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Contents In the News

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Kenyan Farm Turns Harvest Waste into Electricity

Health Matters

32

China Gets Less than 3,000BOPD of Crude from Nigeria, Wants more

8

Tanzanian’s Solar Plant Wins Award Africa Taps Geothermal Resources for Energy

9

Egypt Signs New Acreage Deal Nigeria Moves to Revive Ailing Refineries

34 36

Interview

Future is Bright and 10 The Entrepreneurship will run Africa

13

Cover Story

The Rise of Africa’s Energy Entrepreneurs

Business Start-up's

16 Africa’s Top 10 Solar-Preneurs Entrepreneurs

Falling Oil Prices, 22 With AfricanAgriculture Now has an Opportunity#

26

This is the time to build Africa forAfricans by Africans

Africa & Middle East

Private Sector 28 Mobilizing Investment in Africa’s Oil and Gas Industry in a Low Oil Price World

Future Health Challenges Facing the Oil and Gas Industry

Media & Entertainment What you Need to Know About South Africa’s Movie Industry

Retail & Trades Deciphering Nigeria’s New Trade and Currency Deal with China

Commerce

38

Africa’s Top 10 Oil and Gas Investment Destinations in 2016

41

Falling Oil Price – Opportunities for Entrepreneurs

46 48 54

Events

Ghana Eyes Oil Wealth at Oil and Gas Summit Tanzania International Forum for Investments

Hospitality

EKO Hotel & Suites

EDITOR’S LETTER

IN THE NEWS

Kenyan Farm Turns Harvest Waste into Electricity

B2B Publishing Ltd. 1 Hartdames, Shenley Brook End, Milton Keynes, MK5 7HP United Kingdom

Management Benjamin Adesola PhD President and CEO Sola Adesola PhD Executive Director International Business Matthew Adesola Executive Director Corporate Strategy & Communications Abraham Era Iyayi Executive Director Operations & Projects

Editorial Olubukola Afuwape Managing Editor Paul Adepoju Executive Editor Pawan Singh Photographer Mayim Robinson

Sales & Marketing Joseph Bayode

Distribution Manager Ademola Akitoye Janet Soyingbe

Production, Media & Publicity

| 6 | African Entrepreneur Volume 1, Issue 003 2016

Energy is Life

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nergy is life. It shapes nations, trade and fuels wars. Energy, I discovered, is also intensely personal. It shapes our lives on a daily basis. It’s not only a matter of how we get around or whether we have enough food to eat; energy production affects the communities that receive it and those that produce it. It shapes attitudes toward gender and race and nationalism and identity. It pollutes the air and the rivers. It offers immense economic opportunities. Or it does both.

And it is shaping the African continent too. The continent is home to five of the top 30 oilproducing countries in the world.

You might not think of South Africa and Ghana right away as big energy producers. But Nigeria, Algeria, Angola, Equatorial Guinea, Gabon and the Central African Republic are. Nigeria, for instance, stands thirteenth in global oil production and Africa’s biggest oil producer with daily production reaching about 2.4 million barrels. Nigeria also has the second largest proven oil reserves in Africa and the 10th largest in the world.

There is also every possibility that the continent could become a gold mine for renewable energy due to abundant solar and wind resources. Africa is blessed with some of the world’s largest hydropower and geothermal resources (10-15 GW of geothermal potential in the Rift Valley alone), bountiful solar and wind resources, as well as significant natural gas reserves, and total power generation capacity in Africa is about 80,000 megawatts (MW) (including South Africa), roughly the same as that of Spain or South Korea.

While Africa is blessed with vast and untapped sources of energy, it is not without crisis. There is certainly a lot of catastrophe related to energy in the continent. The security issues and business risks such as massive corruption, frequent fuel scarcity, militancy, vandalism, and weak

governance framework stare at your face. The Eskom electricity drama which has dealt a big blow to the energyhungry economy of South Africa; drought issues that are dramatically affecting power generation for domestic use in southern Africa and the endemic electricity shortages that is a part of the Sub-Saharan Africa all point to the sector’s challenges and opportunities depending on your perspective and risk appetite.

But when I reflect on the importance of energy to a nation and hear stories about the production of energy - what it feels like to grow up in an oil camp, how some locals are generating revenues from coals, how young people are innovatively tapping alternative electricity energy sources, how energy production affects indigenous women in some regions and what they are doing to get by, how local communities involve themselves in deciding what is done with solar – I can’t but conclude that our survival depends on energy. Like water, energy is life. Energy matters!

Today we live in interesting times. Natural gas reserves on the continent are enormous, coal reserves are expected to last for about 300 years and oil prices are falling globally. In this issue on energy, we see some Africans are already taking advantage of these opportunities to improve their standard of living and develop their nation. You should too.

Enjoy the issue.

Olubukola AFUWAPE Managing Editor

G

orge Farm, in Kenya’s Naivasha Rift valley, is the first gridconnect anaerobic digester power plant in Africa. The 800ha vegetable farm--and also the largest fresh-produce exporter in East Africa--is able to convert its daily150 tonnes of fresh organic waste into bio-gas, which is then combusted, using GE’s J420 Jenbacher engines, into electricity. At an installed capacity of 24 MWs, the farm is able to power its operations, sell electricity into the country’s grid and reduce carbon emissions by 7,000 tons a year.

Africa’s first grid-connected anaerobic digester plant on Gorge Farm

in Kenya was developed by Tropical Power and is operated by independent power producer Biojoule. The Gorge Farm Energy Park, launched in August 2015, uses organic waste and sunshine to produce renewable power, both of which are plentiful on the 800ha vegetable farm.

Currently only 23 per cent of Kenya’s population have access to electricity, says the World Bank, yet access to energy is a key imperative for economic development.

Gorge Farm Energy Park has an installed capacity of 2.8MW, with a net output of 2.2 MW bringing muchneeded power into the grid at a time when

China Gets Less than 3,000BOPD of Crude from Nigeria, Wants more

C

hina imported 2, 740 Barrels per day of crude from Nigeria in 2015; and the People’s Republic says it is not enough.

“The total export to China was only one million barrels in 2015”, Zao Ling Xiang, the Economic and Commercial Counsellor of the Chinese Embassy in Nigeria told the News Agency of Nigeria (NAN) in Abuja. “That was just 1.3% of Nigerian annual oil export”.

Mr. Zao says that his country was keen to buy more from

A f r i c a ’ s l a rg e s t o i l p r o d u c e r.

The narrative around Nigerian crude oil export has focused largely on how its crude grades have struggled to berth in markets that used to demand them. Commentators have severally lamented the fact that the United States was no longer an enthusiastic buyer of Nigerian crudes.

Indeed, the energy media cheered in April when the news agency Reuters reported that Nigerian crude oil export to the United States has for some reason

Kenya’s energy needs are steadily rising.

The plant is powered by GE’s J420 Jenbacher engines, which are able to operate smoothly at 2,000 metres above sea level. This was the first time that Jenbacher engines were deployed on a renewable energy project in East Africa. As the largest biodigester of its type in East Africa, Gorge Farm Park is seen as a trailblaser for renewable energy development in the region.

The project cost US$6.5 million to build and was developed in under 12 months, with a projected payback period of less than six years.

“Through the Gorge Farm Energy Park we aim to displace the expensive and imported generation fuels – like diesel and heavy fuel oil – from Kenya’s distributed power mix. The Gorge Farm AD Plant is proof that locally produced feedstock can generate clean and cost effective distributed power,” says Mike Mason, chairman of Tropical Power.

“This was the first anaerobic digester project for GE in sub-Saharan Africa. It is a big win for Kenya and Africa in general, demonstrating that waste to power projects are feasible in this market” says Oluwatoyin Abegunde, GE’s distributed power leader for Africa.

Beyond producing power, the plant has multiple environmental benefits.

These include the development of a rich natural fertiliser, which is a by-product of the power production process. Once fed back into the land this helps to improve crop health and reduces the need for synthetic fertilisers. Further by displacing oil-fired generation from the grid, the plant reduces carbon emissions by 7,000 tons a year soared again. “Imports of Nigerian crude by the United States last week jumped to 559,000 barrels per day, a weekly record going back to mid-2013. The rise comes as refining firms turned to imports of West African crude that had previously been displaced by domestic grades during the US shale boom.

Nigeria was the fourth largest supplier of foreign crude to the US this April, displacing Mexico and also competing with Iraq and Colombia, according to preliminary figures from the Energy Information Administration, the statistical arm of the US Department of Energy, Reuters reported”As there are no guarantees that the renewed surge of US import of Nigerian crude African Entrepreneur Volume 1, Issue 003 | 7 |

IN THE NEWS would last long, Mr. Zao’s words about China’s willingness to purchase more cargoes from Nigeria is a little reassuring.

“In my opinion, it really doesn’t matter

IN THE NEWS whether Iran comes back or not”, he told NAN; “Chinese companies want to import more crude oil from Nigeria.”

Tanzanian’s Solar Plant Wins Award

T

he Arusha based solar company Off Grid Electric (OGE) has won the prestigious Zayed Future Energy Prize for its work in bringing electricity

to power-starved areas of rural Tanzania.

The achievement has made t h e Ta n z a n i a s e c o n d A f r i c a n country to win a global award.

Africa Taps Geothermal Resources for Energy

Mr. Akinwumi Adesina (President of the African Development Bank) | 8 | African Entrepreneur Volume 1, Issue 003 2016

The United Arab Emirates (U.A.E.) ambassador to Tanzania Abdullah Ibrahim Ghanem Sultan Al-Suwaidi honoured OGE (http:// offgrid-electric.com) at a recent event for winning the prize in the Small- to Medium-Sized Enterprise category.

Off Grid Electric, based in San Francisco, California and Arusha, Tanzania, is currently installing solar power in over 10,000 new homes and businesses per month.

“Now in its ninth year, the U.A.E.’s international prize recognizes pioneers in the fields of renewable energy and sustainability, and Tanzania is very proud to be the second African country to win in this category, said Abdullah Ibrahim Ghanem Sultan Al-Suwaidi.

The Zayed Future Energy Prize is an annual award which celebrates achievements that reflect impact, innovation, long term vision and leadership in renewable energy and sustainability. 

The amount of heat within 10,000 metres (about 33,000 feet) of earth’s surface, according to the Union of Concerned Scientists, “contains 50,000 times more energy than all the oil and natural gas resources in the world.” The heat, when converted into power through large and complex power stations or through small and relatively simple pumping systems, is referred to as geothermal energy.

To address Africa’s current and future energy needs, the African Development Bank (AfDB), in a “New Deal on Energy for Africa,” (https:// youtu.be/aOn7Npyf-Fc) wants to help the continent get its hands on all its energy resources, including the15 gigawatts of geothermal energy under the surface.

The Menengai geothermal development project, for example, is located in the Rift Valley, about 180KM northwest of Nairobi. Through the development, the AfDB (www.afdb. org/en/) seeks to harness the potential

of the Menengai geothermal steam field in generating150 MW of clean, reliable and affordable electricity annually so as to meet

the growing energy needs of Kenyan households, businesses and industries .

Egypt Signs New Acreage Deal New acreage in Egypt’s Western Desert and the Gulf of Suez is going to be put on offer when the next oil exploration

round is launched.

The country’s Petroleum Minister, Tarek El Molla, said that 11 blocks would be up for auction this April.

The Minister also revealed that this April’s licensing round was just the first of three licensing rounds to be held this year.

El Molla said that the next two rounds would be for gas exploration.

The deals will bring in investment of at least $265 million for eight new wells in Northern Sinai in the Mediterranean Sea and the Nile Delta, according to the Ministry.

Digital

www.petroleum.gov.eg

Discover the world of entrepreneurial Information in your Palm

Mr. Tarek El Molla (Egypt’s Petroleum Minister)

Nigeria Moves to Revive Ailing Refineries

T

he Nigerian National Petroleum Corporation (NNPC), country’s oil firm has launched bidding to find partners to overhaul its ailing refineries, it said in a tender published recently.

Africa’s top oil producer has been trying to restart its refineries, which hardly produce any petrol due to decades of mismanagement and widespread graft. Motorists have been queuing for fuel for months across Nigeria.

In March, NNPC head Emmanuel Ibe Kachikwu said the firm was in talks with Chevron, France’s Total and Italy’s ENI to revamp the refineries but would also launch a separate tender in order to

attract a maximum number of bids.

NNPC (www.nnpcgroup.com) is seeking partners for joint ventures to “fund, rehabilitate and jointly” operate the 210,000-barrel-per-day Port Harcourt refinery, the 110,000-bpd Kaduna refinery and the 125,000-bpd Warri refinery, according to the tender.

Bidding will end on May 30.

Investors would be paid from proceeds from the sale of refined products, the tender said.

In February, Kachikwu told Reuters that NNPC was also in talks with oil companies and banks to raise capital for new drilling and to repay its debt 

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African Entrepreneur Volume 1, Issue 003 | 9 |

EXCLUSIVE Interview

computer languages and since I already made some money from teaching in school, I invested all my money in building a cybercafé which was a launch pad for me. As I made money on the side to take care of myself, I also created a learning paradise for me as I was always on the internet learning and learning. So I learnt everything along the way as there was no one ahead of me who knew what I wanted and how I wanted badly to be an entrepreneur.

What are the general hurdles that you believe entrepreneurs would have to scale irrespective of where they are from?

I would not say it’s a hurdle but a trait you must have. I would call it tenacity. You have to be resilient and stay the course. It is a big part of me. As for hurdles, you have to close your ears to mostly those closest to you as they would always not see your vision and I have seen most wonderful entrepreneurs give way just because people talked them down. My advice has always been stop complaining and start fixing the situation.

Simeon Ononobi, Serial Tech Entrepreneur, Founder of SimplePay and MyAds

The Future is Bright and Entrepreneurship will run Africa

A

cross Africa, Simeon Ononobi is in a class of his own. While other entrepreneurs are dreaming of growing their companies across their country before expanding across Africa, he’s looking at the concept of startup growth differently by taking the world by storm all at once. His latest venture, MyAds, a product that allows phone users to earn when they receive calls, has already been rolled out in India and is rolling out elsewhere rapidly.

