquarters, in 2014 . For more information, read here.

Profiteering from the MANDELA brand As former President and father of the nation, Nelson Mandela spends almost three months in hospital due to a critical lung infection, South Africans and many others around the globe keep him in their prayers. In the meantime, businesses including book shops and curio stores are experiencing increased sales of merchandise bearing the anti-apartheid hero’s name, image or quotations from his well-known books. For more information, read here.

Turning up the heat on Trade Mark rights in Kenya Does withdrawal of a threat of opposition amount to a surrender of your rights to institute cancellation proceedings in respect of the same trade mark? In Kenya, in terms of a recent decision handed down by the Assistant Registrar, the answer is no. For more information read here.

Examining Examination A question that has received some attention and has elicited some debate recently, particularly since South Africa has joined the BRIC group of countries to form BRICS, is whether or not the South African Patent Office should implement substantive examination as part of its patent prosecution process. The motivation of this article is not to participate actively in that debate or exhaustively to discuss all of the issues relevant to it, but rather to provide some context for it and raise selected thoughts on some of the issues that may have to be taken into account in taking a decision on implementation. For more information read here.

Mauritius to set up a National Plant Varieties and Seeds Office Mauritius is in the process of setting up a National Plant Varieties and Seeds Office that will regulate the cultivation, production, trade, export and import of seeds. It will also provide for the registration of varieties and seeds for testing, inspection and certification. For more information read here.

Adams & Adams - Africa Focus November 2013

Consultancy Africa Intelligence Your African partner in superior research and analysis

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AFRICA EVENT PICKS

FEATURED EVENT Creating and Leveraging Intellectual Property in Developing Countries: A Power Tool for Social and Economic Growth, 17-20 November 2013 The Companies and IP Commission (CIPC) in joint partnership with the National IP Management Office (NIPMO) of South Africa will be sponsoring a conference on “Creating and Leveraging Intellectual Property in Developing Countries: A Power Tool for Social and Economic Growth.” The Conference will take place between 17-20 November at the Southern Sun Elangeni in Durban and follows from the highly successful meeting of the BRICS Heads of Patent Offices in May 2013.

A handful of the many high profile speakers includes: McLean Sibanda (CEO, Innovation Hub of Gauteng Province; Justice Joel Ngugi (High Court of Kenya); Chief Judge James Smith (U.S. Patent and Trademark Office); Roy Waldron (Chief IP Counsel, Pfizer); Phil Johnson (Chief IP Counsel, Johnson & Johnson); Prof Steve Sammut (Wharton School of Business); and Dr Michal Preminger (Executive Director of the Office of Technology Development, Harvard Medical School).

Key discussions will include an opening Ministerial Round Table on “The Strategic Use of IP in Emerging Economies” and an analysis of “The Effect of the National Patent System on the Perceived Investment Value of a Patent” by representatives of the BRICS Head of IP Offices. The conference will be co-chaired by Astrid Ludin, Commissioner of CIPC; Jonathan Youngleson, Head of National IP Management Office; and Shelley Knowles, the Principal of Knowles IP Strategies. Other attendees include senior officials from the South African Government, industrial and academic leaders from Africa and other BRICS countries as well as the United States (US), Europe and various international organisations.

Events Picks for this quarter ChemExpo Africa 6-7 November Sandton Convention Centre, Johannesburg, South Africa For more information: www.chemspecevents.com

Flotation ’13: 6th International Flotation Conference 18-21 November Vineyard Hotel, Cape Town, South Africa For more information: www.min-eng.com

Lephalale Mining Exhibition 7 November The Mogol Club, Lephalale, South Africa For more information: www.interactmedia.co.za

Mining Risk Management Summit 25-28 November Indaba Hotel, Johannesburg, South Africa For details on last year’s event: www.miningriskmanagementsummit.com

National IP Management Office (NIPMO) Conference 17-20 November Southern Sun Elangeni, Durban, South Africa For more information: www.nipmo.org.za

14

PSWA: Pre-Salt West Africa Development Congress 2013 11-12 December Venue to be announced, Johannesburg, South Africa For more information: www.pre-salt-west-africa-2013.com

Adams & Adams - Africa Focus November 2013

Consultancy Africa Intelligence Your African partner in superior research and analysis


CLOSING WORDS

We trust that you’ve enjoyed the third edition of the Adams & Adams Africa Focus! Adams & Adams strives to provide its clients with the necessary legal guidance to navigate the African business enigma, and with this quarterly report, your (un)fair advantage as an Adams & Adams client is significantly enhanced to ensure your success with and within Africa. The next edition of the Adams & Adams Africa Focus is scheduled for release in January 2014 and will look back on an eventful year and also forward to what is sure to be an eventful 2014. South Africa’s general election will take place during the first half of next year and is expected to be hotly contested, with new competition entering the fray. Political powerhouses the African National Congress (ANC) and their official opposition, the Democratic Alliance (DA), will need to work harder than ever before to secure votes. Newcomers to keep your eyes on in the coming months include anti-apartheid icon Mamphela Raphele’s newly formed party, Agang South Africa, as well as South Africa First (SAF) (led by former members of the ANC’s armed wing, Umkhonto we Sizwe) and the Economic Freedom Fighters (EFF), led by former ANC Youth League president and highly controversial Julius Malema.

The outcome of South Africa’s election next year will have wide-ranging implications for the country and the African continent more generally. Other major African players such as Botswana, Nigeria and Namibia will also hold general elections in 2014, and the Adams & Adams Africa Focus will keep you informed and updated on these and all other key developments across the continent. Considering the needs and interests of you, our clients, which evolve with the ebb and flow of the African business environment, we welcome your input and suggestions for future editions of this publication. Our goal, after all, is to enrich your experience as a valued Adams & Adams client. Please send any feedback or queries that you may have to africaip@adamsadams.com. We wish you all the best for the remainder of the year and look forward to hearing from you! Siyabonga kakhulu (We thank you very much).

Proudly produced by Consultancy Africa Intelligence (Pty) Ltd. This Adams & Adams Africa Focus is designed to provide accurate and authoritative information on the subject matter covered. It is provided with the understanding that the publication is not intended to provide implicit legal, accounting, investment, or other professional advice. The information, research and opinions provided are collated and formulated by CAI from its associates’ understanding and knowledge of issues dealt with, as well as from a variety of open sources including, but not limited to, audio, visual and print media. CAI’s associates are located across the African continent, as well as in Asia, Europe, the Middle East and the United States. While Consultancy Africa Intelligence (Pty) Ltd. believes that the information and opinions contained herein are reliable, it does not make any warranties, express or implied, and assumes no liability for reliance on or use of the information or opinions contained herein. Furthermore, Consultancy Africa Intelligence (Pty) Ltd indemnifies itself from unforeseen errors due to certain sources being gathered from third parties.

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Adams & Adams - Africa Focus November 2013

Consultancy Africa Intelligence Your African partner in superior research and analysis

15

Adams & Adams Africa Focus  

November 2013

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