With numerous successful products to his credit and millions of dollars in earned revenue, Ononobi is scaling hurdles and recording successes where was once considered extremely difficult and impossible. In this exclusive interview, he tells African Entrepreneur his own rare but relevant perspective to entrepreneurship – irrespective of the industry.

How did you venture into entrepreneurship?

It all started back in school with my first real business I called Compuversity. I taught fellow students how to use the internet, before then I | 10 | African Entrepreneur Volume 1, Issue 003 2016

was giving out tutorials on advanced mathematics but no one paid for that. So when I realized people of my level and those above me did not know much about computers, I decided to start a school lecture. Back then, all my lecturers knew about computers was Cobol, fortran and basic programming languages, they did not know any better. So the introduction of the internet to my school was revolutionary, even opening emails was seen as magic. So I created Compuversity and charged students to come and watch me show them what search engines did, what Yahoo email was and how to create and assembly a personal computer. That was my first business and it created every other thing I do today.

How did you acquire the skillset that are helping you today to scale entrepreneurial hurdles?

I would say I learnt along the way and I read a lot about the likes of Gates, Elon and Sean Parker back then. I wanted to know a lot about what made them tick and how they came up with wonderful innovations. I first had to learn

Across Africa, Simeon Ononobi is in a class of his own. He is scaling hurdles and recording successes where was once considered extremely difficult and impossible

You often say most of your products came up as solutions to personal problems. Can that always be the case in all instances?

No, for me it was always like that, I don’t think it goes for every case. A point will come when it won’t be about solving a problem but creating a solution to a foreseeable problem in future or a challenge you think might be there.

Elon is thinking about the HyperLoop transport system, not because he faces a problem but he wants to better equip the human race for a speedier more relaxing transportation mode. So, yes most times it might be you are solving your problems, but does not always have to be that.

How will an entrepreneur know which of his numerous ideas will bring him or her best success?

This is a very hard question. You can never tell, you just keep at it and something will give if you stay the course. I don’t think it can be written.

It is like asking a singer ‘which of your songs will be most sort after in your new album?’ He/she won’t know until it’s out and you see the reaction from the people. It might not be your favorite that the people like so you can’t say it’s this one or that one. You can’t really tell.

How do you assess your level of

success?

Another tricky question. Levels of success can be measured by fulfillment.

Once I get to a point that I feel I am fulfilled then I will say I am successful.

Becoming known or getting your name in public does not make you successful, no I won’t say that. Once you know you are content and you have ran the race and you believe you have won it, then you are successful. There is no one measuring tape for that limit. You will have to find out yourself. At the moment I will say I am not yet successful.

What are the world’s problems that you think only African entrepreneurs can help to solve?

Food. Food and Food again. I believe we can feed the world only if we can wake up to it. It’s important that we understand this. We don’t have crazy natural disasters here. We have abundant natural resources in Africa, but yet we are hungry. We can feed half of this world and I believe we will one day.

To what extent do you think African governments can get themselves involved in entrepreneurship?

They should champion it. We all know we have very corrupt and old leaders whom do not want to leave the seats of power to young dynamic youths.

If we get youths that have a vision to propel Africa towards the right direction then we will have governments that will be ready to grow ideas and create wealth. The governments are doing less than 5% of what they should be doing. And for me that’s not acceptable.

The world is interested in Africa’s tech space with global companies expanding to the continent even though some startups are already operating in the spaces. What do you think is the best approach to ensure that in spite of the foreign interests, African startups remain viable?

The same things I have always said. We have old hands that don’t understand technology, leadership and this fast moving global village we call the internet. They don’t understand anything, that’s why a company from America can come to Nigeria and run their business and take business from the poor startups and still not pay tax and tell you they are a global company with offices and banks in the Netherlands. That way you are killing

your own country allowing foreigners do what they do best, take your resources to build their own countries.

If we don’t rise up and protect our own companies like China is doing and India is following, we will never have billionaires that will reinvest into the tech space. Imagine if we have our own Facebook for Nigerians and Nigeria in diaspora? You would have built a billionaire who in turn will invest in another startup and another startup and the list will continue to flow and then you have these companies expand globally and pay tax wherever they go.

You can’t do business by not protecting local content. Even jobs are being taking by expatriates and we don’t see anything wrong. No good schools, no good training facilities, you have to be 50 and above to be a professor, loads of stuff are wrong here and I believe the next space to be disrupted is government.

What are your favorite African startup ecosystems?

I don’t know if I can mention up to five but I like the Kenyan, Nigerian, South African, Ghanian and Moroccan eco systems. I have visited almost all of them and they seem to be growing very well.

What is the product you developed that is still your favourite?

A father can’t have a favourite child, and if he does he can’t say it out. So I would say all have been great. I have learnt from everything I have started and concluded. So, yes, all have been great.

What is your most prominent entrepreneurial failure story, what lessons did you learn from it?

Most prominent would be when I tried to create an online freelancing solution. I learnt not to hold on dearly to a project even if it felt good but was yielding nothing. I also learnt that you could have bigger things and that your present idea might not be as good as the future ones. So I learnt to let go.

What is your perspective of the future of Africa’s entrepreneurship?

I believe the future is bright and entrepreneurship will run Africa and make Africa great. It’s growing and will continue to grow. The disruptions will continue in different sectors and it will only be good for Africa. I believe that a future with brightness will fall amongst our generations to come and Africa will be one of the greatest continent sole due to skilled and strong entrepreneurs African Entrepreneur Volume 1, Issue 003 | 11 |

COVER STORY

The Rise of Africa’s Energy Entrepreneurs More than a century after the light bulb was invented, most of the African continent is still in the dark after nightfall. School children often cannot read after dusk, businesses cannot grow, and clinics cannot refrigerate medicine or vaccines, and industries are idled hampering economic growth, jobs, and livelihoods.

T • Infinityway magazine is a publication of B2B Publishing LLC. A one stop for promoting and advertising goods and services on internet • Our services is available to consumers and customer via desktop or moble devices 24/7 Locally and Worldwide • Our vision is to provide access to local Markets • Our mission is to bring businesses together by promoting, advertising and publishing their intrest continuously, implementing state-of-the art technology

| 12 | African Entrepreneur Volume 1, Issue 003 2016

oday, some 25 countries in sub-Saharan Africa are facing a crisis evidenced by rolling blackouts. Although the African continent is well endowed both with fossil fuels and renewable resources, these are not evenly distributed, creating windfall profits for some countries and exacerbating the crisis in others. In other words, when the sun sets across the continent, many Africans are forced to live through an overnight blackout until the next day dawns – sometimes for days and weeks – even more elsewhere. According to the World Bank, less than 24% of the sub-Saharan population have access to electricity with some 25 nations suffering rolling blackouts due to the ongoing energy crisis on the continent.

Since the mid-1990s, external finance to Africa’s power sector has averaged only around US$600 million per year of public assistance, plus a similar volume of private finance. More recently, Chinese, Indian and Arab sources have also emerged as significant energy financiers. Nonetheless, it

Paul ADEPOJU

adepojupaul@gmail.com

is estimated that doubling current levels of energy access by the year 2030 will require sustained investment at much higher levels.

Makhtar Diop, World Bank’s vice president for Africa, called on his African compatriots to do more to solve the continent’s energy struggles.

“All emerging countries have to solve the energy crisis. We have to be on par with other nations, ensuring we produce enough energy for Africa at affordable rates,” said Diop at the International Conference on the Emergence of Africa in Abidjan, Côte d’Ivoire.

Moreover, the recent crippling fuel crisis in Nigeria is a stark reminder of Africa’s dependence on oil.

Late 2015, Nigeria’s president, Muhammadu Buhari, said affirmatively that oil can no longer be depended upon noting that the country’s oil and gas industry is no longer sufficient to provide all the revenue needed

by Nigeria. He enjoined stakeholders to start looking elsewhere, agriculture in specific.

“It’s time to go back to the land. We must African Entrepreneur Volume 1, Issue 003 | 13 |

face the reality that the petroleum we had depended on for so long will no longer suffice. We campaigned heavily on agriculture, and we are ready to assist as many want to go into agricultural ventures,’’ he said.

He also advised other oil-rich African countries to begin to look beyond oil, one of such countries is South Sudan.

Buhari urged the government of South Sudan not to depend solely on oil revenues to grow the nation’s economy.

Key Issues in Africa’s Energy Sector ∙∙ Low access and insufficient capacity - Some 24 percent of the population of sub-Saharan Africa has access to electricity versus 40 percent in other low income countries.

Excluding South Africa, the entire installed generation capacity of subSaharan Africa is only 28 Gigawatts, equivalent to that of Argentina. ∙∙ P o o r r e l i a b i l i t y - A f r i c a n manufacturing enterprises experience power outages on average 56 days per year. As a result, firms lose 6 percent of sales revenues in the informal sector. Where backup generation is limited, losses can be as high as 20 percent.

with multibillion dollar oil firms.

Can local content help?

Even though it seems as if entrepreneurs cannot compete in the oil and gas industry in Africa, several African countries have policies in place to cater for the needs of the entrepreneurs that are interested in the sector. As a concept, local content is complex. Within the context of this discussion, it relates to the process of developing local skills and capacity and local supplier competitiveness and participation in an extractive industry.

Local content requires that local citizens get jobs in the sector. In situations where there are no skills available, the capacity to develop them is considered.

It is an important agenda in Africa but the challenges and expectations are huge. Firstly, there is a limited pool of skills and expertise to develop

local capacity and participation in the extractive industry and the overall improvement of the economy.

In Angola, the policy situation is a little more complicated. There is not a central or single institution to supervise enforcement even though the role of local content is clearly appreciated.

Ethiopia opened its mining sector to private investment in 1991. A strategic broadening of mining permits is available with the enactment of the Mining Operations Proclamation. It also seeks to increase the participation of Ethiopian nationals in the extractive sector.

The Botswana government encourages foreign firms to hire qualified nationals rather than expatriates. The granting of work permits to foreign nationals can be made contingent on demonstrable “localisation” efforts. Though expatriates can be employed, international companies need to have strategies for developing

It's time to go back to the land. We must face the reality that the petroleum we had depended on for so long will no longer suffice. We campaigned heavily on agriculture, and we are ready to assist as many want to go into agricultural ventures

∙∙ High costs - Power tariffs in most parts of the developing world fall in the range of US$0.04 to US$0.08 per kilowatt-hour. However, in Sub-Saharan Africa, the average tariff is US$0.13 per kilowatt-hour.

In countries dependent on dieselbased systems, tariffs are higher still.

Given poor reliability, many firms operate their own diesel generators at two to three times the cost with attendant environmental costs.

its natural resources. Secondly, aligning local content with national priorities is a challenge because many stakeholders are involved.

Developing local content also comes at a cost and there is always the question of who pays, at what price.

Another challenge is deciding on who benefits the most and how governments decide on their objectives or policies.

Despite these challenges, there is a clear benefit to local content development for host governments because it helps:

local skills and succession plans.

In Gabon, a new hydrocarbons law encourages the progressive replacement of foreign workers and prioritises the hiring of local people with equivalent.

“Local content is a highly topical issue and is here to stay on the continent.

It’s also clear that key stakeholders, government and industry are favourably disposed to the value of local content as a sustainable proposition,” said Akanimo 'Odon' an honorary/visiting fellow at Lancaster University.

Shortcomings in the power sector threaten Africa’s long term economic growth and competitiveness.

The cost to the economy of load-shedding is equivalent to 2.1 percent of GDP on average.

But while leaders and global organisations continue to work toward implementing a sustainable infrastructure to ease the crisis, entrepreneurs are also taking it upon themselves to provide solutions for alternative energy. And the reason they are venturing into alternative energy sources is because of the stiff competition

∙∙ stimulate jobs,

Africa’s Clean Energy Startups

| 14 | African Entrepreneur Volume 1, Issue 003 2016

∙∙ increase a skilled workforce, ∙∙ develop international competitiveness in local suppliers, and ∙∙ protect a nation’s key strategic industries.

Countries with Policies in Place Local content policies differ from country to country. Nigeria has a Local Content Act. This is geared toward developing and improving

In Zambia’s capital Lusaka, Mutoba Ngoma saw a need for action -- and with his extensive background in aeronautical engineering, the shrewd businessman decided to do something about it.

He says: “I had just completed my schooling in the UK in aeronautical engineering and I came across a program about renewable energy in Brazil. At the same time Zambia was going through fuel shortages.”

He founded Tapera -- a biofuel company that converts used

vegetable oil into fuel -- in 2006 with a two-fold mission in mind: increase the country’s fuel supply sustainability and provide vocational training and stable job opportunities.

At first it was very much a backyard business -- with around 200 litres a month cleaned and processed. Today , that figure has ballooned to 3,000 litres each month and generates about $15,000. The astute technologist has also started designing his own oil processing machines, in turn, steadily building his client base.

“We’ve got one major client that takes the bulk of what we produce and then we’ve got about seven or eight small clients that come in for small quantities.”

Even though Ngoma had established a fairly stable business, they still faced challenges of finding enough used vegetable oil for their bio-diesel. So the discerning businessman decided to diversify their product range with soap.

“The idea of making soaps came about as a result of one of our challenges of securing enough raw material for the diesel. We realised as we were waiting for more oil to come about we could actually be producing something else.

And we found that we could actually produce soap from the same oil.

So we just had to clean it a bit more and it’s even cheaper to process than the diesel. We stuck with it because we felt it is also a good income generator.”

Kenya’s Impressive Solar Energy Startup Aimed at using the cell phone to transform the way that people in Kenya consume energy, M-KOPA Solar, a Nairobi-based business that has pioneered the idea of “pay-as-yougo” solar energy in Africa has pioneered the utilisation of mobile payment for solar energy in Africa.

Africa has more than 518 million people to be connected to mobile networks by 2020, and M-Kopa started as a payas-you-go solar revolution in Africa by tapping into mobile penetration on the continent.

This is how the service works. Customers use a solar light and radio/phone charging stations over several months in installments via SMS messaging on mobile money networks as opposed to kerosene lamps. The service provides safer, cleaner and more reliable renewable

energy for African homes and cuts down carbon dioxide emissions caused by excessive kerosene use, while offering an affordable alternative to help customers save some cash. The company was started by the founders of M-Pesa, Kenya’s top mobile money system which has so far taken the world by storm.

Untapped Spaces for Entrepreneurs in Oil and Gas As tightly controlled as Africa’s oil and gas space appears to be, there are still a couple of opportunities that small scale entrepreneurs can avail themselves of in the industry and here are some of them for the techies.

Both onshore and offshore oil & gas service companies can use locally developed SaaS solutions to eliminate inefficient, manual and often paperbased activity recording. African local technology companies can provide the big oil companies with a platform that allows for the efficient and accurate capture of field and vessel activities, and provide real-time revenue, personnel and other information.

Attention is being given to gas flaring and emissions in the oil and gas industry in Africa not just because of the environmental damages linked to the emissions but also the associated loss of revenues. "Entrepreneurs can help major oil and gas companies such as pipeline operators, refineries, power plants, paper mills and offshore platforms with solutions to help meet emissions standards through a technology that reduces methane bleed."

Africa’s tech entrepreneurs can develop tablet apps for iPad and

Android that allow companies to create and manage their own inspection questionnaires or forms for users in the field. One of such, Spotter, was created

by Envoc, a Baton Rouge-based software and design firm. Spotter was created to replace the inefficient pen and paper in order to make audits and inspections more accurate than ever before.

While it is not entirely false to say that a lot of capital is needed to compete favorably in oil and gas, especially for nontechie entrepreneurs, it is not impossible for individual entrepreneurs and small businesses to run oil and gas businesses.

“You don’t have the money? Start small. Look for like-minded partners to invest or you could consider any of the numerous ways to raise capital for your business. You don’t need to have all the capital in the world to start.

You could start a low-capital kerosene retail business in your neighbourhood or invest in a cooking gas refilling station. If you can find the capital, you could become a supplier of diesel or petrol to businesses in your area who will need it to power their generators,” said industry expert John-Paul Iwuoha.

“To avoid the crowded marketplace and unhealthy competition, this business will work better if you can find dedicated customers or an under-supplied area of town and dominate it.

For these two customer segments (dedicated customers and areas suffering from scarcity of oil products), there is a good potential to make more profit. Rich homeowners, businesses, factories, schools, office buildings and shopping malls are just some examples of customers who can become dedicated to a supplier who can meet their needs for petrol and diesel. “ Yo u j u s t n e e d t o think of creative ways to separate yourself from the crowded competition African Entrepreneur Volume 1, Issue 003 | 15 |

BUSINESS STARTUPS

batteries, and phone-charging services.

To date, this business has installed over 100,000 of its units in Tanzania and Rwanda. If Off Grid continues to expand at its current rate, it would be on track to meet its plan of providing solar power to

Africa’s Top 10 Solar-Preneurs Africa is in a serious electricity crisis as only seven countries: Cameroon, Gabon, Ghana, Ivory Coast, Namibia, Senegal and South Africa according to The Economist, currently provide electricity to at least half of their population. And as more investment dollars pour into Africa in the coming years to lift the continent out of darkness, solar power projects, solar initiatives, solar businesses and ‘solar-preneurs’ will be a big attraction.

Why Solar?

W

ell, of all the potential sources of electricity for Africa – hydro, natural gas, coal, and even nuclear – solar power is the cleanest, cheapest, most practical and abundant. Solar has the best potential to connect far-flung corners of our continent, especially remote and rural areas that could take decades to access national electricity grids.

It’s no surprise that solar has been identified as one of the top business opportunities in Africa that will make more millionaires in 2016, and in several years thereafter.

Here are the ambitious African solarpreneurs working hard to bring electricity | 16 | African Entrepreneur Volume 1, Issue 003 2016

to more people on the continent from the scorching sun – the hotter the better.

Off Grid Electric Based in Tanzania, and confounded by three ambitious Oxford MBAs, Off Grid Electric provides pre-paid solar energy at affordable prices to people living off the grid.

For just about $6 per unit, its home solar kit includes solar panels, LED lights, a meter, and a USB charger for cell phones. And using its ‘solaras-a-service’ business model, customers pay via mobile phone to unlock the electricity they need.

Off Grid claims their pricing is equal to or less than what customers pay for kerosene,

John-Paul Iwuoha

1 million homes in East Africa by 2017.

Off Grid already has an enviable list of investors$100 million in venture capital, debt finance, grants and awards.

Recently, Off Grid Electric raised $25 million from international investors

and won a $5 million grant from USAID.

M-Kopa Solar With 300,000 customers (and counting), Kenya’s M-Kopa started the pay-as-you-go solar revolution in Africa by tapping into mobile phone penetration on the continent.

Founded by the same guys behind M-Pesa, East Africa’s transformational mobile money solution, M-Kopa is on track to replicate the same success.

M-Kopa’s power system costs about $200, and includes a solar panel, two LED bulbs, an LED flashlight, a rechargeable radio, and adaptors for charging a phone. The kit comes with a two-year warranty, and its battery is designed to last at least four years.

Although most of its customers are very poor and cannot afford the full price upfront, M-Kopa relies on its SMS-based mobile payments system to spread the payment. This allows its customers to make small daily payments, and most customers usually payoff in about a year.

In February 2016, M-Kopa launched one of Africa’s first solarpowered digital TV sets, an impressive addition to its product range.

Since M-Kopa started in 2011, it has attracted over $40 million in investments and is backed by the Bill & Melinda Gates Foundation and Safaricom.

African Entrepreneur Volume 1, Issue 003 | 17 |

Atlantic Waste & Power Systems Despite Nigeria’s abundant natural gas resources and huge potential for power generation, most people in Africa’s largest economy receive no more than 2 to 4 hours of electricity every day. Chris couldn’t resist the urge to serve this 170 million-strong electricity-hungry market.

Chris is one of a handful of entrepreneurs leading the quiet solar revolution in Nigeria, and West Africa.

His business installs and maintains solar power systems for clients that include middleand upper-class households, businesses and highbrow real estate developments in Nigeria and Ghana.

In 2015, Atlantic Waste & Power Systems announced a partnership to develop microgrids and utility-scale solar projects in Nigeria with In Sun We Trust, a French solar electricity project developer.

Helvetic Solar

Nigerian entrepreneur, Chris Onwuasoanya used to be a Vice President at JP Morgan Securities and worked with Merrill Lynch and Wells Fargo in the USA before he returned to Nigeria in 2013 to set up his solar business – Atlantic Waste & Power Systems.

Helvetic Solar Contractors (HSC) has installed more than 6,000 small rooftop solar systems in Tanzania and four other East African countries – Kenya, Uganda, Rwanda and Burundi.

The company supplies, installs and maintains solar systems across the East Africa region, and its product range includes everything solar; from solar panels and water heaters, to battery banks and back-up units.

Its long list of clients and solar projects include the UN, the Tanzanian government, World Vision and the Tanzanian Army. Helvetic Solar has installed solar water heating systems in government institutions and several UN projects including schools, hospitals and hotels.

In 2013, this business made more than $5 million in revenues, and was ranked at the top of KPMG’s East Africa Survey of Top 100 Mid-Sized

Companies in Tanzania in 2012.

The brain behind the sterling achievements of Helvetic Solar is Patrick Ngowi, a young entrepreneur

ARED

Powerhive

Photo credit: prweb.com In 2015, Powerhive became the first private company in Kenya’s history to receive a utility concession | 18 | African Entrepreneur Volume 1, Issue 003 2016

to generate, distribute, and sell electricity to the Kenyan public.

Based in California, USA,

Powerhive is a solar micro-grid company with a difference; it originates, builds, finances and manages solar micro-grids, with customers pre¬paying for Powerhive electricity using mobile money or scratch cards.

Using its proprietary technologies, Powerhive makes money by selling its smart meter hardware and licensing its software to third parties.

In markets where it deploys directly, it also makes money through revenues from end-user electricity payments.

Some of the key investors in Powerhive are First Solar, the biggest U.S solar panel producer, and Total – the French global oil giant.

After successfully testing its solar microgrids in four remote villages in Kenya, Powerhive plans to roll out electricity to over 200,000 homes in Kenya.

in his early 30s who has been featured

by Forbes as one of Africa’s Top 10 Young Millionaires To Watch.

Mobile phones are a big deal across Africa. And for many people on the continent, their livelihoods depend on it.

Despite the widespread use of phones on the continent, accessing reliable energy to charge

phones is a daily challenge for more than 500 million Africans.

ARED, short for African Renewable Energy Distributor, is the brain child of Henri Nyakarundi who developed the Mobile Solar Kiosks, or MSKs. These

Quaint Global

50MW ABIBA solar electricity project in Kaduna State, in northern Nigeria.

Q u a i n t Global Energy was named by Forbes in 2015 as one of Africa’s 5 Cleantech S t a r t u p s To Wa t c h . K a r i b u Solar Power

Based in Nigeria, Quaint Global Energy develops renewable power projects – with a focus on solar, biomass and thermal.

It recently received a grant of $1.3 million from the US Trade and Development Agency as part of President Barack Obama’s Power Africa Initiative.

Quaint Global was also one of the winners of a $5 million co-development fund provided by Access Infra Africa.

The company is currently working with its foreign partners on a massive

mobile kiosks come with built-in solar panels which generate power to charge up to a dozen phones at the same time.

ARED’s mobile solar kiosks provide a one-stop affordable charging station for mobile phone users and can be deployed in open and busy areas – markets, parks and streets.

With several mobile kiosks already deployed in Rwanda and Burundi, these kiosks offer mobile money transfer services, mobile phone sales and call credit recharge in addition to the charging service.

The most impressive feature of ARED’s business is its micro-franchise model which creates opportunities for ordinary people to use the MSKs to earn a living and supplement their income.

African Entrepreneur Volume 1, Issue 003 | 19 |

Worthy of Note: Mobisol

Karibu Solar Power Karibu Solar Power has an interesting value proposition: it models itself as a social enterprise that makes energy available at the price of kerosene.

A winner of the United Nations SEED Award, and the 2014 Cornerstone International Business + Social Good Award, Karibu Solar is bringing affordable and sustainable energy solutions to marginalised Africans.

The business designs, manufactures and distributes a solar pay-as-you-go “business in a box” kit in Tanzania. It sells this kit to entrepreneurs who then earn income from selling recharges to other people.

Karibu Solar is working to expand

Photo credit: karibusolar.com to Cameroon and Nigeria, with the aim to bring solar lighting and affordable

mobile phone charging to 1 million Africans within the next five years.

also a leader in driving policy and advocacy for off-grid lighting and solar technology

advancements internationally.

Ugesi Gold Ugesi Gold is a South African social business that’s lighting up Africa as much as it’s empowering rural women.

Its key focus is the electrification of rural and informal settlements.

Its flagship product is the Solar Turtle; a standard 6m shipping container converted into a unique solar battery charging station where local people can purchase electricity by the bottle (special battery packs that look like water gallons).

Ugesi’s plan is to start as many of these micro-utility SolarTurtle businesses throughout South Africa expanding to Sub-Saharan Africa in the near future.

Its SolarTurtle design and unique approach to solar energy has earned it several accolades. It won the WWF Climate Solver Award in 2014, and it has been named as a 110% Green Flagship Initiative by South Africa’s Western Cape government.

Berlin-based Mobisol provides a range of solar home systems with an affordable payment plan via mobile phones. The business a l s o o ff e r s a c o m p r e h e n s i v e customer service and innovative remote monitoring technology.

To date, it has installed over 27,000 solar home systems across East Africa.

Mobisol’s systems come in varying sizes from 80 to 200 Wp to match the various energy needs of different households. Its solar home systems provide enough electricity to power bright LED lights, radios, mobile phones and a variety of household and consumer appliances.

The larger systems can also power small businesses enabling entrepreneurial customers to create additional income.

In 2015, Mobisol won the United

Photo credit: plugintheworld.com Nations Framework Convention on Climate Change (UNFCCC)’s Momentum for Change Award 

SunnyMoney SunnyMoney has one goal in mind: to eradicate the kerosene lamp from Africa by the year 2020.

SunnyMoney is a social enterprise owned by the international UK based charity, SolarAid. With a presence in Kenya, Uganda, Malawi, Zambia and Tanzania, it is one of the most widespread solar ventures in Africa.

It uses an innovative distribution model to sell solar lights in rural offgrid communities that are dependent on costly, toxic kerosene for lighting.

Its parent organisation – SolarAid – raises philanthropic funding for SunnyMoney’s expansion. SolarAid is | 20 |African Entrepreneur Volume 1, Issue 003 2016

African Entrepreneur Volume 1, Issue 003 | 21 |

ENTREPRENEUR

African agriculture is likely to witness a transformation over the next two decades. We believe Africa will see a change similar to that of Brazil over the past forty years. Urbanisation, the rise of superfarms, and the need for food security are key drivers

With Falling Oil Prices, African Agriculture Now has an Opportunity Kate Douglas

F

ood security has become a global concern.

In most developed markets farming yields have been maximised and there is no great untapped agricultural areas left. On the other hand, some industrialising economies are losing the ability to feed themselves. For example, China is now losing its self-sufficiency in maize.

However, despite a large agricultural deficit, Africa holds the majority of the world’s uncultivated, arable land. In a recent PwC report, titled Food security in Africa – water on oil, the continent’s opportunity to take the lead in agricultural production was compared to Brazil’s a few decades ago, with key advantages including fertile land, abundant water and cheap labour.

“African agriculture is likely to witness a transformation over the next two decades. We believe Africa will see a change similar to that of Brazil over the past forty years. Urbanisation, the rise of superfarms, and the need for food security are key drivers. New investment | 22 | African Entrepreneur Volume 1, Issue 003 2016

models tailored for Africa will become increasingly prevalent,” continued the report.

“Advantages in the demand side are rising food requirements, both locally and globally.”

Furthermore, the report argues that the recent decline in oil prices could be seen as an opportunity to develop agricultural production capabilities on the continent.

From Oil to Agriculture: Reversing the Resource Curse Much of Africa’s growth story over the past decade was underpinned by strong demand for its commodities. But with the decline in oil prices since the second half of 2014, a number of oil and gas producing economies – such as Nigeria, Ghana and Angola – have experienced a collapse of their currencies.

For example, the Nigerian naira has since depreciated by close to 25%, resulting in a number of fiscal and monetary changes that

has slowed GDP growth. According to the report, the Central Bank of Nigeria predicts GDP growth in 2015 to total 2.6%, compared to 6.3% in 2014.

However, the depreciation of currencies in these economies also presents an opportunity for the agricultural sector. It could counteract some of the effects of the ‘Dutch Disease’ and ‘resource curse’ many of these

The Dutch Disease, alongside government mismanagement, is also one of the causes of the resource curse, a paradox seen when countries with an abundance of natural resources end up having poor development outcomes.

This has been witnessed in a number of resource-rich African countries.

“Any Nigerian over a certain age will tell you how advanced the

economies have been experiencing.

The Dutch Disease describes the negative economic impact of a country’s reliance on one booming export sector – such as oil and gas – which causes an inflow of foreign currency, resulting in the value of the local currency to strengthen against foreign currencies.

This makes the country’s other products less price competitive for export, while imports become cheaper.

country’s agriculture sector was in the 1960s during the early flushes of independence. However, the discovery of oil in the Niger Delta – along with other political and economic factors – helped to weaken established industries such as palm oil, cocoa and rice production,” continued the report.

“Malaysian and Indonesian groups now dominate the palm oil industry; Nigeria has a 7% market share of global

cocoa production versus a combined 65% for Côte d’Ivoire and Ghana. Meanwhile, Nigeria imports over 3m tonnes of rice per annum, almost 50% of consumption.”

Today Africa has a US$35bn agricultural deficit, and PwC estimates that Nigeria may account for around 15% of this deficit.

However, while a weaker local currency pushes up the cost of food for consumers domestically, it can also incentivise local production by offering greater returns for domestic producers and exporters. This has been seen in the past with the 1999 and 2001 exchange rate devaluations in Brazil and Argentina, which drove agricultural exports in both countries.

“The collapse in oil prices has forced food security and agricultural development to the top of the

African agriculture is likely to witness a transformation over the next two decades

political and economic agenda across Africa,” summarised the research.

But “to thrive economically and socially, Africa needs first to deal with its own $35bn structural food deficit before it can play a role in alleviating long-term strategic supply impediments across the world”.

Douglas’ contribution was courtesy of How We Made It In Africa African Entrepreneur Volume 1, Issue 003 | 23 |

| 24 |African Entrepreneur Volume 1, Issue 003 2016

African Entrepreneur Volume 1, Issue 003 | 25 |

ENTREPRENEUR This is the time to build Africa for Africans by Africans. This continent has all the necessary human and capital resources as well as the markets to make every business venture a success. Let us invest in one another and join hands to lobby for better governance that will facilitate open trade between countries

This is the time to build Africa for Africans by Africans Paul Muhato, Managing Director, Engen Petroleum Tanzania

I

n January, Paul Muhato emerged the new managing director of Engen Petroleum (Tanzania) Ltd. The company said the appointment heralded an invigorated vision for the company’s future growth in East Africa.

“His enthusiasm is buoyed by the opportunities for growth in the region, coupled with his clear strategy. At the top of my list of objectives is the need to enhance business growth via the current retail sites and build a robust network of additional retail outlets that reflect the Engen brand, whilst also aiming for the Engen Tanzania terminal to turn over its 24,000m3 capacity at least once a month,” Engen said in a statement.

Currently EPTL commands approximately 2% of both retail and commercial market share, a sharp decline especially in the commercial sector which used to enjoy a more robust 7% to 8% allocation.

According to Paul, this all changed when the wholesale (read commercial) market prices fell below Engen’s product cost, prompting a concerted effort to constrain the business to positive margin territory | 26 |African Entrepreneur Volume 1, Issue 003 2016

as well as reducing related financing costs of carrying huge inventories in a market with highly volatile international prices.

Says Paul: “Our attention has shifted to the retail end of the business which has less or nil credit exposure and more or less regular margins as captured in the Energy and Water Utilities Regulatory Authority (EWURA) monthly price cap formula. The additional turnover from hospitality business at the terminal will cover overheads and reduce our unit cost per litre.”

Career Trajectory With a work ethic embedded in the belief that “success will not walk to you, you must run to it”, it is no surprise that Paul’s career ascent has seen him rise from Marketing Manager and Acting General Manager of Kobil Tanzania Ltd to MD of Engen Petroleum (Tanzania) Ltd. Prior to amassing experience in Tanzania, Paul enjoyed an 11 year career in Sales and Marketing as well as Supply and Trading in the Kenyan oil industry.

Says Paul: “While at Kobil Tanzania Ltd,

African entrepreneurs in oil and gas and other industries can still play crucial roles in shaping the future of Africa.

running a fully-fledged petroleum company with an initial 40 staff, 22 retail stations, various end-user commercial clients and a 33,000m3 capacity multi-product terminal that catered for local, transit as well as hospitality customers gave me a great opportunity to understand the inner workings of managing a petroleum company.”

With a CV that reads like a wish list of experiences, Paul has been exposed to product costing and margin determination, sales and marketing strategies, bulk fuel and terminal operations, supply and trade optimization, corporate governance, stakeholder engagement – and the list goes on. In his experience though, he emphasises that human capital management is the vital ingredient to the success of any organisation.

“It is against this background that I expect to start this new phase at EPTL, which has a more or less similar profile,” says Paul.

with limited resources,” he recently said.

But in spite of the pressure, he said he has a stream of support and encouraging originating from his wife.

“She has been my biggest supporter and encouragement throughout the tough times and hard decisions,” he said.

He also plays golf occasionally and he enjoys socializing with family and friends.

He portrays the image of a homely and social executive even though he coordinates Tanzanian

Mahuto Outside Engen He has experience spanning more than a decade in sales and marketing, as well as supply and trading, in the Kenyan oil industry. Before he joined Engen, Muhato served as the marketing manager and acting general manager of Kobil Tanzania. He holds a Bachelor of Business Administration from the University of Eastern Africa, Baraton.

“My favorite interview question is when can you start?”

His job requires him to be at his desk by 7am, but he didn’t start his career with such an enormous task on his manly shoulders. Instead, Muhato started his career occupying a management trainee position in the sales and marketing department at the five-star Safari Park Hotel in Nairobi, Kenya. He believes that Historical tax and legal matters have significant implications on the business.

“I also toss and turn [at night] while thinking of how to grow the company

operations of Engen a company which has about 5,000 employees some of which are directly under Muhato.

Muhato’s employer, Engen Petroleum, is a South African oil and gas company. Until 1990, it was part of Mobil Oil. In 1993, it changed the brand name into Engen. The company is present in over 20 countries and export products to over 30 more countries, mostly in Africa and the Indian Ocean Islands.

Engen has a refinery in Durban that has a nameplate capacity of 135,000 barrels per day and operates approximately 1,500 service stations across sub-Saharan Africa and

Indian Ocean Islands. A number of Engen’s service stations are operated on a franchise basis. Engen operates its own transport fleet with approximately 180 bulk fuel tankers.

Today, Engen Petroleum is active in South Africa, Botswana, Namibia, Zimbabwe, Mozambique, Kenya, Ghana, Gabon, Tanzania, Rwanda, Burundi, Zambia, Malawi, Lesotho, Swaziland, Mauritius, Réunion and The Democratic Republic of the Congo.

When asked why he has been successful in the oil business, Muhato said he owes his success to a positive attitude which he said will capitalise the smallest opportunity. But more important, he said he cherishes persistence, consistence, people-orientation, good listening skills and a positive attitude.

All across Africa, entrepreneurs and business owners are striving to have the kind of success Muhato has had so far without varying degrees of success. In Tanzania for instance, many entrepreneurs in that country still struggle with raising capital, acquiring entrepreneurial skills, getting government support, dealing with less favorable policies and cultural and religious beliefs.

“Yeah, we Tanzanians are not good in business, we say that we have a dream but sometimes we get stuck just because of poor communication skills. Even if they train you hundred times with quality trainings, u will only succeed if you are good in communicating.

And bad enough, English is the language of the juggle,” said Pius John, a Tanzanian entrepreneur.

But Mahuto believes that African entrepreneurs in oil and gas and other industries can still play crucial roles in shaping the future of Africa. In spite of the dwindling oil fortunes, falling currencies and numerous serious challenges, he is still confident that this is the right time for Africa.

“This is the time to build Africa for Africans by Africans. This continent has all the necessary human and capital resources as well as the markets to make every business venture a success. Let us invest in one another and join hands to lobby for better governance that will facilitate open trade between countries African Entrepreneur Volume 1, Issue 003 | 27 |

AFRICA & MIDDLE EAST

Mobilizing Private Sector Investment in Africa’s Oil and Gas Industry in a Low Oil Price World

A

frica currently supplies about 12% of the world’s oil and boasts significant untapped reserves estimated at 8% of the world’s proven reserves. According to the BP Statistical Review of Energy, Africa’s proven oil reserves have grown by almost 150% since 1980 – increasing from 53.4 billion barrels at that stage to 132 billion barrels at the end of 2014. From proven oil reserves of 132 billion barrels, Africa produced about nine million barrels of crude oil per day (bbl/d) in 2014.

Eighty-one percent of this oil production came from Nigeria, Libya, Algeria, Egypt and Angola in 2014. Africa has proven natural gas reserves of 513 trillion cubic feet (Tcf) with 91% of the annual natural gas production of 7.1Tcf coming from Nigeria, Libya, Algeria and Egypt.

Oil and Gas is of critical importance to the African economy. In fact, it is estimated

| 28 |African Entrepreneur Volume 1, Issue 003 2016

that 57% of Africa’s export earnings are derived from hydrocarbons. Within the continent, North and West Africa are host to the most renowned producers; some of the countries in those regions are also among the most dependent on oil and gas revenues in the world. In recent years, East Africa has also emerged as an exciting prospect for international oil companies.

Overall, the booming oil and gas industry is seeing greater interest in all regions and discoveries in commercial quantities in frontier African oil and gas countries such as Namibia, Togo, Liberia, Ghana, Côte d Ivoire and South Sudan. The crown jewels are, however, the new players on the east coast, particularly Mozambique and Tanzania.

Mozambique is expected to become the second-largest exporter of Liquefied Natural

Oil and Gas is of critical importance to the African economy.

In fact, it is estimated that 57% of Africa's export earnings are derived from hydrocarbons

Gas (LNG) by 2025, as the country steps up production from 10 million tonnes per annum (Mtpa) to an envisaged 50Mtpa in 2017. Access to the lucrative Asian LNG market has significant economic benefits for the East African region and could act as a catalyst for meaningful economic development.

Developments in Ghana have demonstrated the possibilities within Africa to the world. The Jubilee field was hailed as the fastest ever deepwater development, taking just 24 months from development to production.

The sharp drop in international oil prices since mid-2014 and the reduction in demand from major buyers of Africa crude such as the US and China have slowed growth and have had varying effects on African economies. The drops in oil prices will likely lead to a decrease in capital spending by energy companies, which could weaken the medium-term prospects for prospective oil and gas producers. This is especially a concern for East Africa, since billions of dollars’ worth of investment will be needed over the next decade to commercialize the region’s hydrocarbon resources. As onshore oil production costs in West Africa are generally low, oil companies are expected to continue to invest significantly in the region.

Securing finance for oil and gas projects in this period of global uncertainties has become increasingly competitive among the different oil and gas producing regions and between countries in the same region.

Africa has its competitive advantage.

Africa is the last true oil and gas frontier with more than 4200 oil and gas blocks identified. Almost half of these blocks are open, subject to force majeure or in the application phase. More than 80% of the 1300 blocks in North Africa are licensed, while in sub-Saharan Africa it is estimated that only about 30% of 2900 blocks are licensed. In the subSaharan regions it is evident that many new opportunities still exist, especially for exploration and production (E&P) companies that are willing to take risks.

There are many key opportunities within Africa’s Oil and Gas industry open for private sector investments due to: New exploration blocks being opened for competitive bidding; ∙∙ New refinery development or upgrades ∙∙ Port development and management ∙∙ Pipeline engineering and

construction (both subsea and onshore) ∙∙ Onshore and offshore maintenance ∙∙ LNG plant engineering and construction ∙∙ CO2 reduction and gas-powered electricity generation ∙∙ Other gas monetization projects for local use (methanol, fertilizers, urea); ∙∙ Stability of supply and security of supply with a reduction in exports ∙∙ Infrastructure development for mega projects Historically, it was easy-to-exportoil-to-fuel-factories-in-developedeconomies thinking that motivated the bulk of foreign investment in Africa’s oil and gas sector. But with rapidly increasing domestic demand for energy within Africa there is the need to rethink the investment strategy in Africa’s Oil and Gas Industry and there is much progress to be made.

According to the Oil and Gas council and based on moderate projected growth in domestic and global demand, the African continent will require $1.6 trillion in cumulative investment in oil infrastructure and $721 billion in gas infrastructure over the next 20 years, with an average required total upstream spend estimated at $92 billion per year. This amount could be even higher due to the complex technical requirements of many planned offshore and LNG developments. Fortunately, maturing economies and novel risk mitigation strategies are creating new avenues for meeting the financing gap.

In recent years, debt financing in Africa has largely been government sponsored. The World Bank estimates that 70% of current external lending to Africa originates from foreign governments, and of the remaining 30%, around half the loans were based on sovereign guarantees. A significant source of debt has been development finance institutions (DFIs )such as the World Bank, and Export Credit Agencies (ECAs), which have seen in today’s illiquid markets an opportunity to advance their own organizational goals (economic development and export promotion, respectively) by offering debt facilities and credit enhancements.

Poor or no sovereign credit ratings limit many African governments’

access to international debt markets, on top of which many countries face restrictions on non-concessional debt and sovereign guarantees imposed by the IMF and World Bank. As both a direct and indirect result of these restrictions, in the past three years oil and gas firms used their own cash flows as the largest funding source for new business in Africa. Nevertheless, the availability of both debt and equity financing has steadily increased.

Growing investor confidence is driving growth in equity investment with the help of alternative financing sources and risk mitigation measures, with benefits for Africans and international investors alike. A survey conducted

by PwC showed that in the past three years, private and public equity were the fastest growing funding sources for oil and gas companies’ African operations, but still account for only 28% of total oil and gas financing. Also notable is the emergence of private equity funds as investors in energy and infrastructure developments. As of early 2013, Taylor-DeJongh identified 57 private equity funds that operate exclusively in Africa, and majors such as Carlyle, Och-Ziff, and Blackstone have started funds that specialize exclusively in African infrastructure. Growth in firsttime funds and private investment companies specializing in specific regions within Africa is especially pronounced. Upstream oil and gas projects offer private investors value growth in the form of reserve increases, making them an attractive alternative to the more competitive buyout market.

Energy demand from expanding local markets also helps to balance risk.

African banks are an additional emerging resource. South African banks such as Standard Bank and Nedbank as well as Nigerian banks such as First Bank, UBA and Zenith Banks have established themselves as lenders for energy infrastructure throughout the continent. The Nigerian banking sector is also especially active in home-country oil and gas sector lending. This trend is extending to other countries, often with the support of credit enhancements from DFIs and other external agencies.

Across all sectors, the largest markets for local currency loan syndications are in Kenya, Zambia, Nigeria, Ghana, Angola, and South Africa. Loan tenors in Sub-Saharan Africa have extended to as long as 8 years, with hope that continued macroeconomic stability and regulation might support longer terms in the future. In the meantime, African Entrepreneur Volume 1, Issue 003 | 29 |

annually for the past five years to a total market exceeding $600 billion by 2015.

While Egypt has been the target of most African Sukuk to date, issuances have also taken place in The Gambia, Senegal, and Sudan; plans for sovereign Sukuk are also being developed in Nigeria, Mauritania, Morocco, and South Africa.

With each major project that successfully uses tailored financing solutions to accommodate a unique risk profile and expand local economic activity, more opportunities are likely to emerge for international and African investors.

Principal Sources of Oil and Gas Funding

Source: ThomsonONE

Corporate Finance

Project Finance

Complexity

Typically lower

Can be complex

Recourse

Gives rise to a claim against the corporate balance sheet and uses up corporate debt capacity

None or limited recourse finance projects – limited to the project balance sheet and are more highly structured for credit enhancement

Size

Borrowing capacity linked to sponsor credit strength

Variable dependent on structuring and risk Profile

Maturity

Short to medium repayment periods typical, Long-dated capital available

Longer repayment periods may be achievable

Depth of Market

Very deep and liquid for investment grade credits

Bank markets continue to provide majority of capital.

Capital often structured to incentivize refinancing post construction of projects. Infrastructure funds, pension funds and other institutional investors increasingly looking to invest in long dated Infrastructure.

Lower levels achievable, debt on sponsor balance sheet

High levels due to structuring and risk allocation.

Typically off balance sheet.

Gearing

Project Financing and Infrastructure Investment as Sources of Funding for Oil and Gas Projects in Africa

engaging local investors puts available capital to work, hedges currency risk, and has the potential to reinforce regulatory advances, helping to ensure long term reliable and stable returns.

The availability of resources as collateral is particularly advantageous because it allows companies to raise debt secured by claims on future production.

Since 2007, banks have issued nearly USD 17.7 billion in reserve-based loans (RBLs) in Africa. RBLs base credit on the net present value of projected cash flows from resource sales. Banks have varying approaches to reserve-based lending, but the existence of fields in production or under development is necessary. The credit facility is reevaluated regularly, allowing credit growth if production | 30 | African Entrepreneur Volume 1, Issue 003 2016

or reserves increase. In the past two years, over USD 5 billion in RBLs have been issued based on assets in Ghana, Nigeria, Equatorial Guinea, and Egypt.

Growing competition for RBLs has also helped to hasten the expansion of Sukuk, an Islamic asset-backed debt instrument. Like conventional bonds, Sukuk provide a fixed amount of income to the borrower for a predetermined tenor. Like RBLs, they are backed by physical collateral and associated cash flows. In lieu of interest, the lender is entitled to an agreed-upon portion of the income or dividends generated by the backing asset in exchange for taking partial ownership responsibility (similar to a moderated equity risk). The global market for Sukuk has grown over 28%

Increased predictability of cash flows and business maturity In addition to traditional sources of capital, more creative financing techniques and new sources of finance will help to ensure that sufficient and efficient funding is available to finance oil and gas projects in the future. In response to heightened economic instability, companies have begun to diversify their traditional sources of funding. This has involved a shift from bank-led financing to non-bank and capital markets-based funding, project partners, private equity and export credit agencies. There is now both more competition for funding and also a wider range of debt and equity providers serving the African market.

Compared with other infrastructure intensive sectors, such as power and utilities, project finance has been less widely used by the oil and gas industry.

The industry is inherently long term in nature which can be a challenge when trying to arrange project financing on acceptable terms. Future revenue streams are typically less stable and less predictable in oil and gas projects than in other large-scale infrastructure projects, which are not directly exposed to commodity price risk.

The table following table shows how project finance can be used instead of corporate financing.

There is a growing interest amongst investment funds in infrastructure as an asset class. According to EY’s report on “innovative financing solutions for oil and gas companies”, infrastructure investment remains a core objective for many governments as a means of stimulating economic growth. The

Europe 2020 Project Bond Initiative, a joint credit enhancement program by the European Commission and the European Investment Bank, is designed to stimulate capital market financing for infrastructure delivered under project finance structures.

The liquidity line under the Project Bond Credit Enhancement Initiative will allow projects to achieve a credit rating more attractive to investors.

The majority of institutional investors in infrastructure debt are public pension funds, insurance companies and private sector pension funds. The longterm nature of most oil and gas projects might provide a match to the long-term liabilities of insurance companies and pension funds. However, just as Basel III regulations are constraining the ability of banks to lend long-term, EU Solvency II requirements could limit European insurers’ ability to continue providing long-term funding. Solvency II aims to

establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements. Insurers are faced with the challenge of balancing an appetite for greater returns against compliance with new regulations.

Exploring the Full Range of Funding Options The risks of doing business in Africa are real, but institutional and infrastructure growth promise to reward those sponsors and investors who are willing to find constructive mitigation and risk-sharing structures.

The mutual benefits to private and public stakeholders, both local and international, should encourage even more private sector investments and help bring Africa into a new era of economic development, as global investors follow the lead of the capital providers to Africa’s oil and gas sector African Entrepreneur Volume 1, Issue 003 | 31 |

and should be taken seriously.

HEALTH MATTERS

∙∙ Infectious diseases. As the 2014 Ebola crisis showed the world, infectious diseases are a serious threat, though they are not new to oil and gas workers. Infectious diseases have long been a health hazard that the industry has worked hard to mitigate. Malaria impacts all operations in Africa as well as many parts of Asia. It is critical that operating companies take steps to protect their workers by controlling the mosquito populations onsite, providing early diagnosis and treatment, and, for non-immune workers, providing chemoprophylaxis to prevent a potentially deadly infection for those not born and raised in malariaendemic areas.

Future Health Challenges Facing the Oil and Gas Industry

E

very day the oil and gas industry faces a multitude of global health care challenges, ranging from the exotic (i.e. African sleep disorder) to the mundane (i.e. heart attacks). Oftentimes the industry operates in remote areas, and the nearest hospital may be a two-hour plane ride away.

Therefore, to ensure employees and their families receive the medical care they need, many oil and gas companies have built clinics and emergency stabilisation facilities, and in some cases, full hospitals onsite.

Defining the Top Three Risks However, even with proper planning and the necessary procedures in place, unforeseen situations can – and do – arise. As we look ahead, savvy oil and gas companies view keeping a workforce healthy as not just a “nice to have” but “business essential” to sustain a company’s growth performance. Understanding the | 32 | African Entrepreneur Volume 1, Issue 003 2016

potential threats and issues out there and proactively implementing mitigation strategies can sometimes mean the difference between life and death and meeting critical project timelines. Some of the key health care issues currently facing the industry include: ∙∙ Extreme environments. For those that have operations in the Arctic, the risk of frostbite is present year-round. Additionally, ice and weather are major operational challenges limiting the ability to move patients to shore. For companies that operate in the deserts of Algeria and Saudi Arabia, heat exhaustion and heat stroke must be carefully avoided by providing shelter, ensuring hydration, and limiting physical activity to defined time periods. These extreme environments and their associated health risks are not new to the oil and gas industry, but they remain a significant issue

Every day the oil and gas industry faces a multitude of global health care challenges

It’s also important to remember that malaria is not the only infectious disease to impact operations. Tuberculosis can be a particular challenge in the close quarters of an oil rig, especially in areas where the prevalence of the disease may be 100 times that of the United States. For example, in the U.S., only three people out of every 100,000 have tuberculosis, while in Nigeria, 311 people out of every 100,000 have this deadly infectious disease.

To limit the spread of the disease among workers, oil and gas companies should implement rigorous screening programs in highly endemic areas.

Since much of the oil and gas activity is in a camp environment, the challenges seen in any communal living environment are also found at these locations. Close attention must be paid to prevent outbreaks of gastrointestinal illness, such as norovirus. Additionally, laundry must be washed at the appropriate temperatures to prevent the spread of skin diseases. The immunisation status of camp residents should be thoroughly verified to avoid outbreaks of chicken pox, measles, and other vaccine-preventable illnesses. ∙∙ Non-communicable diseases.

Perhaps the greatest health care challenge is the one many workforces face – non-communicable diseases (NCDs). NCDs, also known as chronic diseases, are not passed from person-to-person. The four main types of NCDS are: cardiovascular

Close attention must be paid to prevent outbreaks of gastrointestinal illness, such as norovirus.

Additionally, laundry must be washed at the appropriate temperatures to prevent the spread of skin diseases. The immunisation status of camp residents should be thoroughly verified to avoid outbreaks of chicken pox, measles, and other vaccine-preventable illnesses

diseases (such as heart attacks and strokes), cancers, chronic respiratory diseases (such as chronic obstructed pulmonary disease and asthma), and diabetes. NCDs disproportionately affect low- and middle-income countries, where nearly 75 percent, or 28 million, of NCD deaths occur. Since oil and gas workers increasingly are older, and food is plentiful and smoking is common in the camp environment, they are as or more likely than workers in other industries to be victims of NCDs. To address the issue of NCDs in the work place, we recommend oil and gas companies launch wellness programs, with the goal of keeping employees healthy and productive.

The wellness initiatives vary by region and company needs, but they are all geared at raising employees’ awareness of health risks. These initiatives also aim to increase physical activity and encourage employees to follow good nutritiona l practices, which includes quitting smoking. Although we may think of these challenges as firstworld problems, they are global issues and difficult to solve.

Successful Proactive Approaches in Practice Two examples come to mind of companies in the oil and gas industry that have effectively implemented health care programs to protect their workforce and mitigate risk.

One is Chevron who launched a world-class cardiovascular health program to address the multiple risk factors associated with cardiovascular disease. Chevron’s Cardiovascular

Health Program aims to reduce employees’ overall risk of cardiovascular disease, encourage employees’ u n d e rstan d in g th at b e h av io rs can influence long-term health, demonstrate the link between health, productivity, and safety, and create a competitive advantage for Chevron with a healthy and safe workplace.

ExxonMobil is another company that has seen success with its health program. Its Culture of Health Program provides U.S. employees and their families with preventative health and wellness resources. The program can help employees achieve personal health goals through resources, such as seminars focused on healthy food choices, fitness, stress management, and quality sleep. Outside the U.S., ExxonMobil is piloting cultural-specific programs within the context of different health care systems, health care needs, and available resources in countries with ExxonMobil offices and operations.

These examples demonstrate the important need for a health care program to be designed in an integrated fashion tying together operations, human resources, the medical department, safety, and community affairs in order to mitigate risk in an efficient and effective way.

It’s an exciting era in the oil and gas industry. But as companies continue to expand their global footprint, a comprehensive health strategy is critical. Without one, maintaining a healthy workforce becomes increasingly difficult and can prevent a company from achieving its sustainability goals and overall success. Ensuring that the importance of mitigating these health risks is understood at all levels of the value chain is perhaps the greatest part of the challenge that lies ahead African Entrepreneur Volume 1, Issue 003 | 33 |

Media & Entertainment

importance of film in building the country’s heritage by telling its own stories, and has set about providing an “enabling regulatory framework” to encourage the production of local content.

“South African audiences have come to have a healthy demand for good quality local content as has been noted in television trends,” the National Film and Video Foundation points out. “Some of the most popular television shows are locally produced programmes which regularly enjoy the bulk of the audience share over their international counterparts.”

Developments

technical capacity and infrastructure – as well as the good weather.

Contribution to the Economy

What you Need to Know About South Africa’s Movie Industry

L

ocal and foreign filmmakers are taking advantage of the country’s diverse, unique locations – as well as low production costs and favourable exchange rate, which make it cheaper to make a movie here than in Europe or the US. The jewel in the industry’s crown is Tsotsi, Gavin Hood’s gritty drama about a young gangster in Soweto, near Johannesburg, which won an Academy Award for best foreign language film in 2006.

In 2010, District 9 – an action-packed science-fiction movie about a sub-class of aliens forced to live in the slums of Johannesburg – was nominated for four Academy Awards, including best picture.

South Africa also has a growing reputation as a producer for award-winning local content, such as Oscar-nominated Yesterday, the story of the struggles of an HIV-positive mother; and U Carmen E Khayalitsha, a Xhosalanguage film which won the Golden Bear

| 34 | African Entrepreneur Volume 1, Issue 003 2016

award at the 2005 Berlin Film Festival.

Documentary filmmaker Francois Verster’s A Lion’s Tale won a non-fiction Emmy in 2006, recognised for its “most outstanding cultural and artistic programming”.

Building on South Africa’s reputation for quality, creative film making, a string of successful big budget international productions have been filmed here, including Fury Road, the fourth Mad Max film; Blood Diamond with Leonardo DiCaprio; and Clint Eastwood’s Invictus.

The Lord of War, the 2005 movie starring Nicholas Cage as a global arms dealer, showcases South Africa’s wealth of breath-taking locations – with Cape Town appearing as 57 different settings in the Middle East, Afghanistan, Bolivia, Sierra Leone and elsewhere.

Opportunities abound, with the makers of movies, commercials and other productions being attracted by South Africa’s highly skilled film crews and technicians, excellent

South Africa has a vibrant, growing film industry that is growing in reputation and is competitive internationally

The government has identified the film industry as a sector with excellent potential for growth, and is regarded as a catalyst for both direct and indirect employment of people from different sectors of the economy.

The South African film and television industry contributes around R3.5 ($245m) billion a year to the country’s economy, according to a 2013 study conducted by the National Film and Video Foundation, an agency of the Department of Arts and Culture.

In 1995, when the country first became a viable location venue for movie and television production, the industry employed around 4 000 people.

This has grown to around 25 000 people.

The benefits of a burgeoning film industry are clear, especially when it comes to bringing in foreign exchange.

Co-productions with international companies result in the direct investment of millions of rands into the economy.

South Africa has signed coproduction treaties with eight countries: Canada, Italy, Germany, the UK, France, Australia, New Zealand and Ireland. This means that any official co-production is regarded as a national production of each co-producing country, making it eligible for any benefits or programmes of assistance available in either country.

South Africa also has a memorandum of understanding relating to film with India.

Telling South African Stories South Africans have been reclaiming their lost histories and are beginning to tell their own stories. The number of local films is increasing steadily each year. In 2009, 13 titles were released; by 2012 this this number had almost doubled, with 24 South African films released locally.

Box office successes include Material, a story of a young Muslim man’s quest to make it on the comedy circuit, and Spud, based on John van de Ruit’s best-selling book about a boy in

International filmmakers and producers are the target of the multimillion, Hollywood-style film studio built on the outskirts of Cape Town. A public-private partnership, the fully fledged sound stage complex is designed to meet the needs of both local and international film makers. Shooting of Black Sails, an international pirate drama television series, began in 2013 and is scheduled to run for three to five years at the studios. Other hits shot there include the sci-fi hits Chronicle and Dredd.

South African broadcasters also distribute local productions to the rest of Africa through direct sales and a form of bartering, where content is exchanged for advertising airtime.

This has helped increase the demand for locally produced television content.

The South African film and television industry contributes around R3.5-billion a year to the country's economy, according to a 2013 study conducted by the National Film and Video Foundation, an agency of the Department of Arts and Culture

a South African boarding school. Spud 2 was due out in 2013. Fanie Fourie’s Lobola was hailed by Arts Minister Paul Mashatile after it won the audience choice award for the best comedy at the Sedona International Film Festival.

South Africa’s highest grossing film is Leon Schuster’s Schuks Tshabalala, which made R37million at the box office in 2010.

The government has stressed the

Incentives and Support The state, via the National and Film and Video Foundation, the Industrial Development Corporation and the Department of Trade and Industry, is the chief investor in the local film production industry.

There are film commissions i n G a u t e n g , C a p e To w n , Durban and the Eastern Cape.

African Entrepreneur Volume 1, Issue 003 | 35 |

financing institution, the Industrial Development Corporation (IDC) seeks to create a sustainable local film industry.

The IDC’s Media and Motion Pictures Strategic Business Unit funds film, broadcasting and post-production projects. Assistance is usually in the form of loan finance, and it will not fund more than 49% of a project.

Regional film commissions Four regional bodies – the Cape Film Commission, Gauteng Film Commission and Durban Film Office - have been set up to market their cities as location destinations and create enabling environments for film makers.

The commissions offer a range of help and advice. The Gauteng Film Commission’s support programmes, for example, include assistance with funding and finance facilitation, as well as negotiation of co-productions and partnership projects with broadcasters.

Department of Trade and Industry The DTI offers industryspecific incentives to encourage local-content generation as well as attract international productions.

Its film and television production incentives were revised in March 2012.

1. Foreign Film and Television Production and PostProduction Incentive Intended to encourage and attract large-budget films and television productions and post-production work that will contribute towards employment creation, enhancement of South Africa’s international profile, and increase the country’s creative and technical skills base. ∙∙ A 20% tax reduction on production expenditure for foreign productions filmed in South Africa with a budget of R12-million (about $1.3-million) or above. ∙∙ A 22.5% to 25% reduction if filming and post-production takes place in South Africa. Postproduction expenditure must be R1.5-million (about $166 000) or above to qualify.

2. The South African Film and Television Production and Co| 36 | African Entrepreneur Volume 1, Issue 003 2016

Production Incentive

∙∙ Cape Town: www. capefilmcommission.co.za • Gauteng: www.gautengfilm.org.za

A rebate of 35% for the first R6-million (about $662 000) spent, and 25% for the remainder of production expenditure.

∙∙ Durban: www.durbanfilmoffice. com

National Film and Video Foundation

∙∙ Gauteng: www.gautengfilm.org.za

The National Film and Video Foundation (NFVF) helps the industry access funds, promotes the development of South African film and television audiences, develops talent and skills in the country – with a special emphasis on previously disadvantaged groups – and helps filmmakers represent and market their work internationally.

The NFVF offers funding for the production of films and documentaries through repayable loans or grants. It supports South Africanowned production companies, and prioritises projects or organisations of national importance and proposals that contain local content and have empowerment or training components.

It also funds education and training through various bursaries; awards development funding; and supports applications for marketing and distribution funds, allowing independent producers and distributors access to test screenings and film launches. ∙∙ Website: www.nfvf.co.za Industrial Development Corporation A state-owned development

∙∙ Eastern Cape: www.ecfo.co.za ∙∙ Durban: www.durbanfilmoffice. com ∙∙ Eastern Cape: www.ecfo.co.za Tax Incentives The South African Revenue Service, through Section 24F of the Income Tax Act, grants a deduction of the production cost of a film to the film owner. It excludes any deductions for production costs under any other provisions of the Income Tax Act, providing for a film allowance instead. Section 24F also provides that a film owner may deduct a film allowance from his income. ∙∙ Website: www.sars.gov.za

Department of Arts and Culture Local film production is also vigorously promoted by the Department of Arts and Culture.

The department funds film production and especially supports documentary film making. ∙∙ Website: www.dac.gov.za African Entrepreneur Volume 1, Issue 003 | 37 |

retail & trade So efforts have to be in place to stimulate Chinese demand for Naira. To consolidate this development, there must be radical measures to stimulate economic independence, by diversifying the economy and improving the industrial, manufacturing and agricultural sector

then from dollar to yuan," he added.

"You can all testify to the number of made in China things in the country. So if small and large businesses can convert straight to yuan, it's better," he told reporters.

Controversies

Deciphering Nigeria’s New Trade and Currency Deal with China Folake Odubamowo

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uch has been said about Nigeria’s new deals with China with somem media claiming that the move would bolster Nigeria’s currency against the dollar and other international currencies. Is it a swap? Will the dollar crash? How does it affect the country’s entrepreneurs? Folake Odubamowo reports.

The Industrial and Commercial Bank of China Ltd and the Central Bank of Nigeria signed a deal on yuan transactions as a way to resuscitate the current currency slump in Nigeria. The deal meant the yuan will flow freely around Nigerian banks and will even be included in the country's foreign exchange reserves.

Since 2014 when yuan was recognized as a likely global reserve currency, Ghana, South Africa and Zimbabwe have integrated

| 38 | African Entrepreneur Volume 1, Issue 003 2016

the currency into their financial markets.

Naira bounces back Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria, said the announcement of the China – Nigeria deal improved the fate of the Nigerian currency with dollar changing for 310 as against the former rate of 320 and predicted that once the policy is in force, the price of dollar will continue to fall.

He told reporters that this new policy will help the informal payment sector.

"You know more than 50 percent of foreign businesses in Nigeria is with China and before now, Nigerians doing business in China have to change their money to dollar,

The Industrial and Commercial Bank of China Ltd and the Central Bank of Nigeria signed a deal on yuan transactions as a way to resuscitate the current currency slump in Nigeria

There are several accounts of the agreement between the Nigerian government and the Peoples Republic of China. An account of the deal as given

by Nigeria’s Minister of Foreign Affairs Geoffrey Onyeama was that the currency deal signed between Nigeria and China during the recent visit of President Muhammadu Buhari to China would boost the economies of both countries.

The minister noted that the currency deal would eventually make Nigeria a hub of the Chinese currency.

According to him, the Chinese are looking for a hub in West Africa, stressing that Ghana is interested in being the hub for the currency to circulate it for those who want to use it but not compulsory. He, however, explained that it had become attractive for China to make Nigeria the hub because of the size of the country and economy, adding that the currency deal would also give the country more flexibility.

How the deal works The minister explained that if Nigeria is buying Chinese goods, for instance, it will be in the country’s interest to use the Yuan because there is a lot of squeeze for the dollar.

“But, we still use the dollar. But if it is not enough and there are some people who want to invest in the country, instead of crying that they cannot take dollar out, there might be Yaun that they would be happy to take out because it is now internationalised as a currency and they can use it.

“So, it gives us a much larger option.

“As you know, a lot of importers now are complaining that they are not able to access the dollars to buy goods and things like that.

“What it takes is that as the Chinese economy goes strong, there are some pressures on them from the trading partners, international financial institutions. They agreed that the money should be internationalised.

“They were protecting it also.

They did not allow it to be fully exchangeable. But now, their economy is fully strong; they are looking for a way to internationalise the currency.

“Now, they were saying essentially that they wanted to segment it,’’ he said.

The minister said that for Southern Africa, South Africa was going to be the sort of a hub for the currency.

Matters arising The minister revealed that the deal was a way for Nigeria to benefit from the internationalisation of the Chinese currency. But this is the not the first time Nigeria has made attempts to include the Yuan into its foreign exchange reserves.

In 2011, under the governor of the Central Bank of Nigeria at the time, Lamido Sanusi, a small percentage of the country’s foreign reserves were in the Chinese Yuan. At the time, Nigeria’s $32 billion in reserves were 79 per cent in dollars with the rest largely held in Euros and Swiss francs.

Bloomberg reported that Sanusi was cited saying the decision came because the Nigerian financial sector had a lot of confidence in the Chinese currency. “Confidence in China doesn’t mean lack of confidence in America.

Europe and America will continue to be important parts of the world. Having said that, it will be almost living in a dream world to ignore China. It’s the

second-largest economy in the world and it’s well managed,” Sanusi said.

In 2014, the CBN’s deputy governor, Kingsley Moghalu, said the bank was looking to increase the percentage of Yuan foreign reserves in its possession from two per cent to seven per cent. According to him, 85 per cent of its foreign reserves were in dollars and it needed to have more in Chinese Yuan, as the country was taking a more important place in global trade.

“It was clear to us that the future of international economics and trade will shift in large part to business with and

by China. Ultimately the renminbi (Yuan) is likely to become a global convertible currency,” Moghalu said.

Now, the question is, will this integration of the Yuan help to shore up the naira as intended by the President?

The answer lies in the tentative decision that African countries are taking to dump the US dollar as the prevailing currency in their foreign reserves. Since 2014, the world market has recognised the Yuan as a likely global reserve currency, a replacement for the dollar, which has led countries like Ghana, South Africa and Zimbabwe to integrate the renminbi (Yuan) into their financial markets. As a result of this, trade (however imbalanced) has increased between certain countries on the continent and China, as well as providing a fertile ground for demand for the currency on the continent.

Best for short term An analyst, Dr. Ahmed Adamu, described the deal as very good as a short term measure since without structural change, the Yuan will be appreciating higher and may be as high as NGN200 in the nearest future.

“So efforts have to be in place to stimulate Chinese demand for Naira.

To consolidate this development, there must be radical measures to stimulate economic independence, by diversifying the economy and improving the industrial, manufacturing and agricultural sector,” he said.

“This will offset any balance of payment deficit and enhance the exports from Nigeria, so that Nigeria will hold more of the China’s currency in its reserve. There should be more productions in Nigeria and reduction of importation. Nigeria can have a statistics of major importing goods and services and then invest heavily to enable production of these goods and services within the country.” African Entrepreneur Volume 1, Issue 003 | 39 |

COMMERCE

2. Madagascar Tax Royalty

21% -

Madagascar is one of the world’s least-explored areas when it comes to oil and gas. People have known of the island’s extensive heavy and ultraheavy oil reserves for over a century, but interest is only now picking up among oil companies. Junior and major operators are in the country, including French oil-giant Total, exploring oil reserves onshore, while Chinese and Nigerian companies seek gas deep offshore in the Mozambique Channel. With corporate taxes as low as 21%, relatively low royalty rates and simple and attractive regulation, Madagascar might just be haven for frontier oil and gas exploration.

3. South Africa Tax Royalty

Africa’s Top 10 Oil and Gas Investment Destinations in 2016

A

s the oil price plummets, now is the time to invest in new acreage and guarantee future reserves in anticipation of an eventual market rebound. Competition, especially among the lesser-explored countries, to attract exploration and foreign capital is stiff.

Fiscal conditions, investment incentives and resource opportunities all factor into the appeal of an oil and gas jurisdiction. Africa Oil & Power has selected our top ranking destinations for oil and gas investment in 2016: Here’s our top 10.

1. Mauritania Tax Royalty

| 40 |African Entrepreneur Volume 1, Issue 003 2016

25% -

This massive landmass in north-west Africa is definitely not the continent’s best-known arena for oil and gas activities, and that is part of its appeal. Mauritania has quietly emerged as an exploration hotspot that ticks every key investor criterion. For starters, its tax and fiscal system make finding hydrocarbons here a highpaying bet. Kosmos Energy, which announced two major gas discoveries offshore last year, knows this well. With no royalty payments required, a reduced corporate income tax set at 25% and a myriad of investment incentives for oil and gas corporations, Mauritania makes a strong statement as an opportunity waiting to be seized.

“Mauritania has quietly emerged as an exploration hotspot that ticks every key investor criterion.”

While the oil price stays low, the oil stays in the ground. But not for long. Home to some of the biggest oil and gas discoveries in recent years, Africa remains under-explored and its untapped

5. South Sudan 0.5 - 5% 28%

Clear, straightforward and businessfriendly policies put South Africa on our podium and makes it a very attractive place to do business and explore for hydrocarbons. The country boasts a developed infrastructure network, easy access to oil and gas equipment and fairly transparent administrative structures.

But what really sets South Africa apart are its royalty rates – between 0.5% and 5% – and its corporate tax rates, set at 28%, which are among the lowest in Africa. VAT exemptions and capital allowances are among the incentives available for oil and gas companies and there are no signature bonuses to be paid for acquisition of acreage. Political stability, good security conditions and a developed internal market make South Africa one of the best places to invest.

“But what really sets South Africa apart are its royalty rates – between 0.5 and 5 percent – and its corporate tax rates, set at 28 percent, which are amongst the lowest in Africa.”

4. Morocco

Tax Royalty

30%

Royalty (Oil)

10% 5%

Our only North African entry,

10 - 20% -

Royalty (Gas)

7. Ghana Tax

35%

8. Namibia

Royalty 30% 2 - 6% 3 - 12.5%

Still to produce its first barrel of oil, Senegal is an unlikely pick. A closer look at its legal and fiscal regime show that Senegal is deserving of its number six spot. Secure and politically stable, Senegal has a simple, business-friendly

3 - 12.5%

Home to the famous Jubilee super-field discovered by Tullow Oil in 2007, Ghana is a developed and mature market, unlike most of the jurisdictions on this list. Comparatively, the country’s corporate income tax rate of around 35% and progressive royalty payments set between 3% and 12.5% are not as attractive as lessproven playgrounds, but Ghana has remained welcoming to new investors because of its world-class discoveries and because of the way it conducts business with foreign companies. The oil and gas investors interviewed by the 2015 Global Petroleum Survey rated Ghana as the second-best oil and gas market in Africa. Between large discoveries, an attractive regulatory structure and the ease of doing business, Ghana represents a great bet for new investors in African hydrocarbons.

Tax

6. Senegal Tax

Petroleum Law that sets a royalties at 2-10% for oil production and 2-6% for gas, plus a 30% corporate income tax. In 2014, Cairn Energy announced the discovery of oil offshore Senegal in a reservoir system that could hold up to two billion barrels. This is valid proof that Senegal combines both a strong legal system and a high resource opportunity to emerge as one of the most compelling frontier investment spots on the continent.

“Secure and politically stable, Senegal has a simple, business friendly Petroleum Law that sets a royalties at 2-10 percent for oil production and 2-6 percent for gas, plus a 30 percent corporate income tax.”

Royalty

Civil unrest and war in South Sudan pre- and post-independence from Sudan in 2011 has left most of its oil infrastructure untouched. And now, putting some of their differences aside, South Sudan and its northern neighbour have recognised the oil industry’s essential role in both economies. With 3.5 billion barrels of proven oil reserves and considerable under-explored gas reserves, South Sudan is slowly getting back on its feet and opening doors to investors. The government has devised an attractive fiscal regime for investors, with corporate income tax between 10% and 20% and exemptions from VAT and various other taxes.

While political instability still keeps some international companies away, South Sudan could represent a great opportunity for the brave and the bold.

Royalty (Oil)

Tax Royalty (Gas)

Morocco has refreshingly little bureaucracy and political instability compared with its counterparts in the region. The Moroccan Hydrocarbons Code is designed to attract new players.

National corporate income tax is set at 30%, but oil and gas companies are exempt from this form of taxation for 10 years from the start of production.

Royalties are also below average, set at 10% for oil and 5% for gas for operations onshore and offshore up to 200 metres depth, and 7% for oil and 3.5% for gas in deeper waters. Further, the code sets a royalty exemption for the first 300,000 tonnes of oil and 300 million cubic metres of gas produced from any concessions.

These quantities rise to 500,000 tonnes of oil and 500 million cubic metres of gas for producing sites located in waters deeper than 200 metres. In all, Morocco offers one of the most attractive hydrocarbons jurisdictions round.

5%

Ranked number one in Africa for investment by the Global Petroleum Survey’s Policy Perceptions Index in 2015, Namibia presents an easy and business-friendly environment. With royalties set across the board at 5% and a number of investment incentives in place, including a VAT waiver and other tax advantages for oil and gas companies, Namibia has been able to African Entrepreneur Volume 1, Issue 003 | 41 |

attract a number of international players in recent years, including Repsol, Shell and Tullow Oil. As the country’s basins remain mostly unexplored, Namibia represents a great mixture of investor-friendly regulations and large untapped potential. So far, however, the exploration campaigns have revealed nothing but a string of dry wells.

“As the country’s basins remain mostly unexplored, Namibia represents a great mixture of investor friendly regulations and large untapped potential.”

9. kenya Tax

20 -37.5%

Royalty

-

Kenya capitalised on its strong

reputation to command the attention of investors keen to explore for first oil. The country has been looked at as the most promising exploration play in East Africa. Kenya’s tax code sets a steep 37.5% corporate income rate on non-resident companies but it offers reduced rates of 20% for up to five years for new companies listed in Kenya. The incentive has worked well to court international companies to incorporate in the country. But the current oil price drop has taken its toll on Kenya, empowering foreign operators with significant negotiation leverage as they mull an entry into this business-friendly economy.

10. Mozambique Tax

-

Royalty

-

A number of significant offshore discoveries instantly made Mozambique a globally-relevant player. By the end of the decade, it will become a major LNG exporter capable of influencing gas markets. Competition with neighbouring Tanzania for first LNG export from East Africa is fierce, but Mozambique’s project holds the edge.

Plus, its legal and fiscal framework is more attractive to investors, particularly after the revision of the Tanzanian code in 2014, which made contract terms stricter and more punishing for investors.

If you are looking for the hotspot for gas production with a friendly business environment and considerable growth potential, Mozambique is your pick.

“Competition with neighboring Tanzania for first LNG export from East Africa is fierce, but Mozambique’s project holds the edge.”

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| 42 |African Entrepreneur Volume 1, Issue 003 2016

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COMMERCE

Falling Oil Price – Opportunities for Entrepreneurs

O

il has for decades been perceived as a necessary and highly addictive energy commodity, fuelling the world economy. It is a crucial input good for most of the net-oil consumer countries, and it is an important source of revenue for the netoil supplier countries. This means that huge dependency on oil-derived fuels in various sectors makes the global economy vulnerable to several macroeconomic economic side effects. The recent plunge in oil prices in particular is hurting African countries and some advance economies as well.

From 2010 and mid-2014, world oil prices were fairly stable, at around $110 a barrel. However, since June 2014, global oil prices have fallen sharply, leading to significant revenue shortfalls in many energy exporting nations, while consumers in many importing countries are likely to have to pay less to heat their homes or drive their cars.

The reasons for this change are t wo f o l d - we a k de m a nd i n m a ny countries due to insipid economic growth,

coupled with strong US dollars gains.

Added to this is the fact that the oil cartel OPEC is determined not to cut production as a way to prop up prices. For situations of declining prices in the past, OPEC would have normally stepped in to stabilise prices by cutting production. However, not this time; in an unprecedented move during the last quarter of 2014, the cartel decided not to intervene in its 30 million barrels a day quota. With over $800 billion in foreign reserve assets at peak, Saudi Arabia, with the largest reserve capacity to bail out the OPEC group by production cuts, this time refused to intervene.

So who is winning and who is losing?

The recent plunge in oil prices in particular is hurting African countries and some advance economies as well

Huge Blessings For some, the price fall was a great relief.

It was a huge drop. The price of crude oil is less than half what it was in June 2014.

A fall in the oil price is often seen as similar in its effects to a tax cut for consumers. It means they have more to spend on other goods and African Entrepreneur Volume 1, Issue 003 | 43 |

services, some of which will be produced by businesses in the same country.

It also reduces costs for businesses that use oil products - which mean any that have goods to transport, plus the petrochemical industry which makes plastics, fertilisers, synthetic fabrics and much more using raw material made from refined oil.

It also helps any that spend a lot on the goods and services produced by these industries - farmers, for example. Take the eurozone, in the two years before the big price fall the region’s economy contracted.

In 2014, it grew and did so again in 2015, though admittedly not robustly.

The fall in the oil price is not the only factor, but it surely helped.

The flipside of lower oil prices is lower operating costs. From shipping expenses to the cost of the raw materials, low fuel prices will help business owners manage and reduce expense lines in 2015.

Combined, higher revenues and lower costs will generate improved earnings for companies in the businessfor-sale marketplace. Consequently, we will likely see a bump in asking and sale prices, primarily due to valuations based on earnings multipliers.

A Harbinger of Disaster?

Oil prices just keep falling and crashing into things on their way down. It seems like every day another country gets a bill for damages: Saudi Arabia, Nigeria, Russia, the United Kingdom. The global economy’s biggest players are seriously reeling.

In the Africa, Sub-Saharan Africa’s oil exporters, which account for nearly half of the region’s aggregate output, have been hit hard by the sharp decline in the price of oil. Streamlining it down to Nigeria who trades mainly in oil, all other products and services sold inside the country is subject to the oil price since it’s the major if not the only product traded by her at the world market.

Oil and gas players most likely to be affected include frontier areas, host governments, major gas projects and oilfield service companies.

According to Chris Bredenhann, PwC Africa oil and gas advisory leader, “Oil and gas explorers will be relooking at their budgets and deciding where to allocate their limited capital spends given the substantial decline in the oil price. Overall, low oil prices could have an impact on production undermining certain players in the market”.

In response, several of the region’s oil-exporters have revised their | 44 |African Entrepreneur Volume 1, Issue 003 2016

While there are opportunities for entrepreneurs in other sectors such as in the agribusiness, tech business, commerce business, finance business; the oil and gas sector also offers huge hidden opportunities in spite of the falling prices. Industry experts still believe that there are great opportunities for investment in Africa, particularly within onshore exploration.

budgets by adjusting the oil price assumption and cutting spending, especially capital expenditures.

“While oilfield service companies will venture to cut back on spending, they will also be under extreme pressure by the oil companies to drop their prices,” said Bredenhann.

These issues are plaguing Nigeria and Algeria, two of the three other African members of OPEC (the third being Libya, which has a very relatively stable currency

despite its governmental dysfunction than the currency issued by one).

Nigeria, which is Africa’s biggest oil producer, has seen growth in the rest of its economy but despite this it remains heavily oil-dependent.

Energy sales account for up to 80% of all government revenue and more than 90% of the country’s exports.

In recent months, Nigeria has launched increasingly strict capital

controls that affect everything from imports to bank cards in a bid to control its shrinking pile of foreign reserves. And according to recent news, the country has re-introduced fuel subsidy amid low oil prices. On the other hand, Algeria is facing economic difficulties looking at reducing some subsidies of its own.

Similarly, in Angola, the central bank hiked its policy rate. Angola’s economy is in a rough spot, and its currency just hit a record low against the US dollar following its latest

devaluation, Bloomberg reports. In addition, in early June, it devalued the Angolan kwanza. Several of the region’s oil exporters share a common currency, the CFA franc, which is pegged to the euro. With the euro depreciating against the US dollar, the CFA franc has also depreciated against the dollar, helping to smooth adjustment to the oil-price shock for these countries by boosting export earnings in domestic currency.

Like a lot of market developments these days, the kwanza’s lowly state has its roots in the sharp decline of oil prices over the last year and a half.

Since July 2014, the currency has lost 37% of its strength against the dollar and Brent has fallen 67%. OPEC stats show that 90% of the country’s exports are oil-related, and Venezuela comes to mind as a country as economically dependent on the commodity.

Public spending cuts, currency weakness, rising inflation, and falling investment point to a weaker outlook for the region’s oil-exporting economies.

In Nigeria, the region’s largest economy, growth slowed markedly in the first quarter of 2015, with real growth turning negative in the oil sector and stalling in the non-oil sector.

Opportunities for Entrepreneurs The situation is not too bad after all. What should be in the mind of entrepreneurs is solving this identified problem with the right mindset, skills and hard work needed to take the world by storm rather than stalling to see what the world has to offer.

While there are opportunities for entrepreneurs in other sectors such as in the agribusiness, tech business, commerce business, finance business; the oil and gas sector also offers huge hidden opportunities in spite of the falling prices. Industry experts still believe that there are great opportunities for investment in Africa, particularly within onshore exploration.

Also, some players are moving ahead with development programmes even though they do not have plans

to expand with exploration drilling.

New players with strong balance sheets may also find potential opportunities to enter the African market at a low cost.

Here are different opportunities for entrepreneurs to explore particularly with the falling oil prices.

Green Paths Renewable hydroelectric energy, solar water heating, renewable biofuels - the collapsing oil price presents major opportunities for the green economy and the climate movement as a whole.

Green energy or renewable energy, if you will, is probably in the best time of its history. Falling costs are turning renewable energy into a competitive alternative to conventional energy resources. For example, the price of solar panels has decreased more than 80% in the past five years, mainly because of China’s research and development and innovation in renewable technologies.

According to the estimation of Energy Information Agency, the levelised cost of electricity of wind in the U.S. (onshore) would be $57.7 per megawatt-hour (MWh) (at 2013 prices) by 2020, which is lower than the price of conventional coal ($60.4/MWh, at 2013 prices).

Additionally, public awareness about environmental risks of oil and fossil fuels has improved greatly. The “real” prices of oil and other fossil fuels are not cheap, because of negative externalities such as air pollution and climate change.

Even with low oil prices, the transition to a low-carbon and sustainable economy will not stop. Both policymakers and entrepreneurs have recognised this trajectory, and are prioritising renewable energy development worldwide. For instance, the Indian government has committed to scale up India’s renewable energy capacity from 35 GW in 2014 to 175 GW by 2022.

A recent “Energy Access” report by Carbon Tracker (www.carbontracker. org) found that coal giant Peabody Energy Corp’s assertion that coal can help to alleviate energy poverty in Africa and India is totally unfounded and smacks of desperation. In fact,

African Entrepreneur Volume 1, Issue 003 | 45 |

A fall in the oil price is often seen as similar in its effects to a tax cut for consumers. It means they have more to spend on other goods and services, some of which will be produced by businesses in the same country. It also reduces costs for businesses that use oil products - the petrochemical industry which makes plastics, fertilisers, synthetic fabrics and much more using raw material made from refined oil

exploiting falling costs of renewable like solar is the only answer for many rural communities lacking basic forms of energy. For example, the report found that a fraction (seven per cent) of Sub Saharan Africans without energy live in a handful of countries actually producing coal, making the cost of installing centralised grid infrastructure prohibitively expensive.

Therefore, focusing on off-grid and mini-grid renewables – as solar costs fall and battery technology improves – are without doubt the most costeffective solutions going forward.

Financial Innovation Mac Elatab, a member of the investment team at TrueBridge Capital Partners, in his report, ‘5 trends in oil & gas technology, and why you should

| 46 |African Entrepreneur Volume 1, Issue 003 2016

care’, thinks that it is important to have financial innovation in place since oil and energy prices are extremely volatile,.

He argued that the price volatility is a huge problem for consumers and corporations and presents a huge opportunity for entrepreneurs.

Price Lock is one of the most innovative companies which helps consumers lock in prices for oil.

Image Credit: Venturebeat.com  Onshore and Offshore Breaks Oil rich markets tend to have very high levels of entrepreneurship and self employment. The hugely capital intensive projects associated with sucking oil out of the seafloor brings in lots of money to the region but it also attracts some of the smartest and best trained engineers and scientists in the world to work on these projects.

Entrepreneurs are able to find plentiful opportunities in these markets — many begin by serving the local market as contractors or sub-contractors on big projects before developing a technology that can be exported to other oil service centres. Think new software tools to manage the flow of resources into projects or submersible technologies that can be used to inspect offshore installations anywhere.

But developing an onshore or offshore oil field is a major investment that will most likely be in operation for several decades. You don’t make decisions like that on major, but quick, fluctuations in the price of oil. After all, oil is still a non-renewable resource and it’s still getting burned off like crazy.

Oil Company Stocks Prospect In an article titled ‘Take Advantage of Cheap Oil, Invest in these ETFs’ on Investopedia.com, investors are advised to take advantage of oil company stocks, expecting future oil price rises to push up oil company stock prices. Decline in oil prices have generally led to decline in oil company stock prices. However, the decline in crude oil prices affects each oil company stock differently.

This variation constitutes a major risk in investing in oil company stocks to take advantage of low crude oil prices.

It is evident that U.S. oil companies like Exxon Mobil (XOM), ConocoPhillips (COP), and Chevron Corp (CVX) have performed differently than the base case of Brent crude oil price. Stock prices of all three U,S. oil companies have dipped 10 to 16 percent by February 2015, while Brent Oil prices have gone down by 50 percent. Brazil’s Petrobras (PBR) has shown much higher volatility compared to the U.S. oil companies.

Company-specific stock performance depends on several factors. Each listed oil company may have varying levels of debt, cash holdings, inventory, additional streams of business, different operational efficiencies and dependencies, seasonality effects, and local market and geopolitical effects which determine its stock price. For example, Petrobras has the highest amount of debt of all global oil companies while the three U.S. oil companies have comparatively much less debt. Such company-specific factors impact stock prices, and hence individual stocks may not exactly reflect crude oil prices. Investors looking to invest in oil through individual oil

company stock purchases should be careful about these dependent factors.

Some of the stock-specific risk can be mitigated by diversification, like buying an oil-focused mutual fund or an oil index fund like those based on OSX index. Such an oil-based mutual fund or index fund will invest in a group of oil stocks, taking away the stockspecific risk through diversification.

However, it may have high fund charges, and may not necessarily guarantee the exact replication of oil prices since the aggregate of multiple oil stocks may perform differently than actual crude oil price.

Investment in Oil ETFs An alternate to oil stocks and oil mutual funds, oil Exchange-Traded Funds (ETFs) offer a cost-effective and efficient way to invest in oil. ETFs offer the best of both worlds: diversification and fund management like a mutual fund and real-time tick-by-tick trading like a stock. Oil-based ETFs include a select

portfolio of oil stocks, oil-based indexes, or oil-based derivatives with an attempt to closely mirror the set benchmark.

Benefits of Oil ETFs ∙∙ Low cost of ETF transactions ∙∙ Highest level of correlation with the underlying asset (in other words, close replication of actual crude oil prices) ∙∙ Tax efficient structure ∙∙ Availability of both short-term intraday trading and long-term investment opportunities ∙∙ Possibility of long as well as short positions ∙∙ Availability of leveraged ETF’s offering exposure of multiple proportions Other Interesting Opportunities The business opportunities in the oil sector are quite enormous and impressive. As stated above,

there are many untapped territories within this sector, ranging from the petrochemical industry which makes plastics, to fertilisers, cosmetics and beauty products, soap making, paint business, synthetic fabrics, pesticides, heating oil and much more using raw material made from refined oil.

What the Future Holds for Investors Volatility in the global oil market will probably last for a while, which implies further depression in employment and the economy, at least for countries that highly depend on oil exports, such as Nigeria and Russia. However, countries that have net oil imports will likely welcome the benefits from low oil prices, while this will save more money for consumers. On the other side, with the current situation, traders are flocking to oil-based investments. It will be great to see more investors step up their investments in these and other non-oil sectors in the near future, and boost the global economy in a healthy and sustainable way around the world

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African Entrepreneur Volume 1, Issue 003 | 47 |

EVENTS

Ghana Eyes Oil Wealth at Oil and Gas Summit

G

hana Oil, Gas & Power Summit returned in April 2016 for its seventh edition and it ended with the country’s government’s strong resolve to achieve national prosperity via oil wealth.

In his remark, Emmanuel Armah-Kofi Buah, Ghana’s Minister for Petroleum, said government has taken appropriate steps that would drive the oil and gas industry forward and to ensure that the resource would be a blessing.

He said over the past two years, a number of international oil and service companies had relocated their regional offices to Ghana and this is gradually making the country the regional hub of the petroleum industry.

Buah disclosed that Ghana's second Floating Production Storage and Offloading (FPSO) had already arrived in the country for the Tweneboa/Enyera/Ntomme (TEN) development. According to him, a third FPSO for the Offshore Cape Three Point Sankofa development would arrive early 2017, and

| 48 |African Entrepreneur Volume 1, Issue 003 2016

probably, a fourth in the not too distant future.

The two-day summit on the theme,

"Driving Ghana's Oil, Gas and Power Potential", was organized by the CWC Group, the Ghana National Petroleum Corporation (GNPC) in collaboration with other stakeholders.

It was meant to provide a congenial atmosphere for stakeholders to discuss strategies to drive Ghana's Oil, Gas and Power Potential forward.

Speaking on the theme, the petroleum minister said it underpinned Ghana's recent experience with the power supply challenges and what had come to be known in local and international parlance as "dumsor" and its debilitating consequences on the economy and government's determination to overcome it.

"Our oil and gas and power sectors have long been recognized as key catalysts for Ghana’s speedy ascent to the league of upper middle income countries," he said.

"It is for this recognition that the Ministry of Petroleum is pursuing a menu of policy goals aimed at strengthening linkages between the oil, gas and power sectors," he said.

Mr Buah said in the development of a Gas Master Plan for the country, they had prioritized the use of indigenous gas power plants above any other consideration.

He said government's plan was to ensure that by the end

of the next decade, 80 per cent of Ghana’s power supply would be generated through thermal means.

Dr Rashid Pelpuo, the Minister of State in charge of Public-Private Partnerships, said recommendations from the summit would have a direct influence on how the oil, gas and power sectors would be managed.

He said government would continue to support the activities of Small and Medium Enterprises (SMEs) in the oil

and gas sector to get them involved in the nation's socio-economic development.

Dr Pelpuo said government would be organising an SMEs fair to bring together financiers of SMEs, the SMEs, and oil and gas companies. Mr Alexander Kofi-Mensah Mould, the Chief Executive Officer of GNPC, said energy had become a national priority amidst recent power challenges fraught with persistent power outages that hindered economic development

African Entrepreneur Volume 1, Issue 003 | 49 |

TANZANIAN INTERNATIONAL FORUM FOR INVESTMENT 12-14 July 2016

EVENTS

The inaugural Tanzania International Forum For Investments (TIFI 2016) is scheduled to take place from the 12-14 July 2016 at the Julius Nyerere International Convention Centre under the theme “Increasing private sector participation, public-private partnerships and regional integration” Confirmed participation from global investors and funding institutions in control of more than US$200 billion

12-14 July 2016 Julius Nyerere International Convention Centre, Dar Es Salaam, United Republic of Tanzania

Patrice Lumumba Street, The New Ushirika Towers, 4th Floor P.O. Box 1489, Dar Es Salaam, Tanzania.

Tel: + 255 (0) 22 2181613 | +255(0)22 2184519, Fax: +255 (0) 22 2181590 Mobile : +255 758 300600 | +255 742 100600 Email: meetings@shadesofgreencongresses.com | registration@tziforum.com

Godfrey Simbeye, Executive Director, Tanzania Private Sector Foundation

Davies Pwele, Africa Head, Business Development – Development Bank of Southern Africa (DBSA)

Tavonga Shoko, Senior Consultant, Letsema Consulting & Advisory (Pty) Ltd

Steven De Backer, Founder & Executive Chairman Afriwise Consult

Papa Madiaw Ndiaye, CEO and Founding Partner, AFIG Funds

Dr. Austine Sequeira, Chief Executive

Juliet Rugeiyamu Kairuki, Executive Director, Tanzania Investment Centre

Zhann Meyer, Head: Agricultural Commodities, Global Commodity Finance, Nedbank Corporate and Investment Banking

Ravi Kalaichelvan, Executive Director, Pembani-Remgro Infrastructure Fund

Peter Bleeker, Managing Director, Advance Consulting, Netherlands

Mason Cranswick, Director, Credit Suisse Fixed Income division Sub-Saharan Africa

Frontline Development Partners (FDP) Fidelis Madavo, Head -Strategic and African Listed Investments, Public Investment Corporation (PIC) of South Africa

With confirmed participation from global investors and funding institutions in control of more than US$200 billion, the Tanzania International Forum For Investments will see the biggest congregation of serious investors in Tanzania.

At a time when investors are turning to Africa as a new relay for global economic growth, TIFI 2016 will highlight the country’s investment opportunities

- some yet unforeseen – to investors from across the globe. Involvement at TIFI 2016 will align you with the most influential companies and personalities in all key sectors in Tanzania and the region.

The TIFI 2016 Forum will be the largest gathering of industry leaders, SMEs, investment funds, bankers, institution leaders, political decision-makers and international media representatives, coming together behind the Tanzanian growth story, its potential and its ambitions to become a middle income country by 2025.

The discussions will focus on opportunities in different sectors of the Tanzanian economy and regional integration.

TIFI 2016 will officially launch sector specific Forum investing streams in the following sub sectors • • • • • •

Agri Business & Agriculture Mining Infrastructure Technology and ICT Financial Services and Banking Manufacturing

12-14 July 2016 Julius Nyerere International Convention Centre, Dar Es Salaam, United Republic of Tanzania

• • • • • •

Tourism & Hospitality Healthcare and Social Infrastructure SME’s Oil & Gas Energy & Power Renewable Energy

CONTACT US

Patrice Lumumba Street, The New Ushirika Towers, 4th Floor P.O. Box 1489, Dar Es Salaam, Tanzania.

Tel: + 255 (0) 22 2181613 | +255(0)22 2184519, Fax: +255 (0) 22 2181590 Mobile : +255 758 300600 | +255 742 100600 Email: meetings@shadesofgreencongresses.com | registration@tziforum.com

Confirmed participation from global investors and funding institutions in control of more than US$200 billion

| 50 | African Entrepreneur Volume 1, Issue 003 2016

African Entrepreneur Volume 1, Issue 003 | 51 |

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African Entrepreneur Volume 1, Issue 003 | 53 |

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| 56 | African Entrepreneur Volume 1, Issue 003 2016

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Spend Without Limits.

Explore the world without restrictions with our Foreign Currency (FCY) cards available in USD, GBP and Euro.

No limit on ATM withdrawals No limit on Web payments No limit on POS transactions

USD Prepaid Card

UBA Gold MasterCard

*FCY cards require domiciliary account For more information, contact:

+234 1 280 8822

cfc@ubagroup.com